Bullock v. Young

• Decision Date: 12 December 1933
• Citation: 252 Ky. 640,67 S.W.2d 941
• Parties: BULLOCK v. YOUNG.
• Court: Kentucky Court of Appeals

67 S.W.2d 941

252 Ky. 640

BULLOCK v. YOUNG.

Court of Appeals of Kentucky

December 12, 1933

As Extended on Denial of Rehearing February 20, 1934.

Appeal from Circuit Court, Jefferson County, Common Pleas Branch First Division.

Action by T. L. Young against H. E. Bullock, wherein defendant filed a counterclaim. Judgment for plaintiff, and defendant appeals.

Affirmed.

Woodward Hamilton & Hobson and Wilbur Fields, all of Louisville, for appellant.

Gordon Laurent & Ogden, of Louisville, for appellee.

RICHARDSON Justice.

For many years prior to 1925, H. E. Bullock and T. L. Young were associated in the operation of several coal companies, both producing and selling, controlling them for the profits of co-operative control of both ends of the industry. Two or three of the corporations were engaged exclusively in marketing coal and for that reason Bullock and Young were anxious for the control of the Carrs Fork Coal Company which owned and operated certain mines in Eastern Kentucky. To secure the control of it, it was necessary that they buy approximately 200 additional shares of the stock of that company. T. J. McConnell and W. J. Raybould owned 211 shares of its stock. On the 18th day of December, 1923, Bullock, Young, and one L. H. Stone contracted to buy and bought the 211 shares at $200 per share. They executed and delivered a writing evidencing their purchase, and their joint notes therefor, for $42,200. Stone became insolvent and dropped out of the transaction, and, as the $42,200 became due, and renewals were required, Young signed them with Bullock. Within about two years after the contract for the purchase of the 211 shares, Bullock and Young got themselves in a position to acquire administrative control of the corporation, which was accomplished in June, 1925. The election of directors was held that month. Some time prior to the election, Bullock, Young, and Frank E. Wood, a practicing attorney of Cincinnati, Ohio, agreed to elect themselves as president, treasurer, and secretary, respectively. From this point, the digression of the asservations of Bullock and Young becomes the vital issue of the case. Frank E. Wood was not a party to the purchase of the McConnell and Raybould stock, nor did he sign any notes executed for it. His only connection was as an attorney of the several corporations under the control at that time of Bullock and Young. At the time Young agreed to go in with Bullock and purchase the 211 shares, he was without means with which to pay for his portion of the stock, which fact was known to Bullock. For this reason he agreed to participate in the purchase of the stock on the condition that he be paid a salary by the Carrs Fork Coal Company and that his salary be applied to the payment of his proportion of the stock, and Bullock consented to this arrangement. He claims that on the day the meeting was held to elect directors, which would enable Bullock and himself to acquire the cherished control of the Carrs Fork Coal Company, he, Bullock, and Wood agreed on the side that a salary would be voted to Bullock of $7,500, to Wood $2,500, and to Young $2,500, as president, treasurer, and secretary, respectively, and that, as the salaries accumulated they would be applied by Bullock to the payment of his and Bullock's notes outstanding for the purchase price of the 211 shares of stock of the Carrs Fork Coal Company. He claims this arrangement was not put through at that meeting which was adjourned to Wood's office where later it was carried out by a resolution of the board of directors. At the time it was made by the three of them, it was agreed that Wood would reduce to writing their agreement showing the amount of their salaries and that Bullock was to receive, as trustee, and apply, the same as they accumulated on the payment of his and Young's obligation for the 211 shares of stock. On May 12, 1925, the board of directors voted Bullock's salary as president at $7,500; Wood's as secretary at $2,500; and Young's as treasurer at $2,500, per year. They continued in office until July 8, 1926, during which time Bullock drew a salary of $625 per month for himself. On July 8, 1926, he was re-elected president at a salary of $2,500 per year. The record of the corporation, which was in the possession of Bullock as president, charged $2,500 as Young's salary. It fails to reflect the payment of the salary of Young. An entry therein shows payment to Wood, on account of salary, $2,000 on May 6, 1926, $500 on May 31, 1926, and on July 30, 1926, $208.33. On July 18, 1926, Wood was elected attorney of the company at a salary of $2,500, payable in equal monthly installments. The record also shows that on May 28, 1926, a certificate of 150 shares of stock was issued to Frank E. Wood. It was signed by Bullock as president and Wood as secretary. A certificate of stock was issued to Bullock for 200 shares, on the 27th day of January, 1927. An indorsement on the back of it shows 12 1/2 shares transferred to Frank E. Wood and 7 1/2 shares to H. E. Bullock. The certificate of 12 1/2 shares to Wood, issued on the 4th day of June, 1927, was canceled July 12, 1927, and a new certificate, No. 376, issued to Bullock, which was originally issued to Bullock on January 27, 1927. On December 11, 1928, 52 shares of the 120 shares issued to Wood were transferred by Wood to Bullock. Wood, on May 15, 1926, was paid attorney's fee of $3,000; also March 12, 1926, $30, and July 6, 1926, $479.49. The Carrs Fork Coal Company earned a total dividend of 14 per cent. after December 18, 1925.

