Collier v. Brown

• Citation: 228 So.2d 800,285 Ala. 40
• Decision Date: 07 November 1969
• Docket Number: 6 Div. 710
• Parties: J. J. COLLIER and Johnie Kuglar v. Barto BROWN and D. W. Segars, Jr.
• Court: Alabama Supreme Court

Page 800

228 So.2d 800

285 Ala. 40

J. J. COLLIER and Johnie Kuglar v. Barto BROWN and D. W. Segars, Jr.

6 Div. 710.

Supreme Court of Alabama.

Nov. 7, 1969.

Rehearing Denied Dec. 11, 1969.

Witcher & Young, Birmingham, Brobston & Brobston, Bessemer, for appellants.

Huey, Stone & Patton, Frank Marsh, Bessemer, for appellees.

MADDOX, Justice.

Appellants, J. J. Collier and Johnie Kuglar, complainants in the trial court, brought an action for declaratory judgment against appellees, Barto Brown and D. W. Segars, Jr., asking that the court declare the rights of the parties under two agreements over which a controversy had developed.

The case was tried without a jury and submitted upon the pleadings, oral testimony exhibits and stipulation of the parties.

The trial court entered a final decree finding that Collier and Kuglar, the appellants, fraudulently entered into an agreement with appellees Brown and Segars for the purpose of defrauding Brown and Segars.

Collier and Kuglar had entered into an agreement with Brown and Segars on November 21, 1963, whereby Collier and Kuglar purchased all the capital stock of a corporation, Ponderosa Estates, Inc., for the sum of $103,352.00. Collier and Kuglar gave three notes to cover the purchase price secured by a mortgage assignment and chattel mortgage. It is undisputed that Collier and Kuglar agreed to pay to Brown and Segars, or their heirs and assigns, the sum of $1,000.00 from the proceeds of the sale of each lot of property in the subdivision known as Ponderosa Estates, Inc. The agreement also provided that the failure of Collier and Kuglar to make these payments upon sale of each lot would give Brown and Segars a lien on all of the assets of Ponderosa Estates, Inc.

Collier and Kuglar defaulted under the 1963 agreement, having failed to make the payments as required, but a subsequent agreement was drawn on November 19, 1965, and it is this agreement which gives rise to the controversy. In this second agreement, entered into by Collier and Kuglar, their respective wives, and Brown and Segars, the parties recited the fact that Collier and Kuglar had defaulted by failing to make payments as agreed. They further agreed that a fifteen day extension of time, up to midnight December 5, 1965, would be given to Collier and Kuglar within which to remedy their default. If the default was not remedied, all the assets of Ponderosa Estates, Inc., would become the property of Brown and Segars.

In October, 1965, shortly prior to the date of the execution of the second agreement between the parties, Ponderosa Estates, Inc., had conveyed certain of the lots to Kuglar Construction Co., Inc. Johnie Kuglar, one of the appellants here, owned ninety-eight percent (98%) of the stock in the Kuglar Construction Co. Ponderosa had also conveyed certain lots in the subdivision to Collier Development Co., Inc., a corporation. J. J. Collier, one of the appellants here, was president of this company and his children owned all its capital stock.

The question at issue is whether the 1965 agreement released Collier and Kuglar from the obligations of the agreement of November 21, 1963. To decide this question it is necessary to refer to the agreement itself. Paragraph 4 of the 1965 agreement provides:

'4. All lots in the 3rd Sector of Ponderosa Estates which have been conveyed by Ponderosa Estates and for which the sum of One Thousand and no/100_ _ Dollars ($1,000.00) per lot has not been paid to the First National Bank of Birmingham as provided in the contract of November 21, 1963, shall be reconveyed to Ponderosa Estates, Inc., on December 6, 1965. Mrs. Lovene C. Kuglar, wife of Johnny (sic) Kuglar, one of the parties of the first part, and Mrs. Novel Morrow Collier, wife of Julius Jefferson Collier, the other party of the first part, join with their respective spouses in the execution of this agreement for the purpose of binding and obligating themselves to join in the execution of any deeds, bills of sale, conveyances and other agreements that may be necessary or desirable in order to accomplish and carry out the provisions of this agreement.'

Brown and Segars claim, and the trial court found, that Collier and Kuglar had not complied with this provision and were not released from the obligations of the agreement made November 21, 1963. Brown and Segars claim, and the trial court found, that they were deceived by Collier and Kuglar since the appellees had no knowledge of the conveyances made by Ponderosa to Kuglar Construction Co. and Collier Development Co., and since Kuglar and Collier knew they could not convey these lots because they were held by the two corporations.

Collier and Kuglar say that the deeds of conveyance were duly filed of record, that the parties were dealing at arm's length, that there was no duty on their part to inform Brown and Segars of the conveyances, and that Brown and Segars should have required that the corporations sign the agreement of 1965 if they were to be fully protected.

There is no question that Collier and Kuglar defaulted under the original agreement. The record shows that Collier and Kuglar initiated the request for an extension of time to remedy the default. The 1965 agreement recites the fact of this default....