Grenada Bank v. Glass

• Decision Date: 09 April 1928
• Docket Number: 26761
• Citation: Grenada Bank v. Glass, 150 Miss. 164, 116 So. 740 (Miss. 1928)
• Court: Mississippi Supreme Court
• Parties: GRENADA BANK v. GLASS et al. [*]

116 So. 740

150 Miss. 164

GRENADA BANK v. GLASS et al. ^[*]

No. 26761

Supreme Court of Mississippi

April 9, 1928

Division A

Suggestion of Error Overruled May 14, 1928.

APPEAL from chancery court of Grenada county, HON. N. R. SLEDGE Chancellor.

Suit by the Grenada Bank against Lee E. Glass and the Lee E. Glass Lumber Company. From the decree plaintiff appeals and the Lee E. Glass Lumber Company prosecutes cross-appeal. Affirmed on both direct and cross-appeal.

Decree affirmed.

Green, Green & Potter, for appellant.

The question involved under the pleadings were confined within a very narrow scope under section 359, Hemingway's Code 1927; Sec. 344, Hem. Code 1917, sec. 584, Code of 1906. Unless the answer of the defendants specifically deny the allegations of the bill, such allegations, as are not denied are taken as uncontrovertible facts.

Insofar as the case against the Lee E. Glass Lumber Company was concerned, the gravamen of the bill was that through fraud, Lee E. Glass has borrowed ten thousand dollars from the Grenada Bank. That this sum was used in acquiring the property described, in the bill for and on behalf of the Lee E. Glass Lumber Company, a corporation, to be subsequently organized. That the loan was made on a basis of certain false and fraudulent statements as to the financial worth of Lee E. Glass, and the money thus secured by this loan, was sued for the purchase of the property, and the property was now held by the corporation--the Lee E. Glass Lumber Company. As the only facts denied by the answer were that the money obtained by Glass was used in the purchase of the property described in the bill, and that Glass had no authority to bind the corporation, these were the facts at issue. Sec. 359, Hem. Code 1927, has been construed a number of times by our courts, the leading cases on the subject being Hooper v. Overstreet, 79 Miss. 241. See, also, Jones v. Fox, 120. Miss. 798, 83 So. 241; Reynolds v. Wilkinson, 119 Miss. 590, 81 So. 278.

The evidence conclusively shows that the money borrowed by Glass from the bank was used in the purchase of the property described in the bill, title coming from the Phoenix Chair Company, to Glass, Thorne and Mitchum, and from Glass, Thorne and Mitchum to the defendant corporation. And that the corporation was not a bona-fide purchaser for value, only selling its stock to the three parties above named, in return for the property. As this money was obtained by fraud and as the Lee E. Glass Lumber Company was the beneficiary of this fraud it is liable to the complainant for the full amount of the loan for the full value of the property out of which the Grenada Bank was defrauded. 27 C. J. 11; Young v. Barcroft, 168 S.W. 392; Bailey v. London Guarantee & Accident Co., 121 N.E. 128; Green v. Waddington, 103 N.E. 964; Bringham v. Judy Investment Co., 186 S.W. 15. There is only one Mississippi case on this subject, that being Planters' Bank v. Neely, 7 How. 80, 40 Am. Dec. 51, the syllabus reading as follows: "It seems that the loss of a bill of exceptions taken in a cause, is not a good ground for a rehearing, after the elapse of the term at which the judgment was rendered. The probate court has power to set aside an administrator's sale on the ground of fraud, where by the fraud and deceit of the administrator the property of the estate did not bring more than one-fifth of its appraised value at the sale, and the purchaser had paid out no money for the property, the court of probate set the sale aside." And further going on to say that a person, innocent himself of fraud, cannot hold property or an advantage gained by him by the fraud of another. So, in this case, where it is proven beyond all peradventure that the money was borrowed from the Grenada Bank by Lee E. Glass, by means of fraudulent misrepresentations as to his worth, that this money was used for the purpose of purchasing property from the Phoenix Chair Company, for a corporation to be formed, as was agreed at the time of the loan. That this corporation obtained title to the property that was purchased with the money secured by the fraud of Glass, and the corporation was not the bona-fide purchaser for value and where Glass was used by the incorporators and stockholders of the corporation to borrow money for this purpose, the corporation itself is liable for all of the acts of Glass, and cannot retain the benefits of his fraud without also accepting the burdens thereof.

