O'Bear Jewelry Co. v. Volfer

• Decision Date: 24 April 1895
• Citation: 106 Ala. 205,17 So. 525
• Court: Alabama Supreme Court
• Parties: O'BEAR JEWELRY CO. ET AL. v. VOLFER ET AL.

17 So. 525

106 Ala. 205

O'BEAR JEWELRY CO. ET AL. v. VOLFER ET AL.

Supreme Court of Alabama

April 24, 1895

Appeal from Birmingham city court, Jefferson county; W. W Wilkerson, Judge.

Suit by S. Volfer & Co. and others, against the O'Bear Jewelry Company and others seeking different relief from the different defendants. From a decree overruling demurrers to the bill for multifariousness, defendants appeal. Reversed.

Ward &amp John and Dickinson & Kerr, for appellants.

John Vary and Arnold & Evans, for appellees.

McCLELLAN J.

The present bill is filed by Volfer &. Co. and others, as judgment creditors of the O'Bear Jewelry Company, a corporation. Said corporation, R. D. Johnston, the Alabama National Bank, G. S. O'Bear, Jr., W. G. O'Bear, F. C O'Bear, and W. B. Copeland are made parties defendant. It is made to appear by the bill that the O'Bears and Copeland organized said corporation with a proposed or nominal capital of $25,000, divided into 250 shares of $100 each. Of these, G. S. O'Bear subscribed for 80 shares, or $8,000, to be paid by transferring to the corporation a certain stock of jewelry, store fixtures, etc. W. G O'Bear subscribed for 30 shares, or $3,000, to be paid by transferring to the corporation a lot of miscellaneous jewelry, a list of which was, according to the report of the commissioners, in their hands. Mrs. F. C. O'Bear subscribed for 20 shares, or $2,000, with the privilege of paying for the same by delivering to the company certain gold watches (28) and diamond rings (3). And W. B. Copeland subscribed for 20 shares, to be paid in money. The corporation organized in February, 1888, and a report was made to the probate judge's office, setting forth that said subscribers for stock had made the transfers of property and the cash payments as provided for in the terms of their respective subscriptions. The bill avers that said Copeland did not and has never paid the $2,000 subscribed by him, but still owes the same; that the stock of goods, etc., which was paid to and accepted by the commissioners in satisfaction of G. S. O'Bear's subscription of $8,000 was not worth more than $4,000, was fraudulently accepted in full payment, and that said G. S. still owes the balance of $4,000; that the lot of jewelry with which W. G. O'Bear was to pay his subscription of $3,000, and which was so accepted, was worth only $1,000, and hence that W. G. still owes the balance of $2,000; that Mrs. F. C. O'Bear did not pay the amount subscribed by her, either in property or money, and still owes the same. Saig G. S. O'Bear and W. B. Copeland were the commissioners appointed by the probate judge to open books of subscription to the capital of said corporation; and the bill charges "that the pretense and representation that said W. B. Copeland had paid his subscription in cash, and that Mrs. F. C. O' Bear had paid her subscription by the transfer of watches and three diamond rings, when in truth no such payments were made, and the excessive valuation of the property transferred by G. S. and W. G. O'Bear, was knowingly and intentionally made by collusion and agreement among said incorporators, and constituted fraud upon persons who might become creditors of said corporation." The corporation upon organization commenced and continued business until December, 1888, or January, 1889, when most of its stock of goods was destroyed by fire, and since then it has not carried on its business. While carrying on its business, the corporation bought large quantities of merchandise, and at the time of the fire had on hand goods amounting in value to many thousand dollars, which were insured to a large amount, and it was agreed that the insurance companies should pay the corporation the sum of $7,000 on account of said loss. At the time of said fire the corporation was indebted to complainants in the several sums stated in the bill, and to divers other persons, including the Alabama National Bank, to which it owed $2,500, and was then and ever since has been confessedly insolvent, the bulk of its assets after the fire consisting of the sums owing it by the insurance companies. The bill further avers "that for the purpose of preventing complainants and other creditors of said corporation from subjecting said insurance money to the payment of their debts, and to save the same, or as much thereof as possible, to said incorporators, said company assigned and transferred the policies of insurance held by it to the Alabama National Bank before the dispute which had arisen between it and said insurance companies had been settled, and complainants charge that for said transfer there was no consideration except that said corporation was indebted to said bank in the sum of twenty-five hundred dollars, as aforesaid, and that said bank received in cash on account of said policies a sum not less than seven thousand dollars; and, after appropriating to itself a sufficiency to pay the debt due said bank, it paid over the balance, amounting to the sum of forty-five hundred dollars, to the persons who composed said corporation, or to some of them, or for their personal account." The bill further avers: "Complainants are advised that said [insurance] money, as well as all the other property of said corporation, was a trust fund, and, after said fire and the insolvency of said corporation, belonged to said corporation in trust for the payment of the debts thereof, and that the collection thereof and the payment by said bank of the proceeds to or on account of the individual corporators was a misapplication of said funds, for which said bank, which (as your orators charge) knew the insolvent condition of said corporation, as well as the said individual corporators, was and is liable to the creditors of said corporation." It is further shown that on September 4, 1889, said corporation appeared in court, and confessed judgment in favor of said bank for $1,075 on a complaint then filed, and, immediately after the confession and registration of this judgment, the jewelry company executed a general assignment to R. D. Johnston for the benefit of its creditors; and it is charged that said confession of judgment and assignment were parts of one and the same transaction, and should be so decreed and administered; and that said assignee took possession of the property of said corporation, converted the same into money, and out of such proceeds paid said judgment to the bank, and still has a small sum in his hands.

