Bateh v. Brown

• Decision Date: 20 February 1975
• Citation: 293 Ala. 704,310 So.2d 186
• Parties: Fred BATEH v. Richard Hail BROWN et al. Joseph A. BATEH, Jr. v. Richard Hail BROWN et al. SC 641, SC 641--A.
• Court: Alabama Supreme Court

Page 186

310 So.2d 186

293 Ala. 704

Fred BATEH v. Richard Hail BROWN et al.

Joseph A. BATEH, Jr. v. Richard Hail BROWN et al.

SC 641, SC 641--A.

Supreme Court of Alabama.

Feb. 20, 1975.

Rehearing Denied April 3, 1975, in No. SC 641--A.

William M. Acker, Jr., Ferris S. Ritchey, Jr., Birmingham, for appellants.

McMillan & Spratling, Birmingham, for appellees.

JONES, Justice.

This is a joint appeal from the Circuit Court of Jefferson County wherein two judgments based on jury verdicts in two separate suits were rendered in favor of Richard Hail Brown (defendant-appellee) and adverse to Joseph Bateh, Jr., and Fred Bateh (plaintiffs-appellants). While the cumulative relief sought by the two suits was the return of 75,000 shares of capital stock of Southeastern Enameling Company (SECO), which were allegedly being wrongfully withheld by Brown, Joe's suit specifically sought either the return of 37,500 shares of SECO stock together with the value of the hire or use thereof during the period of detention, or in the alternative the sum of $30,000 for money had and received, and Fred only sought the return of 37,500 shares of SECO stock. Plaintiffs' motions for new trials were overruled; hence these appeals.

The facts of these cases are rather complicated and since many of them are in dispute among the various parties, we will first outline the general scope of the transaction involved and then delineate the conflicting contentions among the parties.

Brown and Joseph Bateh, Sr. (father of Joe and Fred), were equal partners in the B--D Development Company (B--D) from December, 1965, to March 22, 1966 (the time of the transaction in question). During that period, Brown had conversed with the original controlling stockholders of SECO regarding the selling of their shares in SECO. The talks culminated on March 22, 1966, and the opportunity arose whereby 119,968 shares of SECO became available for purchase for the sum of $47,500. At that time, B--D owned a substantial amount of SECO's common stock and it now desired to make the purchase and gain controlling interest in SECO.

A $20,000 down payment for the 119,968 shares was required, but B--D lacked the necessary funds. Bateh, Sr., put up $30,000 toward the purchase price, all or substantially all of which came from a 'common pool' which the Batch family, including Joe and Fred, jointly maintained.

The disputed testimony is as follows:

Joe and Fred Bateh:

They contend that the $30,000 was furnished by their father out of the 'common pool' so that they (Joe and Fred) would each own 37,500 shares of SECO stock. It was understood that the stock represented by the balance of the purchase price, $17,500 (secured by a pledge agreement), would be purchased and owned by B--D. (It appears that the remaining 44,968 shares which B--D would then own, after giving appellants the $75,000 shares claimed by them, would be sufficient to give it controlling interest in SECO.) The $30,000 paid over by Bateh, Sr., was done in his capacity as their agent for the purpose of acquiring the stock in their names. It was understood and agreed that Brown would take title to all of the 119,968 shares as agent for appellants and B--D, to be later transferred in accordance with their proportionate interests.

After the purchase price had been fully paid, title to the 75,000 shares was to be placed in the correct names (Brown had all the shares placed in his name during the period that the stock was pledged to secure the balance owed to the sellers, and it appears that on June 5, 1967, the balance owed to the sellers was paid in full); but Brown, Bateh, Sr., and B--D failed to deliver the stock to them and also failed to transfer their stock on the transfer books of SECO.

Richard Hail Brown:

He contends that nearly all the stock owned by B--D was purchased in his name. (He was apparently the managing partner of the B--D Company and when various acquisitions were made, they were usually purchased in his name.) Bateh, Sr., was 'very active in the buying and selling of stock' and Brown regarded Bateh, Sr., as the one with the greatest knowledge of buying and selling of stocks in the partnership. (However, during the testimony of Charles Morton, the bookkeeper for SECO at the time of the transaction in question, it was stated that from 1962 to 1970 only 10% Or 15% Of Bateh, Sr.,'s time was devoted to the joint interests of Brown and Bateh.)

