Clifford v. Armstrong

• Decision Date: 18 April 1912
• Parties: CLIFFORD v. ARMSTRONG ET AL.
• Court: Alabama Supreme Court

58 So. 430

176 Ala. 441

CLIFFORD v. ARMSTRONG ET AL.

Supreme Court of Alabama

April 18, 1912

Appeal from Chancery Court, Morgan County; W. H. Simpson Chancellor.

Suit by Lillian Armstrong and others against C. T. Clifford. From a judgment for plaintiffs, defendant appeals. Affirmed.

John C Eyster and Tidwell & Sample, all of Decatur, for appellant.

Callahan & Harris, of Decatur, for appellees.

MAYFIELD J.

This bill was filed by the appellees against the appellant to cancel 400 shares of the common stock of the Decatur Land Company, which stock was issued to and held by the respondent, C. T. Clifford, and to require the stock to be reissued to the complainants, who are alleged to be the equitable owners thereof.

The mother of complainants, and the defendant, Clifford, were sister and brother. Clifford was a banker, and was versed in matters of finance and investment, and on this account his sister intrusted to him a considerable amount of her money for investment. She also owned a bond of the Decatur Land Improvement & Furnace Company, of the denomination of $2,500. Clifford owned 500 shares of stock in this company.

This company was largely indebted, and was about to go into bankruptcy. About this time, a new company, the Decatur Land Company, was being promoted; and it seems that the assets of the old company were transferred to the new company. It was provided, whether legally or not, that the stockholders of the old company should be given a preference in the new company; and that the subscriptions to the stock of the new company might be paid by a surrender and cancellation of stock of the old company and the payment, in addition, of $5 per share of the new company's stock so issued; such new stock to be of the par value of $25 per share, and one share out of every five shares thereof to be preferred stock.

Under this arrangement, Clifford surrendered the $2,500 bond of the old company, belonging to his sister, and his 500 shares of stock in the old company, and had issued to his sister 100 shares of preferred stock, and to himself 400 shares of common stock in the new company.

It seems to be conceded that after the sale and transfer of all the assets in the old company its stock was of no intrinsic value; but it is claimed by appellant that, as the arrangement conferred upon the holders of the stock the privilege of exchanging it for the new stock, upon paying $5 per share additional, they to receive in lieu one share of preferred stock and four shares of common stock of the new company, Clifford is at least a tenant in common with his sister as to the 400 shares of common stock issued to him. To grant this contention would be to allow Clifford to perpetrate a fraud upon his sister, who was certainly his cestui que trust in this matter. He had parted with nothing and was entitled to...