The theory upon which complainants seek relief is thus set forth in the bill: "Complainants are advised that the entire assets of said corporation constitute a trust fund for creditors, and that all persons who in any wise knowingly participate in the unlawful appropriation of said trust fund, or any part thereof, will be required in equity to restore the same; that the subscribers to said capital stock will be compelled to pay the differences between their respective subscriptions, and the actual, reasonable value of the property transferred by them in pretended payment thereof, and that such subscribers as have made no payment or transfer of property will be required full payment to make; that said confession of judgment will be held a part and parcel of said general assignment, and said Alabama National Bank will be required to pay the sum received by it in payment thereof, as aforesaid, for the benefit of creditors, and that said bank will be further required to account for the proceeds of the insurance policies received by it as aforesaid, and to restore so much thereof as said bank paid to the individuals composing said corporation or for their use." The prayer is that a receiver of ' the property and effects of the O'Bear Jewelry Company be appointed, and authorized to receive the moneys and effects thereof to which it may be decreed entitled under the allegations of the bill; that said subscribers to the capital stock of said corporation be required to pay to the court the amounts which they respectively subscribed, less the actual reasonable value of such property as they transferred to said corporation; that said Alabama National Bank be required to pay into court or to the receiver to be appointed the amount received by it on account of said judgment, as also the sum received by it as the proceeds of the policies of insurance over and above the debt owing it; and that the said assignee, R. D. Johnston, be required to file in court his accounts as such assignee; and to pay into court or to the receiver all moneys in his hands, and to turn over all property and effects of said corporation; and, finally, that all the assets thus brought together be administered for the equal benefit of the creditors of said corporation.

The Alabama National Bank demurred to the bill, and among other grounds assigned the following: "(1) There is a misjoinder of parties defendant to said bill of complaint, in this: that this defendant, alleged to be a preferred creditor, is improperly joined as a defendant with stockholders of the O'Bear Jewelry Company, who are charged with not having legally paid up their subscriptions to the capital stock of the O'Bear Jewelry Company. (2) The said bill of complaint is multifarious, in that complainants seek in the same suit to have an accounting of the trust created by the alleged deed of assignment made by the O'Bear Jewelry Company, and to collect unpaid subscriptions of the shareholders of the O'Bear Jewelry Company alleged to be fraudulently withheld. (3) The said bill of complaint is multifarious in that it joins, with the claims against the shareholders of the O'Bear Jewelry Company for unpaid subscriptions, claims against this defendant for money alleged to have been improperly paid to this defendant to satisfy a...