Bridgeport Development Co. v. Tritsch

• Citation: 110 Ala. 274,20 So. 16
• Parties: BRIDGEPORT DEVELOPMENT CO. ET AL. v. TRITSCH.
• Decision Date: 31 July 1895
• Court: Supreme Court of Alabama

20 So. 16

110 Ala. 274

BRIDGEPORT DEVELOPMENT CO. ET AL. v. TRITSCH.

Supreme Court of Alabama

July 31, 1895

Appeal from chancery court, Jackson county; Thomas Cobbs Chancellor.

Bill by Leo Tritsch against the Bridgeport Development Company and others. From an order affirming the appointment of a receiver for the defendant corporation by the register, defendants appeal. Affirmed.

J. E Brown and G. N. Messiter, for appellants.

Alex T London and John London, for appellee.

HEAD J.

Bill in equity by Leo Tritsch, a shareholder of the Bridgeport Development Company, against that company and its officers and directors, and the National Park Bank, for the appointment of a receiver of the assets of the company, an accounting from other defendants for assets misappropriated to enjoin the enforcement of a large judgment obtained by the National Park Bank against the company, and for general relief. The appeal is by the defendants from the order of the chancellor affirming the appointment of a receiver made by the register.

The Bridgeport Development Company is a body corporate organized under the general laws of Alabama, in October, 1891, to buy and sell real estate, erect buildings and sell or rent the same, and to have, enjoy, and exercise the powers conferred upon such corporations by part 2, tit. 1, c. 2, of the Code of Alabama. The by-laws of the company provide that its business shall be to purchase, hold, and possess real estate and buildings in the city of Bridgeport, Ala., and to sell at public or private sale, lease, mortgage, or exchange, improve, and restrict the same, to make builders' loans thereon, and to subscribe and own stock in any other company or enterprise that may be located in the city of Bridgeport, Ala. The authorized capital stock was $300,000, divided into 3,000 shares of $100 each, of which $285,000 was issued, the balance remaining in the treasury. Complainant owns 40 shares, for which he paid par. The bill avers that, to induce complainant to purchase these shares, the defendant corporation represented to him that it was the owner of a large tract of land in Bridgeport, in fee simple, free from incumbrances, and of great and increasing value, upon which it had made large improvements, and had contracted with the Bridgeport Land & Improvement Company, by which the latter was to spend, and was then engaged in spending, $150,000 in improvements on the land, under the direction of the defendant company's officers. The directors of the company when the bill was filed, elected November 8, 1893, were Frederick Aldhouse, Richard A. Cunningham, and J. Van Vechten Olcott, resident citizens of New York, and Oscar W. Whitcher and Russell C. Johnson, resident citizens of said city of Bridgeport, Ala. The officers were said Frederick Aldhouse, president; R. A. Cunningham, vice president; and O. W. Whitcher, secretary and treasurer. It is averred that all these directors and officers are parties, to a greater or less extent, in the commission of the various offenses and misconducts in the bill charged, and that if this action was prosecuted by them or through them, or by counsel of their selection, they would be practically suing themselves, and the innocent stockholders would be entirely without remedy; that the company is still under the control of the very directors and persons by whom the very schemes and wrongdoing referred to and complained of were committed; and that it would be futile and ineffective to request or demand from them the commencement of this action, or any action which may be necessary to redress such wrongs, or protect the rights and interests of complainant and the other innocent shareholders, and the property and assets of the company. It is averred that the company is now wholly insolvent; that all of its real estate was suffered to be sold for taxes for the year 1892, to wit, $373.79, on the 31st day of July, 1893; that the unpaid taxes due September 8, 1894, upon said real estate, together with the cost of redemption, amount to the sum of $1,434.96, and in addition to this there are unpaid city taxes which on September 1, 1894, amounted to $255.10. It is next averred that a judgment has been obtained against the company for about $180, for office rent in Bridgeport, by the said O. W. Whitcher, director, secretary, and treasurer of the company, under which the company's property is advertised to be sold on October 1, 1894; that on August 15, 1893, a judgment was recovered by the said National Park Bank of New York against the company, in the court of common pleas for the city and county of New York, for the sum of $14,764.90; the bank brought suit on this judgment against the company, in the city court of Bridgeport, in this state, and on or about July 12,1894, obtained judgment