Galbreath v. Scott

• Decision Date: 27 May 1983
• Citation: 433 So.2d 454
• Parties: Louise GALBREATH and C & G Excavating, Inc. v. H.K. SCOTT. 81-364.
• Court: Alabama Supreme Court

Page 454

433 So.2d 454

Louise GALBREATH and C & G Excavating, Inc. v. H.K. SCOTT.

81-364.

Supreme Court of Alabama.

May 27, 1983.

David C. Wear of Wear & Wear and Loma B. Beaty, Fort Payne, for appellants.

Robert W. Hanson, Albertville, for appellee.

FAULKNER, Justice.

Defendants, Louise Galbreath and C & G Excavating, Inc. (C & G), appeal from a judgment of $50,000.00, entered after a jury verdict in favor of H.K. Scott.

C & G was organized under the laws of Florida. Galbreath and Scott each owned twenty-five shares of stock in the corporation. By virtue of an alleged interest in the fifty-first share of stock in C & G, Galbreath was able to elect herself and her son to the board of directors and make herself managing officer of the corporation. C & G's only asset was a lease to coal lands in DeKalb County, Alabama (the Dixson property). Galbreath, acting on behalf of C & G, entered into a contract with Brown Brothers Coal Co., Inc. (Brown Brothers) to extract and transport the coal from the Dixson property in exchange for the payment of royalties by Brown Brothers to C & G and to Dixson. C & G also paid a part of the royalties it received to Dixson. Mining operations took place between December 1979 and April 1981, during which time C & G received slightly more than $300,000 from the mining operation.

Scott's complaint named both Galbreath and C & G as defendants. In it he alleged that he had received nothing from the mining activities and that he was entitled to recover based on his ownership of the mineral rights to the Dixson property or his ownership of C & G stock. Prior to the trial, the parties entered into a stipulation whereby the question of Scott's ownership of the mineral rights was not to be submitted to the jury, but was to be tried before the court without a jury. The theory presented to the jury was that Galbreath improperly wasted or diverted corporate funds, thereby depriving Scott of his share of the corporate profits.

Galbreath, as managing officer of C & G, spent virtually all of the money received by C & G from the mining operation. Galbreath testified that C & G paid Dixson $118,107.42 in royalties. Dixson testified that he only received $50,909.27. Galbreath also testified that she paid herself $31,378.64 in salary, $4,681.23 in travel expenses and $12,382.89 in rent for vehicles and business equipment owned by Galbreath and used by C & G. The corporation also rented an apartment where Galbreath lived and conducted C & G's business, for which it paid $5,216.50; the corporation also paid $3,737.06 in utility bills for the apartment, $15,781.38 for gasoline and oil, and $3,237.76 for repairs for vehicles C & G rented. C & G also hired two of Galbreath's acquaintances from Florida at a cost of $23,269.71. These employees were charged with keeping up with the extracted coal and insuring that it was taken to the washer and properly accounted for. C & G also was forced to hire a guard at a cost of $5,508.00 to protect the operation from Dixson and his sons, who, according to Galbreath, perpetrated numerous acts of violence against Galbreath and Brown Brothers. C & G spent $49,644.00 for legal fees to represent Galbreath and C & G in other lawsuits. See Coleman v. Galbreath, 351 So.2d 888 (Ala.1977); Dixson v. C & G Excavating, Inc., 364 So.2d 1160 (Ala.1978). Payments were also made for interest on a loan, taxes, insurance, drilling, and miscellaneous supplies.

On appeal the defendants question (1) whether the trial court erred in exercising jurisdiction over the case because of pending litigation in Florida between the parties and (2) whether there was sufficient evidence to support the judgment.

(1) Following an unsuccessful attempt by Galbreath's original co-incorporator to divest her of her interest in C & G, Coleman v. Galbreath, 351 So.2d 888 (Ala.1977), Galbreath filed an action in Florida against C & G seeking an accounting. Galbreath v. C & G Excavating, Inc., et al., # 75-603, 5th Judicial Circuit of Florida. Scott filed an intervention in the Florida case after he acquired an interest in C & G. Scott requested an accounting and sought to otherwise protect his interest in the corporation.

Galbreath and C & G take the position that the trial court erred in assuming jurisdiction over the case due to the pending action in Florida. In support of their contention they cited Hudson & Thompson v. First Farmers & Merchants Bank, 265 Ala. 557, 93 So.2d 415 (1957), and Fegaro v. South Central Bell, 287 Ala. 407, 252 So.2d 66 (1971). Those cases stand for the proposition that a suit pending in federal court may be pleaded as a bar to a subsequent action in state court between the same parties concerning the same issues.

Here, since the action was pending in the court of a sister state, not a federal court, Hudson and Fegaro do not control.

"The mere pendency of an action in one state has no effect upon the right to bring an action in another. Whichever suit is first carried to judgment then bars the other, but it is only the rendition of judgment which has that effect. Until judgment is rendered, successive suits may be brought on the same cause of action in a dozen different states. While rendition of judgment on a prior judgment from another state as a cause of action does not discharge the prior judgment by merger or otherwise, the satisfaction of either judgment will discharge both."

R. LeFlar, American Conflicts Law § 75 (3d ed. 1977) (citations omitted). See also, Hall v. Milligan, 221 Ala. 233, 128 So. 438, 439 (1930).

(2) The case was tried on the question of whether the expenditures made by Galbreath on behalf of C & G were reasonable and necessary in the operation of the business. Scott contended that since C & G did not do the mining, but simply collected royalties on...