Buck v. Gimon
| Decision Date | 16 May 1918 |
| Docket Number | 1 Div. 986 |
| Citation | 201 Ala. 619,79 So. 51 |
| Parties | BUCK et al. v. GIMON. |
| Court | Alabama Supreme Court |
Appeal from Circuit Court, Mobile County; Thomas H. Smith, Judge.
Bill by Dominique T. Gimon against Edward J. Buck and others. From a decree overruling demurrer to bill, the defendants appeal. Reversed and remanded.
Gregory L. & H.H. Smith, Stevens, McCorvey & McLeod, Armbrecht McMillan & Caffey, and Rich & Hamilton, all of Mobile, for appellants.
The appeal is prosecuted by the National City Bank and others from a decree of the circuit court in equity, overruling demurrers a bill filed by Dominique T. Gimon, as holder of stock in said bank, against appellants, as directors, to recover losses sustained through the negligent conduct of the business of that institution.
It is averred in the bill that on account of the embarrassed condition of the bank the Comptroller of the Currency declined to permit it to continue to do business as a national bank, announcing that he would put its affairs in the hands of a receiver unless that corporation should take some action satisfactory to the Comptroller of the Currency or his department by which its depositors could be fully protected; that under the stress of this necessity the board of directors of the National City Bank entered into a contract with the First National Bank of Mobile, Ala., by which they undertook, in the name of the National City Bank to sell, convey, and deliver to the First National Bank of Mobile all of the property, assets, and effects of every kind and description, no matter where situated, belonging to the said National City Bank or in which it had any interest including its banking and trust company business and the good will thereof, for and in consideration of the First National Bank's assumption of the indebtedness of the National City Bank and the agreement on the part of the First National Bank to wind up the affairs of the National City Bank, to collect its assets and to distribute them, first, by reimbursing itself in an amount equal to the debts so assumed by it, and then to distribute the balance between the stockholders of the National City Bank after deducting therefrom certain large commissions which the National City Bank thereby undertook to pay to the First National Bank for said service. A copy of this agreement was made a part of the bill of complaint. In this agreement it was stipulated that, as compensation for liquidating the affairs of the National City Bank, the First National Bank was to receive a part of the proceeds of the assets of the embarrassed bank, in proportion to the amount collected upon such assets as specifically set out in the agreement.
After the agreement was duly entered into by said board of directors and the First National Bank, the original bill in this cause was filed. Subsequent thereto, the stockholders of the National City Bank ratified the action of the board of directors in making such contract with and conveyance to the First National Bank. The amended bill failed to show when the stockholders' meeting was held, at which the ratification took place, yet it alleged that:
"Any demand that your orator could have made upon the stockholders of the National City Bank for the enforcement of the rights which are herein asserted would have been likewise unavailing, for the reason that at the first meeting of the stockholders of the National City Bank, which took place after the execution of said agreement to the First National Bank, which was held before complainant could have obtained any other meeting of said stockholders, the said stockholders ratified and confirmed the action of said directors in executing said assignment to the First National Bank while the said defendants, other than Albert P. Bush, William F. Owen, and Paul Danner, still constituted a majority of the board of directors of said bank, so that the cause of action which had theretofore rested in the National City Bank to recover the damages which are sought to be recovered in this bill of complaint vested in the First National Bank before the said stockholders could have proceeded with the enforcement of said rights through any person other than the defendants herein."
When the stockholders of the National City Bank ratified this conveyance of the bank's assets to the First National Bank, such ratification related back (except as to intervening rights) to the date of the directors' agreement of sale and the conveyance pursuant thereto; it was the same as if the conveyance had been originally authorized by the stockholders. Everett v. United States, 6 Port. 166, 30 Am.Dec. 584; Holloway v. Harper, 108 Ala. 647, 18 So. 663; Bibb v. Hall, 101 Ala. 79, 14 So. 98; Alabama Nat. Bank v. O'Neil, 128 Ala. 192, 29 So. 688; 1 Elliott on Contracts, §§ 277, 333, 455. It is not insisted by the amended bill that complainant acquired any new right intervening the time of the making of the contract and conveyance by the directors to the First National Bank and the date of the ratification by the stockholders. The conveyance by the board of directors was on November 9, 1915, and ratification was had thereof by the stockholders, and thereafter the amended bill in this cause was filed.
For the purpose of the bill as amended, according to its averments, the conveyance to the First National Bank must be treated as valid and binding (on the authority of its ratification by the meeting of the stockholders) from November 9, 1915, the date of the initial transfer by authority of the board of directors. The legal effect of this conveyance is alleged to be:
"The cause of action which had heretofore vested in the National City Bank to recover the damages which are sought to be recoverea in this bill of complaint rested in the First National Bank before the said stockholders could have proceeded with the enforcement of said rights through any person other than the defendant herein."
In effect, the cause of action sought to be enforced by the bill as originally filed was in the corporation--the National City Bank-- and that bank had the right to convey it to the First National Bank as a part of and with its other assets conveyed by its constituted authorities--its directors and stockholders. Tillis v. Brown, 154 Ala. 403, 406, 45 So. 589; Harton v. Johnston, 166 Ala. 317, 322, 51 So. 992; Cook on Stockholders, ...
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...as to the condition of the corporate affairs." The later authorities are in accord with the announcement in Buck et al. v. Gimon, 201 Ala. 619, 79 So. 51. reason for such rules, protecting the stockholder and the corporation as well, is found in the observation on corporate authority contai......
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...619, 79 So. 51, and concludes that the difference in the facts there shown suffices to distinguish that case from this." In Buck v. Gimon, 201 Ala. 619, 71 So. 51, pertinent holding was that, where a national bank made a lawful assignment to another national bank, which was to liquidate its......
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