Gamewell Fire Alarm Telegraph Co. v. Fire & Police Telegraph Co.

• Decision Date: 18 November 1903
• Parties: GAMEWELL FIRE ALARM TELEGRAPH CO. v. FIRE & POLICE TELEGRAPH CO. et al.
• Court: Kentucky Court of Appeals

76 S.W. 862

116 Ky. 759

GAMEWELL FIRE ALARM TELEGRAPH CO. v. FIRE & POLICE TELEGRAPH CO. et al.

Court of Appeals of Kentucky.

November 18, 1903

Appeal from Circuit Court, Jefferson County, Chancery Division.

"To be officially reported."

Action by the Gamewell Fire Alarm Telegraph Company against the Fire & Police Telegraph Company and others. From an adverse decree, complainant appeals. Affirmed.

Dodd &amp Dodd, for appellant.

Randolph H. Blain and McDermott & Ray, for appellees.

NUNN J.

The record in this case is voluminous, and we will state only such facts as are necessary for a proper understanding of the questions involved. It appears that the appellant, the Gamewell Fire Alarm Company, is a foreign corporation organized under the laws of the state of New York. The New Gaynor Electric Company is a corporation organized under the laws of this state, and likewise the Fire & Police Telegraph Company. It appears that the New Gaynor Company was organized in June, 1892, and that the Fire & Police Company was organized in July, 1894. That prior to this last date the New Gaynor Company was a competitor of the appellant, Gamewell Company, in this territory; they being engaged in the same line of business. The Gamewell Company had three or four agents representing it in Louisville, and they, with the president and other officials of the appellant, conceived the plan and purpose of organizing the Fire & Police Company, and preventing further competition by the New Gaynor Company by purchasing its stock. That since the organization of the Fire & Police Company it has owned all the stock of the New Gaynor Company, and there has not been held, or pretended to be held, any stockholders' meeting of the New Gaynor Company, or the election of any officers thereof. That since that date the New Gaynor Company has only had nominal existence, at the dictation of the Fire & Police Company, for the purpose of acting as a pretended competitor in obtaining business, and that it had no independence whatever. That this absorption of the New Gaynor Company by the Fire & Police Company, and holding it out as a pretended competitor for business, was at the instance, dictation, and for the benefit of the appellant. There was placed in the hands of agents of appellant, after the absorption of the Fire & Police Company enough of the New Gaynor Company stock for the purpose of officering it. These persons continued to hold themselves out as the officers of the New Gaynor Company until the institution of this action. The public had no notice or information whatever that it only had nominal existence, and was in fact owned by the Fire & Police Company, and during this time it contracted debts to the amount of many thousand dollars; and they also transferred to the Fire & Police Company all the personal property belonging to them, by a simple entry on the books of both companies, without notice to any one, and without visible change of ownership of the property. During the existence of the Fire & Police Company it contracted debts to the extent of many thousand dollars.

The appellant claimed to be one of the creditors of the Fire &amp Police Company, and in the year 1900 brought this action against it for about $8,000, and also made the New Gaynor Company a defendant, claiming that, by reason of the matters hereinbefore stated, its property and effects were also liable to the payment of the claims of the Fire & Police Company's creditors, and made the necessary allegations for the appointment of a receiver to take charge of the property and assets of both defendant corporations. Appellant also alleged in its petition that the property of the defendant corporations was in danger of being lost, wasted, and largely consumed unnecessarily in costs and in enforced sales under executions of their property in behalf of their divers and sundry creditors, and that its interest as a stockholder and creditor, and the interests of all other creditors and stockholders in these defendant companies, would be materially injured unless the court appointed a receiver to take charge of this property, and convert the proceeds thereof, and pay the same into court for equal distribution among their creditors, and that all the creditors of these defendant corporations be enjoined and restrained from instituting or prosecuting any suit against either the Fire & Police Company or the New Gaynor Company. The court, on the application of the appellant, appointed a receiver as requested, and granted the injunction enjoining and restraining the creditors of these corporations from instituting or prosecuting suits except in this action. The New Gaynor Company and the Fire & Police Company filed their answers, admitting and stating that the allegations of appellant's petition were true, and joined appellant in its prayer for relief.

