Ellis v. Vandergrift

• Decision Date: 11 May 1911
• Citation: 55 So. 781,173 Ala. 142
• Parties: ELLIS v. VANDERGRIFT ET AL.
• Court: Alabama Supreme Court

55 So. 781

173 Ala. 142

ELLIS v. VANDERGRIFT ET AL.

Supreme Court of Alabama

May 11, 1911

Rehearing Denied June 8, 1911.

Appeal from City Court of Birmingham; H. A. Sharpe, Judge.

Bill by A. B. Vandergrift and others against J. E. Ellis and others. From a decree overruling his demurrers to the bill, Ellis appeals. Affirmed.

Barney L. Whatley and Black & Davis, for appellant.

Lee C Bradley, John D. Strange, and Ward & Rudolph, for appellees.

McCLELLAN J.

This appeal is prosecuted alone by J. E. Ellis, one of a number of defendants. His complaint here is that his separate demurrer (he was concerned in no other) to the bill was overruled.

The general purposes of the bill--stating them without effort at particularity--are dissolution of the Three Rivers Coal &amp Iron Company, a corporation, and relief against averred fraudulent conduct on the part of a majority of the directorate, and of some of the officers, and of a majority of the shareholders, of the corporation.

The only relation J. E. Ellis appears from the bill to have to the subject-matter of the bill is that of a creditor--the holder, by assignment and transfer, of a note against the corporation. He is not shown to be a stockholder. His claim is traced, in particular averment, to S. A. Ellis, his transferror.

In formulating his demurrers, appellant appropriated the grounds of the demurrer interposed by C. B. Powell, another defendant. To these appellant added, in his demurrer, grounds addressed to those phases of the bill, wherefrom it is sought to invalidate his alleged claim against the corporation. While the amended bill assails the validity of his claim (note) against the corporation and invokes the powers of the court to annul his claim, yet it carries, also, the alternative in its prayer that, if the appellant's claim is found to be valid, it be paid out of the assets of the corporation--an entity unequivocally alleged to be solvent in any event.

In this state of averment--of limited relation of appellant to the subject-matter of controversy--he is not concerned with those phases of the amended bill which relate to the establishment vel non of the invalidity of stock issues to others described therein, or with the approval vel non of other (than his) claims or charges against the corporation. Nor can his rights be affected in any degree by the inquiry whether the dissolution of the corporation should be effected, since in any event his claim is assured of payment, unless the equity of the bill as amended depends wholly upon the solution of that question.

Only a party who is prejudiced thereby can avail of the objection of multifariousness. 16 Cyc. p. 263; 14 Ency. Pl. & Pr. pp. 212-213; Stone v. Knickerbocker Ins. Co., 52 Ala. 589.

The office of demurrer in equity is to accelerate the decision of the complainant's right, upon the confessed averments of his pleading, to maintain the bill as against the demurrant. If the phases of a bill to which the demurrant objects as defective cannot affect any interest or right the demurrant is impleaded to defend, he will suffer no prejudice by the retention of the bill, having equity notwithstanding. He cannot invoke his exoneration because of imperfections, not related to the cause or right of action, asserted against him. In short, he must be prejudiced by the defect; else he is unharmed and unconcerned.

Does the equity of the bill depend wholly upon the dissolution vel non of the corporation? We think not. We think its equity, so far as to conclude against appellant's demurrer in this regard, may be rested upon that phase of the bill whereby fraudulent conduct on the part of those before mentioned is particularly and sufficiently charged. Out of this conduct came, according to the bill, the claim (note) now held by appellant.

From the allegations of the amended bill, these general conclusions, avoiding unnecessary reiteration of the detailed averments thereof, must be deduced; that a majority of the stockholders and a majority of the directorate, together with some, if not all, of the officers of the corporation entered upon a scheme to wrongfully increase the capital stock of the corporation, to wrongfully create, in their personal behalf, liabilities against the corporation, to dissolve and wind up the corporation by means of a general assignment by them to a trustee of their own selection, and to have the corporation adjudged an involuntary bankrupt, when it in fact was entirely solvent. The phase of the conspiracy to wreck the corporation, charged by the bill, with which appellant is, by averment, connected thus appears: S. A. Ellis, from the year 1887 (the year the corporation was organized) until the year 1907, was at times secretary, president, and secretary and treasurer of the corporation. July 10, 1907, he presented an account for services in these respective capacities to the corporation. Therein he also included items for taxes paid by him on the corporate property for 20 years; for special and extraordinary services under the resolutions of a specified date; and for advertising meetings, and interest thereon. The aggregate of the whole account was $4,003. The aggregate of the items last described was $903. The directorate, of which he was one, allowed his account in toto. At this meeting accounts of other directors and officers for services were allowed, though in each instance the alleged creditor of the corporation did not, as the minutes show, vote upon the allowance of his particular claim. The account allowed to S. A. Ellis was ordered paid, half in stock issue at par and half in a note maturing in 30 days. This was accepted by S. A. Ellis. On August 10, 1907, the bill alleges S. A. Ellis assigned this note for $2,001.50 to his son (appellant). It is further alleged that the purpose and scheme in so assigning the note was to arm appellant to invoke the United States District Court's power to adjudicate the corporation an involuntary bankrupt; the general assignment before mentioned having been that day executed.

It is further alleged that the transfer and assignment was without consideration; that appellant "at said time had notice that these complainants and other stockholders denied that said corporation justly owed the debt for which the note was given, and that they had filed said former bill in this court for the purpose, among other things, to prevent the payment of said alleged debt, and he had notice at said time of the rights and equities of said corporation and these complainants as against the payment of the same."

"Orators aver that the transfer of said note, the adoption of said resolution, and the execution of said assignment were parts and parcel of a conspiracy on the part of said members of said board of directors, and said persons whose said claims had been allowed, to defraud orators and other stockholders of said corporation, not members of said conspiracy, by having said claims alleged to be due satisfied from the assets of said corporation, as a bankrupt, and thereby defraud its remaining stockholders; that it was the purpose of said persons, in furtherance of said conspiracy and their efforts to wreck said corporation, to deprive this court of jurisdiction of this cause, to have said bankruptcy cause instituted by a pretended innocent creditor, so that the defense of said bankruptcy proceedings could be undertaken and controlled by said majority of said board of directors to the end that said fictitious and invalid claims might be allowed as legal and subsisting debts against said corporation in said bankruptcy proceedings, and there paid out of the assets of said corporation, and that further counsel fees incurred by said persons holding said claims and said members of the board of directors, since the last meeting of said board, for services in their additional efforts to wreck said corporation, might be worked in as additional debts against said corporation, and then and there allowed and ordered paid. Orators further aver that in further pursuance of said conspiracy said majority of said board of directors authorized the said C. B. Powell, as attorney for said corporation, to file an answer to said petition in bankruptcy, admitting...