Farmer v. Brooks

• Decision Date: 14 May 1925
• Docket Number: 4 Div. 195
• Citation: 104 So. 322,213 Ala. 137
• Parties: FARMER v. BROOKS et al.
• Court: Alabama Supreme Court

104 So. 322

213 Ala. 137

FARMER v. BROOKS et al.

4 Div. 195

Supreme Court of Alabama

May 14, 1925

Appeal from Circuit Court, Coffee County; W.L. Parks, Judge.

Bill in equity by B.G. Farmer, Jr., as trustee in bankruptcy of the J.H. Armor Mercantile Company, against D.J. Brooks and L.E Hay. From a decree sustaining a demurrer to the bill complainant appeals. Affirmed.

Farmer Merrill & Farmer, of Dothan, for appellant.

John H Wilkerson, of Troy, and M.S. Carmichael, of Montgomery, for appellees.

GARDNER J.

This bill was filed by appellant, as trustee in bankruptcy of the corporation known as the J.H. Armor Mercantile Company, against D.J. Brooks and L.E. Hay, two of the directors of said corporation, for the purpose of enforcing the common-law right of a corporation to hold its directors responsible as trustees for negligent conduct on their part in regard to its affairs. Respondent Brooks alone appears, and interposed demurrers to the bill as amended, and from the decree sustaining this demurrer, the complainant has prosecuted this appeal.

That the directors of a corporation, as here involved, may be brought to an accounting in equity as trustees thereof, for a breach of their common-law duties thereto, is well established by the weight of authority, and was recognized by this court in Bank of St. Mary's v. St. John, 25 Ala. 566. The jurisdiction of the equity court for such purpose was assumed in Blythe v. Enslen, 203 Ala. 692, 85 So. 1 (on subsequent appeal reported in Id. 209 Ala. 96, 95 So. 479), the discussion in that case, as to the right also to sue at law, having relation only to the question of the statute of limitations, upon which the decision rested. See, also, Briggs v. Spaulding, 141 U.S. 132, 11 S.Ct. 924, 35 L.Ed. 662; 14 Corpus Juris 150; 10 Cyc. 835 Hodges v. New England Screw Co., 1 R.I. 312, 53 Am.Dec. 624; Fisher v. Parr, 92 Md. 245, 48 A. 621.

That complainant succeeding to the rights of the corporation as its trustee in bankruptcy may maintain the bill is well settled. 10 Cyc. 837; McEwen v. Kelly, 140 Ga. 720, 79 S.E. 777. Indeed, neither the general equity of the bill nor complainant's right to maintain it is questioned by counsel for appellee, but it is insisted that the bill was defective in failing to set forth sufficient facts upon which liability may be fastened upon this respondent. Mere general allegations will not suffice, but the bill should state complainant's claim with sufficient clearness and certainty that the respondent may be informed of the nature of the case which he is called upon to meet. Duckworth v. Duckworth, 35 Ala. 70.

In Fisher v. Parr, supra, a somewhat similar case to that here considered, the court said:

"There can be no doubt that the claim of the plaintiffs to the aid of equity should be stated with reasonable accuracy and clearness, and that if his case be set out in a vague and indefinite manner, a demurrer will be allowed."

The degree of diligence required of directors is discussed in King v. Livingston, etc., Co., 192 Ala. 269, 68 So. 897, where it is also stated that what constitutes a proper performance of the duties of a director is a question of fact to be determined in each case in view of all the circumstances. Measured by the foregoing rules, we are of the opinion the averments of the bill against the respondents were of too vague and general a character.

The respondents Brooks and Hay, together with Armor and Mayes were the sole stockholders and each a director. The management and control of the business was left with the two directors, Armor and Mayes, and the business showed a profit in 1920 and 1921, but in the period between February and June, 1922, suffered a loss of its capital stock and several thousand dollars in addition. Respondent Bro...