Frenkel v. Hudson

• Citation: 2 So. 758,82 Ala. 158
• Parties: FRENKEL v. HUDSON.
• Decision Date: 18 June 1887
• Court: Supreme Court of Alabama

2 So. 758

82 Ala. 158

FRENKEL v. HUDSON.

Supreme Court of Alabama

June 18, 1887

Rehearing refused July 27, 1887.

Appeal from chancery court, Mobile county; Hon. JOHN A. FOSTER Chancellor.

Bill in equity for specific performance of verbal agreement to execute mortgage.

Overall & Bestor and Pillana, Torrey &amp Hanaw, for appellant.

Greg. L. Smith, contra.

SOMERVILLE J.

1. The appellee, Frenkel, as assignee of the Citizens' Mutual Insurance Company, an insolvent corporation, filed the present bill against the appellant Hudson, who is assignee of the Point Clear Improvement Company, also an insolvent corporation, and other defendants, to compel specific performance of an alleged agreement to execute a mortgage to secure the purchase money of certain real estate conveyed by the complainant insurance company in February, 1885, to the defendant Adams, and by the latter to the defendant corporation, the Point Clear Improvement Company. A second aspect of the bill, claiming a vendor's lien on the same property, having been abandoned as untenable, need not be noticed in this discussion. The main issue, in our opinion, upon which the decision of the cause must turn, is whether the Point Clear Improvement Company, to which Adams conveyed the land, can be regarded as a bona fide purchaser for value without notice of the latent equity sought to be fastened on the property in the present bill. The chancellor decided that the company, as vendee, was chargeable with such notice, and this finding is before us for review.

Our first inquiry is, was the defendant company a purchaser for value? We think that it was very clearly. The testimony shows an agreement of the Citizens' Mutual Insurance Company to sell its undivided half interest in the property to one Goelet for a consideration of $9,000, and, as we may also admit, an agreement proved on his part to secure the amount by mortgage, or else to have Adams secure it, to whom, as a convenient conduit of title, the property was conveyed by the direction of Goelet. The deed to Adams, bearing date February 18, 1885, and filed for record in the probate court on the same day, recited on its face, contrary to the truth, a cash consideration of $9,000 in hand paid by the vendee, nothing in fact having been paid. He had already purchased, for a like consideration, the other half interest in the same property from the People's Savings Bank. Goelet had subscribed for 163 shares of the capital stock of the Point Clear Improvement Company, for which he was indebted to said corporation in the sum of $16,300. Adams was a subscriber for 160 shares, and the remainder of the 400 shares was taken by other subscribers. The entire property, including both the half interest purchased by Adams from the People's Savings Bank, and that purchased from the Citizens' Mutual Insurance Company, was conveyed to the improvement company for a recited consideration of $20,000, in payment or satisfaction of so much of the stock subscriptions, including those of both Goelet and Adams. The bill, it is true, which is relied on as evidence for the defendants, alleges that for this land, so conveyed, the Point Clear Improvement Company "paid nothing;" but it avers at the same time, that the consideration received for the property was stock in the company taken in the name of Adams and Goelet. The testimony abundantly shows that the stock certificates were issued to Goelet, precisely to what amount it does not appear. But, whether the certificates were issued or not, his subscription was pro tanto paid and satisfied by the conveyance of the property. The issue of the certificates would confer no rights additional to the ownership of the stock, but would merely be evidence of such ownership. The rights thus secured by Goelet obviously constituted a valuable consideration. He thereby became the holder of a large amount of corporate stock, which was valuable property, subject to ownership, transfer, levy, and sale. Such ownership also invested him incidentally with the valuable rights of voting at stockholders'...