S. C. Mims, Jr., for appellees.

Appellant charged that the proceeds of the note sued on was used in acquiring the property of appellee, and the appellee denied the allegation. Thus an issue of facts was squarely presented to the chancellor to determine . The chancellor found in favor of the appellee, and its finding of facts will be affirmed by this court unless he was manifestly wrong. Coffee v. Coffee, 24 So. 262; Bank of Lauderdale v. Cole, 111 Miss. 39; Plantation Co. v. Heading Co., 104 Miss. 131; Brooks-Scanlon Co. v. Stogner, 114 Miss. 736. We do not agree with appellant's construction of sec. 359 of Hem. Code 1927. It is our idea that the section means what it says and that is "all matters of fact averred in the bill and not denied by the answer otherwise than by the general traverse, may be taken at the hearing as admitted." This "may be" is one of the prerogatives of the trial court, and one that the trial court, in this instance, did not exercise favorable to appellant. We do not find any case where the chancellor has been reversed for not taking at the hearing an undenied allegation as true, where there was any evidence in the record that the court was called upon to pass. In view of the failure of appellant to establish, by the necessary proof, the essential averments of its bill, and in view of the policy of this court heretofore followed in reference to the decrees of the trial courts, as follows: "The presumption in favor of a decree includes conclusions both of law and fact. It will not be disturbed unless shown to be clearly wrong, being analogous in this respect to a verdict of a jury." Partee v. Bedford, 51 Miss. 84.

We respectfully submit that the cause and decree of the chancellor should be affirmed.

S. C. Mims, Jr., for cross-appellant.

The only assignment of error filed by the cross-appellant is that the trial court had no authority to enter a decree against Lee E. Glass, the co-defendant of cross-appellant, for the reason that Lee E. Glass was not in court by any authority or authorized proceedings of law or equity. In Werner v. Sheffield, 89 Miss. 18, where the answer denied that the co-defendant had any effects of the nonresident in its possession, the burden was on the complainant to establish the fact, and if not established the court was without jurisdiction to entertain the suit. While the answer of cross-appellant does not deny possessing effects of Lee E. Glass, the bill does not charge the co-defendants with having in its possession or hands any effects, and the court did not so find. It must be remembered that the jurisdiction of the court in proceedings of this nature is purely statutory, and one who invokes this remedy must bring himself squarely within the terms of the statute--Scruggs v. Blair, 44 Miss. 406; Statham v. N.Y. Life Ins. Co. , 45 Miss. 581, 7 Am. Rep. 737; Delta Ins. Co. v. Nat. Bank, 137 Miss. 871. This question of whether or not shares of stock held by a nonresident stockholder in a resident corporation are "effects of the nonresident in the hands of the resident corporation, within the meaning and intent of section 307, Hemingway's Code 1927, has never been passed upon by our court as far as I can find." The only case that I find that throws any light on the attitude of this court on this question is Barnes v. James, 129 Miss. 675, in which case this court held that shares of stock in a foreign corporation held by a resident stockholder was personal property, and its situs was in this state and subject to taxation here. If this is a correct holding, and unquestionably it is, the natural deduction to be made from it is that the situs of the shares and stocks of a resident corporation are with the nonresident stockholders and not effects of the stockholder in the hands of the resident corporation. The only case passing on this identical question that I can call to the attention of the court is that of Lambert v. Huff, 1 A. L. R. 650. The court said: "A corporation is clearly not a debtor of its stockholders in respect of his shares of stock or their value, nor are such shares effects or estate of the stockholder in its hands within the meaning of the statute. A share of the capital stock of a corporation is an entity, though intangible and incapable of manual possession and delivery. Both the title and possession thereof, as far as it is susceptible of possession, are in the stockholder. His share is an interest in the corporation itself, not something held by the corporation. It is an estate, of course, but it is manifestly not an estate of the debtor in the hands of the corporation."

Would it be just and equitable to cross-appellant to be compelled to abide the decree of the lower court while it is possible and very probable that Lee E. Glass has hypothecated the very stock in controversy in this lawsuit for value without notice, in which event under the holding of the United States courts in Pennoyer v. Neff, 95 U.S. 714, and our own court in Cocke v. Brewer, 68 Miss. 778, the res or thing not being within the jurisdiction of the court--cross-appellant would be called upon to account to the pledgee in the Federal court for these seventy shares of stock. The same principal involved in the Delia Ins. Co v. Nat. Bank, 137 Miss. 855, is involved in this case and is...