The real appellees in this case are the creditors of the New Gaynor Company and of the Fire & Police Company. The E. A. Kinsey Company, as a creditor of the New Gaynor Company, filed its petition, asking that it be made its answer and counterclaim to appellant's petition and cross-petition against the Fire & Police Company. In these petition and amended petitions the Kinsey Company alleges that the creditors of the New Gaynor Company were numerous, and that its interests and the interests of all the other creditors of the New Gaynor Company were identical, and that the questions involved a common and general interest of many persons; that the parties were numerous; that it was impracticable to bring all of them before the court within a reasonable time, and that the expense would be great if each and all of the creditors were required to file independent and separate pleas in presenting their claims; and that it (the Kinsey Company) be allowed to sue and defend for the benefit of all the creditors of the New Gaynor Company. The appellee Southern Electric Company, a creditor of the Fire & Police Company, filed a similar pleading, with like allegations for the benefit of all the creditors of the Fire & Police Company; and the court made an order allowing the Kinsey Company to sue and defend for the New Gaynor Company creditors, and the Southern Company for the Fire & Police Company creditors.

These appellees, the creditors of the two defendant corporations admitted the attempted transfer of the property of the New Gaynor Company to the Fire & Police Company, and of the purchase by the Fire & Police Company of the New Gaynor Company stock, but say that it was done without any notice to them, or their having any knowledge or information thereof, and for a fraudulent purpose, and with intent to cheat the creditors of the two companies, and with intent to benefit the appellant. They further allege that the appellant, Gamewell Company, the Fire & Police Company, and the Gamewell Fire Alarm Auxiliary Company (which was a Maine corporation) were, at and during the times mentioned in the petition, organized, and had become a pool, trust, combine, and confederation, for the purpose of regulating, controlling, increasing, and fixing the price of electrical apparatus and appliances and fire alarms in the city of Louisville and community, and for the purpose of fixing, establishing, and limiting the amount and quantity of such articles to be produced and manufactured, bought or sold, and that the notes sued on in appellant's petition and transactions and contracts of which they were evidence were made and executed for the purpose of carrying out such illegal combination, pool, or trust, and that the money loaned, pretended to have been loaned, or furnished by the appellant, Gamewell Company, to the Fire & Police Company, as claimed in the petition, was loaned or furnished for such illegal purpose, and in furtherance of such unlawful scheme; that these transactions were in violation of provisions of the statutes of this state, and that the notes and contracts alleged and set forth in appellant's petition, by reason of these facts, were each and all null and void; and that the appellant had no claim against the assets of the Fire & Police Company by reason of such pretended notes and contracts. They further alleged that the assets of the New Gaynor Company and the Fire & Police Company were not sufficient to pay their indebtedness, and would only pay a small pro rata thereon (naming the amount which was also reported by the commissioner of the court), and that the Fire & Police Company owned all the stock of the New Gaynor Company; that the New Gaynor Company was not organized for any of the purposes mentioned in section 547 of the Kentucky Statutes, and that by reason thereof the Fire & Police Company was liable to all the creditors of the New Gaynor Company to the extent of the amount of stock held by it in the New Gaynor Company at par value, in addition to the amount of its stock, not exceeding the total amount of the respective debts of such creditors after the assets of the New Gaynor Company had been exhausted; that the settlement of the affairs of the New Gaynor Company and the Fire & Police Company was then in the hands of the receiver appointed by the court in that action, and they were about to be wound up, and the assets of each company about to be distributed, and unless the liability of the Fire & Police Company as stockholder in the New Gaynor Company be determined in that action, and its liability be enforced, great and irreparable injury would be done to the creditors of the New Gaynor Company, and they would be powerless to enforce their respective rights and claims against the Fire & Police Company as such stockholder. They asked the court not to allow the Fire & Police Company its pro rata on the claim it had filed against the New Gaynor Company,...