Collier v. Mayflower Apartments

• Court: Georgia Supreme Court
• Writing for the Court: GRICE, Justice.
• Citation: Collier v. Mayflower Apartments, 196 Ga. 419, 26 S.E.2d 731 (Ga. 1943)
• Decision Date: 08 July 1943
• Docket Number: 14566.
• Parties: COLLIER v. MAYFLOWER APARTMENTS, Inc., et al.

26 S.E.2d 731

196 Ga. 419

COLLIER v. MAYFLOWER APARTMENTS, Inc., et al.

No. 14566.

Supreme Court of Georgia

July 8, 1943

Syllabus by the Court.

1. Misjoinder of causes of action is a matter for appropriate special demurrer. Such an objection is not reached by general demurrer.

2. A petition by a minority stockholder which seeks to set aside an executed agreement between the corporation and its debtor under the terms of which the corporation received less than the amount of its debt in settlement thereof, and which seeks a judgment against the debtor for the difference between the face value of the debt and the amount so received, the settlement having been made by its president, who executed a cancellation of a deed given to secure said indebtedness which cancellation was ratified at a corporate meeting, fails to set forth a cause of action against the original debtor of the corporation, the petition on its face showing a valid accord and satisfaction.

3. A petition by a minority stockholder against the stockholders who were also the directors, which alleges that they dissipated the assets of the corporation by settling a valid debt of $19,912.50 held by it against a solvent debtor able to pay, it not appearing that the debtor disputed the amount or the validity of the same, for the sum of $12,500, after the petitioner had repeatedly requested at formal meetings that the directors press the collection, that it was long overdue, and the only reply of the directors was in effect that they would rather give the evidences of indebtedness to a named person than to press the collection, the petition disclosing no reason why the directors accepted the lesser amount, or why, other than as above stated, they made this compromise settlement, shows on its face an improper diversion of funds by the directors belonging to the corporation, which was an act ultra vires, to the injury of the corporation, for which the directors were personally liable.

4. The action was not subject to dismissal on the ground that the petition did not disclose that petitioner made an earnest effort to obtain redress at the hands of the directors and stockholders, or why it could not be done, or that it was not reasonable to require it; the petitioner being one of only five stockholders of the corporation, they also comprising the board of directors, he owning one fifth and they four fifths of the stock, and the suit seeking to subject them to liability for acts ultra vires, to the injury of the corporation.

Anjaco Inc. is a family corporation, all the stock in which is owned by Andrew J. Collier, Mrs. Annie Lou Minor, Mrs. Mary Lena Martin, Thomas J. Collier, and Meredith Collier, share and share alike. Originally this corporation held a first security deed against the real estate upon which was later constructed the Mayflower Apartments, the owner of which subject to outstanding liens and securities, is Mayflower Apartments, Inc. Owing to successive loans and liens, the payment of some and the renewal of others, Anjaco Inc. accepted a second or junior security for the $15,000 balance of purchase money owing to it. Andrew J. Collier brought a petition against the Mayflower Apartments, Inc., Anjaco Inc., H. A. Minor, his wife Mrs. Annie Lou Minor, Mrs. Mary Lena Martin, Thomas J. Collier, and Meredith Collier, praying that his petition be construed as a minority stockholder's bill brought for the purpose of recovering in behalf of Anjaco Inc. and its stockholders. The petition as amended shows as follows: Mayflower Apartments, Inc., is solvent. At the time designated in his petition that corporation had $25,000 available for the payment of liens for labor and material used in the construction of its apartment building and the debt owing to Anjaco Inc., which, because of default in payments and accrued interest, had grown to be around $20,000. This debt to Anjaco Inc. held priority over the liens of others for labor and material. Mrs. Annie Lou Minor, one of the five stockholders of Anjaco Inc., and her husband, H. A. Minor, were the owners of all the common stock of Mayflower Apartments, Inc., and those who had liens for labor and material were given all the preferred stock in Mayflower Apartments, Inc., in the proportion of their respective liens. Four of the stockholders of Anjaco Inc., named as defendants, were unwilling to enforce collection of the debt of $19,912 owing to that corporation; and without plaintiff's knowledge and consent, Meredith Collier, the president of Anjaco Inc., made a settlement with Mayflower Apartments, Inc., by accepting payment of $12,500 in full of the debt owing to Anjaco Inc.; and this was over petitioner's repeated protests and after he had informed the other stockholders and directors of Anjaco Inc. that he had obtained a commitment from certain of the preferred stockholders of Mayflower Apartments, Inc., that they were ready to pay off the notes and mortgage given by Mayflower Apartments Inc. to Anjaco Inc., provided only that they should receive a proper and suitable cancellation; and the settlement made was later confirmed by a purported resolution of the directors of Anjaco Inc. The plaintiff alleges that they said they would rather give the money to Mrs. Annie Lou Minor than enforce collection of same; that the settlement of the debt owing to Anjaco Inc. at some $7,500 below its face value enabled the Mayflower Apartments, Inc., to apply what money it had left out of the $25,000 on hand towards the payment of liens owing to the owners of the preferred stock of Mayflower Apartments, Inc., of whom Mrs. Annie Lou Minor was one, she also being one of the stockholders of Anjaco Inc., to the detriment of said family corporation. Petitioner alleges that the above transaction was a conspiracy entered into by and between the remaining stockholders of Anjaco Inc. and Mayflower Apartments Inc.