The written contract, dated June 11, 1925, between Bullock, Young, and Wood, recites that the board of directors of the Carrs Fork Coal Company had voted salaries to Bullock, Young, and Wood, respectively, at $7,500, $2,500, and $2,500 per annum, and that it had been agreed "by and between the parties hereto that all of the salaries referred to above, shall be used exclusively for the purpose of paying off obligations of said parties, all or either of them, still remaining, on account of the purchase of the said McConnell and Raybould stock. " "Now, therefore, in consideration of the foregoing and of the sum of One ($1.00) Dollar, each paid to the other, the receipt of which is hereby acknowledged, said parties do hereby transfer and assign all of their respective right, title and interest of, in and to, said salaries as the same become due and payable, and paid to Harry E. Bullock, Trustee. Said Bullock to receive and accept said salaries with full power to give to the Carrs Fork Coal Company a proper receipt and release therefor, he to apply the same as and when received in liquidation of said indebtedness."

It will be observed from the above résumé of the facts that Young has received neither salary nor stock under the arrangement between him, Bullock, and Wood.

This action was brought in the Jefferson circuit court against Bullock to recover one-half of the salaries, or one-half of the McConnell and Raybould stock. The petition set forth the execution and delivery by Bullock, Young, and Stone of their contract for the purchase of the 211 shares of stock of McConnell and Raybould, and alleged that under the contract between him, Bullock, and Wood, he was the owner of one-half of the combined salaries, amounting to $7,425: He sought to recover of Bullock this sum or that number of shares of stock of the Carrs Fork Coal Company as the $7,425 would purchase at the price of $150 per share.

Bullock in his answer admitted the written contract, but denied the stock was purchased of McConnell and Raybould at $150 per share and averred the purchase price was $200 per share, and that the interest of Young in the combined salaries was one-fifth thereof and no more. He also denied that he had refused to account to Young for it or any portion of the stock purchased with Young's salary.

In the second paragraph he charged that the amount received by him in cash under the trust agreement was $13,891.25, and that he had paid the interest on certain notes, income tax, and other expenses, which when deducted from the $13,891.25, there remained of the trust fund $11,891.25, and that for this reason the total amount of Young's part was one-fifth the combined salaries available for the purchase of stock or $2,378.25, and the actual cost of 12 shares of said stock is and was $2,400.

He prayed that the petition be dismissed with cost. Young filed an amended petition, setting up a new and independent cause of action against Bullock. The summons thereon was served out of Jefferson county. For that reason it was quashed and no further steps were taken on the amended petition. Young's reply to Bullock's answer completed the issues. Later Bullock filed an amended answer, counterclaim, and set-off wherein he sought to recover of Young on an $8,000 note, executed and delivered on November 25, 1925, by the Wallins Creek Coal Company, by Young as president, the liquidating agent of the Wallins Creek Coal Company, and Young, individually, payable to the Carrs Fork Coal Company, ninety days after date, and also on a $1,000 note dated April 27, 1926, signed in the same manner by the same parties, payable to the Carrs Fork Coal Company, four months after date. He charged that these notes were transferred by the Carrs Fork Coal Company to Hiram H. Owens, in August, 1926, and thereafter on August 23, 1929, they were transferred by Owens to him, and that he was the holder thereof. In his reply Young charged that, prior to the execution of the notes, he and Bullock agreed to sign these notes to support the credit of the Wallins Creek Coal Company, and that he had signed them in compliance with this agreement, but that Bullock, in violation of his agreement, had delivered the...