Empire Realty Co. v. Harton

Decision Date19 December 1911
Citation57 So. 763,176 Ala. 99
PartiesEMPIRE REALTY CO. ET AL. v. HARTON.
CourtAlabama Supreme Court

Rehearing Denied Feb. 15, 1912.

Appeal from Chancery Court, Jefferson County; A. H. Benners Chancellor.

Bill by H. M. Harton against the Empire Realty Company and others to enforce a resulting or constructive trust in favor of the Ensley Realty Company, and to declare certain sales of stock therein fraudulent and void. From a decree overruling demurrers to the bill, respondents appeal. Reversed rendered, and remanded.

The demurrers referred to are as follows: (5) "Complainant shows no right to file this suit in his own name as a stockholder of the Ensley Realty Company." (9a) "Said bill is multifarious." (9d) "It is not averred or shown that the Ensley Realty Company has not received its full rights in the premises."

Campbell & Johnston, for appellants.

S. C M. Amason, for appellee.

McCLELLAN J.

This bill, exhibited by H. M. Harton, purports to be one by a stockholder in the Ensley Realty Company, in behalf of that corporation, and seeks the declaration and enforcement of a "resulting or constructive trust" in its favor in property alleged to have been purchased by the use of assets of the Ensley Realty Company. It is the successor of the bill considered, and stricken on demurrer, in the cause of Harton v. Johnston et al., 166 Ala. 317, 51 So. 992. Abstractly speaking, it is, of course, a sine qua non to the maintenance of such a bill that the complainant be at the time a stockholder in the corporation in behalf of which he would proceed. 10 Cyc. p. 974; Cook on Corp. § 735; Inman v. N.Y. Water Co. (C. C.) 131 F. 999; Hodge v. U.S Steel Corp., 64 N. J. Eq. 90, 53 A. 601; Hanna v. People's Bank, 76 A.D. 224, 78 N.Y.S. 516; Tutwiler v. Tuskaloosa Co., 89 Ala. 391, 7 So. 398.

Whether a complainant is a stockholder, invested, under proper conditions, with the right to implead in behalf of the corporation, presents, of course, a different inquiry. Once a stockholder, it is clear that that character, and the rights incident and pertaining thereto, cannot be divested by wrongful, legally fraudulent, conduct or action. It is but the statement of a truism to say that no right can be lost or acquired by such conduct alone.

The complainant was a stockholder in the Ensley Realty Company. Prior to the filing of this bill, all the shares of stock in the corporation in which complainant had any interest were levied upon and sold under an execution issuing out of the city court of Birmingham. No irregularity in the proceeding appears. The judgment plaintiff was T. B. Lyons; and from an exhibit to the amended bill, interpreting it against the pleader, it appears that he had assigned the judgments upon which the executions issued. To whom is not, with certainty, shown. It is averred in the amended bill that Johnston and Enslen, against whom wrongful conduct in respect of the rights and properties of the Ensley Realty Company is charged, procured the issuance of the executions mentioned, and so with the purpose and intent of forestalling and preventing complainant from proceeding to the enforcement and protection of the corporate rights of the Ensley Realty Company, the consequence being, if unavoided, to divest complainant of his character as a stockholder therein. To be relieved of this condition, the amended bill seeks the setting aside and vacation of the sales under the executions; and, along with the ground implied in the stated charge of fraudulent purpose on the part of Johnston and Enslen, it is alleged that the purchase by them of the stock was at a grossly inadequate price, specifying that paid on the one hand, and the value of the stock, on the other, and that the complainant was without means to pay the judgment against him and without ability to secure the means to do so or to avert the sale.

As amended the bill offers to have Johnston and Enslen, if they are the owners of the judgments, paid the judgments and interest and other lawful charges incident thereto, out of dividends, accrued or to accrue, on or to said stock. Unless the sale is avoided, the complainant was not a stockholder when his bill was filed; and hence cannot maintain the cause. Granting the most to complainant, under his amended bill, the grounds upon which he would vacate the sale render it voidable only, not void; and, in consequence, the title to the stock vested in the purchasers, subject to be divested if the sale is vacated. Howard v. Corey, 126 Ala. 283, 28 So. 682.

Under the allegations of the amended bill, in respect of the fraudulent intent with which Johnston and Enslen caused the issue of the executions and the sales of the stock in question, there was some doubt, at first, whether the demurrer, objecting merely that it affirmatively appeared complainant was not a stockholder, and that no fraud was shown, did not admit the general averment of fraudulent intent, and hence deprived that ground of any point; for clearly, taking the averments as true on this hearing, these parties could not fraudulently divest the complainant of his character and rights as a stockholder and thereby deprive him of the standing in court he assumes in this bill. They could not prevent the inquiry sought by reliance upon their fraudulent conduct to create an obstacle thereto. Ernst v. Elmira Imp. Co., 24 Misc. 583, 54 N.Y.S. 116. If the...

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16 cases
  • Apa Excelsior III, L.P. v. Windley
    • United States
    • U.S. District Court — Northern District of Georgia
    • July 27, 2004
    ...sale. See generally Taylor v. Terry, 279 Ark. 97, 649 S.W.2d 392 (1983) (illustrating such an action); cf. Empire Realty Co. v. Harton, 176 Ala. 99, 57 So. 763, 764 (1911) ("Once a stockholder, it is clear that that character, and the rights incident and pertaining thereto, cannot be divest......
  • National Park Bank of New York v. Louisville & N.R. Co.
    • United States
    • Alabama Supreme Court
    • February 1, 1917
    ... ... Skinner v. Southern ... Gro. Co., 174 Ala. 359, 367, 56 So. 916; Empire ... Realty Co. v. Harton, 176 Ala. 99, 57 So. 763; ... Phoenix Ins. Co. v. Moog, 78 Ala. 301, ... ...
  • Moody v. Moody
    • United States
    • Alabama Supreme Court
    • April 28, 1927
    ... ... Co., 203 Ala ... 482, 484, 83 So. 481; Nat. Park Bank v. L. & N.R. Co., supra; ... Empire Realty Co. v. Harton, 176 Ala. 99, 57 So ... 763; Skinner v. South Grocery Co., 174 Ala. 359, ... ...
  • Shelton v. Thompson
    • United States
    • Alabama Supreme Court
    • January 13, 1989
    ...of the corporation in which he no longer owns an interest. Green v. Bradley Construction, Inc., supra; see, also, Empire Realty Co. v. Harton, 176 Ala. 99, 57 So. 763 (1911) (holding that the plaintiff, who had surrendered his stock involuntarily as a consequence of a levy of execution, los......
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