When he discussed with Bateh, Sr., the acquisition of the 119,968 shares, he was 'pretty sure' that he told him that the stock was bought in Brown's name and that nearly all of the stock owned by B--D was bought in his name. The $30,000 given by Joe and Fred to Bateh, Sr., was a loan to Bateh, Sr., for the use of the partnership; therefore, Joe and Fred have no legal claim to the stock. He knew that Bateh, Sr., put the loan in his sons' names, but he did not know until a year later that the transaction was on the books that way; that on the page of the ledger of B--D Company where a ledger card was labeled 'notes payable,' there were entries 'First National Bank of Birmingham' and several other places where money was borrowed. The ledger sheet showed 'Joe Bateh, Jr., $30,000.' There was written on this same page a note in Ms. Cole's (a secretary-bookkeeper) handwriting asking, 'When is interest payable?'

He never instructed either Ms. Cole or Charles Morton to accrue and reflect interest on any of the accounts payable, and he never gave Ms. Cole any instructions whatsoever on bookkeeping. It was the practice of B--D Company that when the partners would loan money to B--D, it would be entered in the books as an account payable. It was customary at B--D that Bateh, Sr., could write himself a check on the money owed him by B--D or to draw a check any time when there was a loan on the books outstanding to either him or a member of his family. Later, when there was sufficient funds in the B--D account, the checks would be cashed. It was not the custom of B--D to pay interest on loans to B--D by the partners or members of the Bateh family. (It appears that, in the transaction in question, Bateh, Sr., did not draw any checks payable to Joe or Fred for the $30,000 advanced to him.)

The first time he heard from the Bateh family that they were claiming stock in their own name, rather than as part of the partnership, was in June or July of 1969. He did admit, however, that in 1967 there was some conversation between Bateh, Sr., and himself regarding letting the 'boys' (Joe and Fred) have some preferred stock in SECO. It was August of 1967 when the conversation arose about Joe and Fred wanting SECO stock in their own names. Bateh, Sr., had stated that some stock ought to be given to his boys for the loan.

Several months later, the stock question arose again. At this time, he volunteered to give Bateh, Sr., some preferred stock (a $20,000 share certificate) for his sons. When this conversation took place concerning giving the boys stock, preferred stock was discussed. Bateh, Sr.'s only complaint about the stock was that it was not callable, but the voting rights were never mentioned by Bateh, Sr., at this time.

Charles Morton (Bookkeeper):

There were no check swaps or checks given for the $30,000 deposited to B--D's account. It appeared from the ledger that the $20,000 which went for the down payment on that stock came out of money deposited on or about that time from sources in the Bateh family.

Brown said to him 'we should accrue interest on this account'--referring to the $30,000 entry--though Morton never accrued interest on the account. Also, he talked to Bateh, Sr., in the presence of Ms. Cole and informed Bateh, Sr., of Brown's wishes; but Bateh, Sr., replied, 'No, we are not due interest, don't record any' or 'don't pay any.' At no time was interest paid on the account. This conversation took place in 1967.

In the late summer or fall of 1967, a conversation took place in Brown's home to which he was a party. Brown was discussing putting some stock in Joe and Fred's names. Brown did not name what kind of stock when mentioning the transfer of stock. It was in subsequent conversations that Brown mentioned 'preferred' as the method of payment. Later in 1967, he explained to Bateh, Sr., that the stock was preferred non-voting. (The transaction which is the subject of this suit is set up on the books of the B--D Company as an account payable to Bateh, Jr.)

Joseph Bateh, Sr.:

(At the time the $20,000 share certificate was offered to Bateh, Sr., for his boys, the B--D Company was financially insecure.) Morton came up to him and said, 'Here is preferred stock worth $3.00 per share.' It was about 5 P.M. and the office was closing. He replied to Morton, 'I don't want preferred stock'; but 'I took it home with me and I read it, and I found out the stock was $1.50 a share and not $3.00. I gave it back to Morton the next morning after I read it at home.' He told Ms. Cole his children were buying the $3o,000 worth of stock for themselves.

The evidence also discloses the following: Joe and Fred at no time made any request for a note or other evidence of indebtedness for their 'loan' to B--D. From time to time the B--D Company had made investments for the Bateh family. Sometime between 1959 and 1969 the Bateh family had bought stock in the Ozark Motel where the procedure was to give B--D money in return for stocks. B--D not only made investments in its own name but that of members of the Bateh family as well.

The partnership was dissolved on May 14, 1970, by court order, and the corporate stock owned by B--D was divided equally between Brown and Bateh, Sr. (For a more detailed history of this case, including other provisions of the trial Court's decrees in two separate actions and their reversals, see Bateh v. Brown, 289 Ala. 695, 271 So.2d 830 (1972); and Bateh v. Brown, 289 Ala. 699, 271 So.2d 833 (1972).)

The issues raised on this appeal are whether the trial...