Attached as exhibits were copies of a petition by certain lienholders against Mayflower Apartments Inc. and Anjaco Inc., and its stockholders, and of petitioner's amended answer thereto. The plaintiff prayed as follows: That a judgment be entered in behalf of Anjaco Inc. against Mayflower Apartments, Inc., for the amount due on the notes given by Mayflower Apartments, Inc., to Anjaco Inc., crediting on said judgment the $12,500 which had been paid as above shown; or, in the alternative, that Anjaco Inc. be required to restore to Mayflower Apartments, Inc., the $12,500; and that Mayflower, Inc., be required to restore to Anjaco Inc. the notes; and for judgment against Mayflower Apartments, Inc., for the full amount of the principal and interest on said notes. That in the event it be determined that the court is without power to grant the relief above prayed, judgment be entered in favor of Anjaco Inc. for the amount of the difference between $12,500 and the face amount of the principal and interest of the notes, against Meredith Collier, Mrs. Annie Lou Minor, Mrs. Mary Lena Martin, and Thomas J. Collier, the remaining directors of Anjaco Inc.; that in the event of any recovery of any sums of money in behalf of Anjaco Inc. as against Mayflower Apartments, Inc., the same be paid into the registry of the court and distributed by appropriate order in accordance with the rights of the parties at interest.

Attorneys representing H. M. Minor and Mayflower Apartments, Inc., demurred on the grounds that the petition failed to set forth sufficient facts entitling petitioner to any of the relief prayed for; and that the facts alleged were insufficient in law to show any fraud, conspiracy, or ultra vires acts on the part of said defendants. There were special demurrers on the grounds that the assailed allegations made were incompetent, irrelevant, and immaterial, and that one or more paragraphs of the petition constituted a conclusion of the pleader, there being no sufficient facts set forth upon which to base said conclusion. Attorneys representing defendants Anjaco Inc., Thomas J. Collier, Meredith Collier, Mrs. Annie Lou Minor, and Mrs. Mary Lena Martin demurred as follows: That the petition as amended sets forth no cause of action at law or in equity; that it alleges no acts or actions on the part of those defendants which would cause cancellation referred to; that it alleges no actions of those defendants which was not authorized under their powers as stockholders, directors, and officers of Anjaco Inc.; that it set forth no act of Anjaco Inc. which it was not authorized to perform; that no facts are alleged by which a verdict based on fraud or conspiracy could be based; that no acts constituting fraud or conspiracy are alleged; that what the defendants did was not ultra vires. And demurred specially, that if the record of the former case is material at all, the complete record, including verdicts, decrees, and remittiturs are material, and that the isolated parts of the former record set forth as exhibits illustrate nothing; and that no commitment, as alleged, is set up in the petition or the amendment. The demurrers were sustained, and the plaintiff excepted.

W. L. Bryan, of Altlanta, for plaintiff in error.

Haas, Gardner, Lyons & Hurt and Mitchell & Mitchell, all of Atlanta, for defendants in error.

GRICE Justice.

1. The demurrers do not invoke a ruling as to whether the petition is defective on account of duplicity in that the alleged cause of action against Mayflower Apartments, Inc., and H. A Minor is distinct from the one against the other defendants. While at common law, and under the decision in Governor v. Hicks, 12 Ga. 189, misjoinder of distinct causes of action was good reason for dismissing the case on general demurrer, the later holdings are to the effect that since that decision such radical changes have been...