Elyton Land Co. v. Dowdell

• Decision Date: 27 November 1896
• Citation: 113 Ala. 177,20 So. 981
• Parties: ELYTON LAND CO. ET AL. v. DOWDELL.
• Court: Alabama Supreme Court

20 So. 981

113 Ala. 177

ELYTON LAND CO. ET AL. v. DOWDELL.

Supreme Court of Alabama

November 27, 1896

Appeal from city court of Birmingham; H. A. Sharpe, Judge.

Suit by J. S. Dowdell, executor, against the Elyton Land Company and others. Decree for complainant. Defendants appeal. Affirmed.

The original bill in this case was filed by Annie Dowdell, on October 8, 1894, against the Elyton Land Company and other appellants. Pending the hearing of the cause, Annie Dowdell died, and, her death being suggested, suit was revived in the name of James S. Dowdell, as executor. The purpose of the bill is sufficiently stated in the opinion. To the bill, the defendants filed their plea, supported by answer. This plea sets forth the history of the dividend trust bonds, and states that the bonds, having been issued in lieu of payment of dividends, were and are a valid obligation of the defendant the Elyton Land Company, and founded upon a good and valuable consideration; that, the complainant having accepted her proportion of said bonds, with the full knowledge of the facts relating to the issuance thereof, she is estopped to deny that they were issued for a valuable consideration; and that they are binding obligations of the Elyton Land Company. The facts disclosed in this plea and answer are sufficiently stated in the opinion. The plea and answer were excepted to, upon the following grounds: (1) That the plea presents no defense to the bill of complaint. (2) There were not facts averred in the plea or answer which raise any question of estoppel as to complainant's right to relief. (3) The plea, supported by answer, presents a purely immaterial issue, and its allegations are not relevant to the case made by the bill of complaint. This plea having been submitted on the above exceptions, the court rendered a decree sustaining such exceptions, and holding that the plea was insufficient as a defense to the bill of complaint. From this decree the present appeal is taken, and the said decree is assigned as error.

A. T London and Tompkins & Troy, for appellants.

Gordon Macdonald and Smith & Weatherly, for appellee.

COLEMAN J.

The complainant, a stockholder, owning five shares in the Elyton Land Company, a corporation, filed the present bill, for the purpose of annulling and setting aside a sale and conveyance of its property assets to the Elyton Company, a corporation and to set aside and annul a mortgage executed by the Elyton Company to the Maryland Trust Company, as trustee, to secure the payment of certain bonds issued by the Elyton Company. To the bill, the respondent filed a plea and answer in support of the plea, to which the complainant excepted, as being insufficient. The court sustained the exception, and this ruling is the only error assigned. In December, 1870, the Elyton Land Company was incorporated, for the purpose of "buying lands and selling lots, with the view to the location, laying off, and effecting the building of a city at or near Elyton," in Jefferson county, Ala. Its capital stock was $200,000, divided into 2,000 shares, of $100 each. In February, 1889, the charter of the Elyton Land Company, by act of the legislature, was amended and confirmed, by which its corporate existence was continued, with all its rights privileges, and franchises, for 50 years, and during such continued existence it was authorized and empowered "to borrow and lend money, to guaranty indebtedness for persons and corporations, to build, own, rent, lease, and otherwise lawfully use buildings of every kind and description, to issue bonds in amount not to exceed five millions of dollars *** and to take stock in other corporations." Prior to the 9th day of November, 1887, it was ascertained that the Elyton Land Company had leased and owned and had in possession, as profits, promissory notes for lots and lands sold, amounting to over $3,900,000, estimated to be worth not less than $3,500,000; and at a meeting of the directors it was resolved that $2,400,000 of said notes be distributed in kind as a dividend to the shareholders. By resolution adopted on the 9th day of November, 1887, so much of the former resolution as provided for a division in kind of said promissory notes was rescinded, and in lieu thereof it was resolved that the dividend should be in the form of a certificate for $1,200 for each share of stock. By the resolution, and on the face of the certificates issued in pursuance thereof, it was provided that the dividend certificate should be paid at the option of the company in money or its bonds, bearing interest at the rate of 6 per cent., "which may hereafter be authorized to be issued." The certificates were issued to the shareholders, including complainant, and subsequently were paid for in the bonds of the company, as provided in the resolution and in the certificate. These bonds are denominated "Dividend Trust Bonds," and provided that the holder is entitled to the security derived from setting apart of $2,400,000 of notes given for purchase money of land, and constituting a first lien thereon. The complainant, it seems, disposed of her bonds either in the market or some other way. Her rights as such bondholder are not involved in this litigation, but only her rights as a shareholder. At a meeting of the board of directors of the Elyton Land Company held November 15, 1888, it was "resolved that no dividends in money shall be paid the stockholders until all of its indebtedness, including the entire principal of dividend...