Ft. Payne Furnace Co. v. Ft. Payne Coal & Iron Co.

• Decision Date: 27 July 1892
• Court: Alabama Supreme Court
• Parties: FT. PAYNE FURNACE CO. v. FT. PAYNE COAL & IRON CO. ET AL.

11 So. 439

96 Ala. 472

FT. PAYNE FURNACE CO. v. FT. PAYNE COAL & IRON CO. ET AL.

Supreme Court of Alabama

July 27, 1892

Appeal from chancery court, De Kalb county; S. K. MCSPADDEN Chancellor.

Bill in equity by the Ft. Payne Coal & Iron Company and another against the Ft. Payne Furnace Company, praying the appointment of a receiver. From a decree for complainants respondent appeals. Reversed.

W H. Denson and T. C. Carey, for appellant.

Spaulding & Parks, Davis & Haralson, and True Page Pierce, for appellees.

STONE C.J.

Each of the principal parties to this suit is a private corporation, having its business situs-its domicile-at Ft. Payne. The furnace company owned and operated a blast furnace employed in converting iron ore into iron. The coal and iron company supplied coke and iron ore to the furnace company. The present suit was instituted by original bill in the name of the coal and iron company against the furnace company; and, being in form a creditors' bill, Powell, on his petition, was allowed to come in as a cocomplainant. The bill avers that the furnace company was and is indebted to the coal and iron company in a sum exceeding $30,000. This claim is not in judgment. The petition and averments of Powell represent that the furnace company did and does owe him over $3,000, which is in judgment. An amendment to the bill contains the charge that the furnace company was insolvent. The bill was sworn to April 30, 1892, and was probably filed at that time. The bill then avers that "on or about the 1st day of May, 1891, the defendant, [furnace company,] by order of its directors, which order was based upon the vote of the stockholders of respondent, directing the action of the directors, voted to issue its bonds, not to exceed the amount of $100,000, and executed by its proper officers a deed of conveyance to the Old Colony Trust Company, a body corporate under the laws of Massachusetts, on the 25th day of May, 1891, conveying all its property, both real and personal. Said deed of conveyance was in trust for the benefit of the holders of the bonds, which were issued as above mentioned and set out. Complainant further avers that respondent has issued and sold in pursuance of its said order the amount of about thirty-four thousand dollars' worth of bonds." The bill then avers that at a stockholders' meeting held at Providence, R. I., on February 17, 1892, "it was voted to empower directors to sell respondent's property, if it seemed to them best; that at a directors' meeting held in Providence, R. I., March 24, 1892, it was voted to sell said property at public sale in Ft. Payne, Ala., on the 9th day of May, 1892." Appended to the bill is a circular letter issued by the directors, appealing to the stockholders to purchase the bonds, as the only means of saving the property from sale, and from an entire sacrifice of all the corporation's effects in the payment of the thirty-four or thirty-five thousand dollars of bonds, previously disposed of. The property was advertised for public sale to the highest bidder, the sale to take place at Ft. Payne, May 9, 1892. The purpose of the present bill was to have the property placed in the hands of a receiver, and thus to prevent the sale. The register appointed a receiver, and on appeal to the chancellor he confirmed the appointment. There was also a motion to dismiss the bill for want of equity, which the chancellor overruled. From those two rulings of the chancellor the present appeal is prosecuted.

We have stated substantially all the material averments of fact contained in the bill which bear on the questions before us. It is nowhere shown who were the purchasers, or who are the owners, of the thirty-four or thirty-five thousand dollars of bonds issued in 1891, or whether the governing body of the corporation, or any member of it, has any interest in or claim to those bonds; and there is no semblance of charge that the directors, or any of them, have any interest in the sale proposed to be made. No charge is made of bad faith or fraud in the sale of the bonds, or that they were not sold for their full value, and to bona fide purchasers. Nor is it shown when the bonds became due, nor on what event or default the mortgage or trust deed is to become due and a foreclosure had, according to the terms of the conveyance. No copy of the mortgage or trust deed is found in the record, and there is no attempt to set forth its terms or contents. For aught we know, the proposed sale was in literal compliance with the requirements of the mortgage.

We said we have stated substantially the averments of fact found in the bill. The bill, however, does contain the following averments: "Complainant charges that the proposed sale on May 9, 1892, is a fraudulent scheme concocted for the purpose of selling said property so that there can be no redemption, and thereby secure to the bondholders the entire property in exclusion of all other creditors or stockholders. Complainant charges and avers that, as will be shown by reference to Exhibit A, unless checked in their fraudulent and unwise course, all the property of respondent, to the amount of fully one hundred thousand dollars' worth, will be sold by said directors for the small sum of thirty-four thousand dollars to the holders of respondent's bonds, and the complainant and all other creditors and the stockholders in respondent's corporation will entirely lose their debts and stock. And complainant avers that said directors of respondent corporation are fraudulently conniving with the bondholders of respondent to sell all the property of respondent for simply the amount of the bonded indebtedness to the holders of the bonds, and that they have advertised and proposed at said sale to take in payment for the property of said respondent the bonds outstanding of respondent; and no effort has been made, or is being made, to pay its general indebtedness; and it is their purpose to sell it for no more than the amount of the outstanding bonds. Complainant charges and insists that such a sale as that contemplated by respondent, and shown by the exhibits hereto, would be a fraud in law and in fact on all the general creditors of respondent, and a clear loss to its stockholders; that its property would be sacrificed for the benefit of the bondholders, while the stockholders and general creditors would be cut entirely off from any benefit of the sale, and lose their debts and holdings."

Exhibit A, referred to in the above extract, furnishes no evidence of an intention or desire on the part of the directors to sell the property for only enough to pay off the bonds. That paper was an appeal to the stockholders to come to the relief of the corporation, by purchasing its bonds; and, as an argument to induce a favorable response, they expressed the belief or conviction that, if relief was not given, the property at such forced sale would not yield more than enough to pay the bonded debt. A further remark: The sale was to be public, and to the highest bidder. For aught that is shown in this record, there was no lien on the property beyond the $34,000 bonded indebtedness secured by the mortgage. Any one could claim to bid at the public sale, and any surplus the property might yield over the amount of the bonds would go to the other creditors till they were paid, and, if any balance was left, that would go to the stockholders.

A mere general averment of fraud, as that a conveyance or a sale or other disposition, made or threatened, was or is with...