therein for $15,844.50; that execution issued upon this judgment to the sheriff of Jackson county, who advertised thereunder all the real estate and personal property of the company for sale on August 27, 1894. This sale was postponed until October 1, 1894, and complainant avers that he applied to the attorney of the National Park Bank for a further postponement, which has been refused; and he avers that in order to obtain the first postponement the bank was paid $1,000 on or about August 23, 1894, of which complainant contributed, out of his own funds, the sum of $250, for the purpose of saving the property of the company. It is averred that the only other assets of the company of which any trace can be found in the books consist of alleged promissory notes to the amount of about $8,250, which the company received as part payment for lots sold by it, and which the makers refuse to pay because of alleged breaches of contract by the company, and false representations made by the company to induce them to become purchasers; that about September 6, 1894, complainant made a personal examination of the company's safe, in its office in Bridgeport, and said notes were not in the safe, and that said J. Van Vechten Olcott, a director as aforesaid, informed complainant that the notes were being carried around by the president of the company, and were in his personal possession, without any memorandum of any kind being left in the office; that there are no other assets of the company, and, as complainant believes, the company was unable to pay its debts as far back as December 9, 1892. It is averred the company ceased to do business about June, 1892, which fact complainant did not ascertain until about September, 1894; that the company has been, to all practical intents and purposes, abandoned by its officers and directors, and that the last entry in the minute book is of the minutes of the meeting of the company held on November 15, 1893; that such minutes follow the minutes of an alleged annual meeting held in Bridgeport November 8, 1893; that the by-laws require that 10 days' notice of meetings of stockholders shall be given by the secretary, and the object of a special meeting shall be stated in the notice; that complainant has never received any notice of any of the meetings, except in November, 1893; that said Olcott asked him for a proxy of his stock, which he gave, and he has been wholly kept in the dark as to the actings and doings of the company and its officers and agents, and did not discover the fraudulent conduct, in the bill complained of, until September, 1894. The bill repeats that the company has become hopelessly insolvent and unable to carry on its business, and that it became, and for at least two years last past has been, the duty of the directors, trustees, and managers to wind up its affairs and prevent further loss, but they have failed to take any steps looking to a winding up thereof, as a part of the wrongful, unlawful, and fraudulent scheme and conspiracy to prevent their misdeeds coming to light, and to prevent their being called to justice and account for the same, and to enable the property of the company to be slaughtered, and purchased by themselves, or in their interest, to the exclusion of the stockholders. The bill avers that the judgment recovered by the National Park Bank was not for the debt of the company, or for one which the company could have lawfully incurred; that the promissory note for $10,000, on the company's alleged indorsement of which the recovery was had, was indorsed by the company

solely for the accommodation of the Bridgeport Land & Improvement Company, through certain of defendant company's officers, never thereunto authorized, and by said Olcott individually; that although Olcott was also an indorser of said note, and although two separate suits were begun on the note, simultaneously, in the said court of common pleas of New York,-the one against the defendant company, and the other against the Bridgeport Land & Improvement Company,-and judgments entered on the same date in both actions, the said Olcott was not made a party defendant to either of said actions. And complainant avers, on information and belief, that these facts were known to said National Park Bank. The bill charges that the same persons who control the defendant company control the Bridgeport Land & Improvement Company; that the summons and complaint in the action against the defendant company were served upon said Frederick Aldhouse, the president of defendant company, in the city of New York, and, in the action against the Bridgeport Land & Improvement Company, were served upon J. Van Vechten Olcott, the president of the last-named, and a director of the defendant, company, and in both actions judgments were suffered to be entered by default.

The complainant avers: That the commencement of said action was unknown to him, and was carefully concealed from the stockholders of the defendant...