Buck Creek Cotton Mills v. Stokely

• Decision Date: 14 April 1938
• Docket Number: 7 Div. 491.
• Citation: 181 So. 100,236 Ala. 146
• Parties: BUCK CREEK COTTON MILLS ET AL. v. STOKELY.
• Court: Alabama Supreme Court

181 So. 100

236 Ala. 146

BUCK CREEK COTTON MILLS ET AL. v. STOKELY.

7 Div. 491.

Supreme Court of Alabama

April 14, 1938

Rehearing Denied May 19, 1938.

Appeal from Circuit Court, Shelby County; W. W. Wallace, Judge.

Bill in equity by J. T. Stokely against Buck Creek Cotton Mills, Mrs E. T. Weller, and Mrs. T. C. Thompson, for specific performance of a contract, injunction, and accounting. From a decree overruling a demurrer to the bill, respondents appeal.

Affirmed.

L. H Ellis, of Columbiana, and Lange, Simpson & Brantley and Reid B. Barnes, all of Birmingham, for appellants.

Benners Burr, McKamy & Forman and Frontis H. Moore, all of Birmingham, for appellee.

THOMAS Justice.

The several assignments of error are to the effect that there was error in the decree holding that appellee was entitled to specific performance of the contract set out in the bill and injunction, and for an accounting in equity.

The averments of the bill as to inducements of the contract, extension, and execution are as follows:

"Complainant further avers that following conferences with said respondents there was prepared, submitted to and approved by said respondents a written agreement, a copy of which is attached hereto and marked Exhibit 'C' and made a part hereof as if herein set out in full; that said contract was approved by the respondents and was submitted to and approved by all of the stockholders of respondent corporation at its annual meeting held on the 16th day of December 1930, and its execution and delivery was thereupon authorized by the Board of Directors of the respondent corporation.

"Complainant further avers that at the time of said approval, authorization and execution of said written agreement it was thoroughly understood and agreed between complainant and respondents that the Cannon stock purchased by the complainant had been purchased pursuant to the agreement between the parties as hereinabove set forth and as a part of the consideration for the execution of said agreement and with such understanding said agreement was executed between the parties and duplicate originals thereof delivered to the respective parties.

"Complainant further avers that said agreement of December 16th, 1930, was extended for an additional term of five years in accordance with the terms and conditions thereof.

"Complainant further avers that for the purpose of carrying out the agreement as in the immediately preceding paragraphs averred between complainant and respondents, and in order to insure the agreement made that complainant's interests should be regarded as a property right, coupled with the right of exclusive management as set out in the written contract, the by-laws of the respondent corporation were amended at the annual meeting on December 16th, 1930, so as to provide that the officers of the corporation should be a Managing Director, a President, a Secretary and Treasurer, and the duties of the Managing Director of the corporation as provided for by said by-laws should include the exclusive right of management of the company, leaving to the President no duties to perform except in the absence of the Managing Director or such duties as the President might be called upon to perform by the Managing Director.

"Complainant further avers that the purpose of these by-laws was to carry out in good faith the agreement of the parties and to assure to complainant, in consideration of his agreement to undertake the continued management of the company, the right to protect his property interest in the company as represented by the stock interest acquired for such purpose, and to protect his agreed compensation by committing exclusively to his management the making of profits upon which his investment and compensation solely depended. Complainant further avers that it was understood by the stockholders and directors of the company that complainant should be elected each year during the pendency of the management contract as Managing Director.

"Complainant further avers that pursuant to such agreement, understanding and by-laws, he was at such annual meeting elected Managing Director, Mrs. T. C. Thompson was elected President and J. T. Phillips on the suggestion of complainant was elected Treasurer, and that pursuant to the understanding complainant was reelected as Managing Director each year thereafter until the meeting of February 8th, 1937, hereinafter more fully referred to."

The contract exhibited and aiding the bill (Grimsley v. First Ave. Coal & Lumber Co., 217 Ala. 159, 115 So. 90), among other things, contains the following averments:

"(1) That the party of the second part will continue the management of the business and affairs of the party of the first part as in the past, devoting such of his time as in his judgment may be necessary, and beginning with the current fiscal year, starting October 1, 1930, the party of the first part will pay to the party of the second part, as a management fee, an amount equal to fifty per cent of the net profits, if any, of the company, in each fiscal year during the term of this agreement, after the payment of all operating expenses, insurance, taxes, (except income taxes), interest on indebtedness and depreciation, as shown by the books of the company, and as approved and allowed by the Bureau of Internal Revenue, and also after the deduction of an amount equal to six per cent on the net value of the company's properties, as shown by its books at the end of the preceeding fiscal year, such net value for the fiscal year ending September 30, 1930, being $239,604.39. The management fee herein provided for shall be paid from time to time during each fiscal year and at the end thereof, as the net profits and the condition of the Company may justify.

"(3) If under the management of the party of the second part the Company shall earn no net profits for two consecutive years, then in that event either party may terminate this agreement.

"(4) Unless sooner terminated, as hereinabove provided, or by the death of the party of the second part, this agreement shall continue in force and effect for a period of five years beginning October 1, 1930, and at the expiration of said five year period, at the option of the party of the second part, shall be extended on the same terms and conditions for an additional period of five years."

The management averred as contracted for, and that done and accomplished by complainant resulted in a liquidation of large indebtedness out of profits that accrued from complainant's management.

The many grounds of demurrer assigned were overruled.

It should be stated that the bill avers that at the time of the authorization and execution of the contract, it was agreed between complainant and respondents that the Cannon stock (from the holders of a large block of holders thereof) was making insistence of bankruptcy and that complainant should purchase the same. This was done pursuant to the agreement between the parties, and was a part of the consideration for the execution of said agreement and understanding of December 16, 1930, entered into between the parties, which contract was evidenced by duplicate originals delivered to the respective parties. It is further averred and shown that the agreement of December 16, 1930, was subject to extension for five years by its own terms and that it was duly extended for an additional term of five years in accordance to its terms and the agreement of the parties.

The bill further avers that for the purpose of carrying out the agreement between complainant and respondents, and in order to insure the agreement that complainant's interest should be regarded as a property right, coupled with the right of exclusive management, by-laws of respondent corporation were amended at the annual meeting on December 16, 1930, so as to provide that the officers of the corporation should be a managing director, a president, secretary and treasurer, and that the duties of the managing director as provided in said by-laws should include the exclusive right of management of the company, leaving the president nominal duties.

It is averred that the purpose of these by-laws was to carry out in good faith the agreement of the parties and to assure to complainant in consideration of his agreement to undertake the continued management of the company, the right to protect his property interest in the company as represented by the stock interest acquired for such purpose, and to protect his agreed compensation by committing exclusively to his management the making of profits upon which his investment and compensation solely depended. It is further averred that it was understood between the stockholders and directors of the company that complainant should be elected each year during the pendency of the management contract as managing director, and that pursuant to such agreement, understanding, and by-laws, he was at such annual meeting elected managing director, Mrs. T. C. Thompson, president, and J. T. Phillips, treasurer, and pursuant to such understanding, complainant was re-elected as managing director each year until the meeting of February 8, 1937, hereinafter referred to.

The bill further avers that pursuant to said agreement and written contract, immediately following his election as managing director, complainant continued to manage exclusively the affairs of respondent corporation and did manage such affairs, devoting thereto his best efforts, time, ability, and attention, until the 8th day of February, 1937, at which time, it is averred, respondents wrongfully and illegally attempted to exclude him from the management of the respondent corporation.

It is further averred that during such period the entire...