Hall v. Henderson

• Decision Date: 10 May 1900
• Citation: 126 Ala. 449,28 So. 531
• Parties: HALL ET AL. v. HENDERSON ET AL. HENDERSON ET AL. v. HALL ET AL.
• Court: Alabama Supreme Court

28 So. 531

126 Ala. 449

HALL ET AL. v. HENDERSON ET AL.

HENDERSON ET AL. v. HALL ET AL.

Supreme Court of Alabama

May 10, 1900

Appeals from city court of Montgomery; A. D. Sayre, Judge.

Action by J. L. Hall and L. B. Farley, as trustees, against Fox Henderson and others. From a judgment in favor of plaintiffs both plaintiffs and defendants appeal. Judgment affirmed on appeal of defendants, and reversed on plaintiffs' appeal.

On June 23, 1896, J. L. Hall and L. B. Farley, as trustees, filed their bill of complaint against Fox Henderson, the Alabama Terminal & Improvement Company, and the Farley National Bank. In this bill it was averred that the Alabama Terminal &amp Improvement Company, a corporation under the laws of Alabama and doing business in said state, opened an account with the Farley National Bank on March 6, 1890, and commenced obtaining loans and discounts from such bank; that this business continued until August 21, 1891, when the Alabama Terminal & Improvement Company was indebted to said bank in the sum of $151,000; and that the failure of said Alabama Terminal & Improvement Company to pay such indebtedness caused the suspension of said Farley National Bank on the day just named. Thereafter the comptroller of the currency of the United States, in pursuance of the laws of the United States appointed one H. M. Hall as receiver of said bank authorizing him to take possession of the books and assets of every kind of said bank, and collect all debts due and claims belonging to it; and said H. M. Hall accepted such appointment, took possession of the books, assets, etc., of said company, and thereafter, on January 25, 1892, instituted a suit as such receiver against the Alabama Terminal & Improvement Company to recover the indebtedness of said company to the Farley National Bank. On October 23, 1892, a judgment was rendered in said suit against said Alabama Terminal & Improvement Company for the sum of $117,891.47; the debt having been reduced by payment made or bill given for a portion thereof during said suit. Execution was duly issued upon this judgment, and was returned by the sheriff "No property found," and said judgment remained in full force and effect and wholly unsatisfied at the time of the filing of said bill. On February 15, 1892, the comptroller of the currency discharged the receiver, ordering the restoration of the Farley National Bank to the possession of its books and assets, and authorizing it to resume business. Thereafter, on February 23, 1892, the said bank assigned and transferred to the complainants, J. L. Hall and L. B. Farley, as trustees, the said debt of the Alabama Terminal & Improvement Company. In the organization of the Alabama Terminal & Improvement Company the defendant Fox Henderson subscribed for 300 shares of its capital stock, amounting to $30,000, and made his promise in writing for the payment thereof. The payment of the note of Henderson which was given for a subscription of $30,000 to the capital stock of the Alabama Terminal & Improvement Company was conditioned upon the completion of the Alabama Midland Railroad from one of the southern terminal points of said road to a point within one mile of the center of the city of Montgomery on or before the 1st day of October, 1890, and the publication of the decision of the board of directors of such completion. This condition was complied with, and the Alabama Midland Railroad was completed as stipulated. It was then averred in the bill that the complainants were informed and believed that Fox Henderson claimed that, after paying of his stock in the Alabama Terminal & Improvement Company, he sold and transferred it to one J. W. Woolfolk and A. C. Saportas. J. W. Woolfolk was president and general manager of the Alabama Terminal & Improvement Company, and A. C. Saportas was a director thereof, and it was averred in the bill that he was under the influence and control of the said Woolfolk in reference to the management of the business of said Alabama Terminal & Improvement Company. The management of the business and control of the affairs of the Alabama Terminal & Improvement Company was entirely in the hands of J. W. Woolfolk. This fact was known to Fox Henderson, who was himself a director and treasurer of said Alabama Terminal & Improvement Company, and who, it was averred in the bill, co-operated with said Woolfolk in the management of said company. It was then averred in the bill that the defendant Fox Henderson, as treasurer and a director of the Alabama Terminal & Improvement Company, well knew that Woolfolk was at the time of the transfer of the former stock to him largely indebted to said company for his own subscription and otherwise, and that said company was largely indebted, and hastening to insolvency; that said Henderson well knew that Woolfolk was at that time carrying out a scheme, and was drawing a large amount of the assets of the company by buying up at par in the name of said company large amounts of the stock of the subscribers to the capital stock, and paying for the same with the assets of the company, without any authority whatever,-the persons thus favored by said Woolfolk being the brothers, relations, partners, and neighbors of the said Fox Henderson. The bill then avers as follows:

"That the said Woolfolk, as president and general manager of the said company, having incurred large debts for said company, and being unable to use to advantage the assets in the hands of said company, owing to the financial condition of depression in the country, proposed to a number of subscribers for the capital stock of said company residing at Troy, Alabama, among whom were brothers, relatives, partners, and acquaintances of said Fox Henderson, and to the said Fox Henderson himself, that they could get rid of their stock in said company, and avoid liability therefor, and at the same time provide for his present need of money, by paying in cash their subscription for stock, and by his buying the stock thus paid for in the name of and for the company, paying for the same in assets of said company in his hands at a certain price,-generally in bonds of the Alabama Midland Railroad at eighty-five cents on the dollar, in his hands, belonging to said company. This plan the said Woolfolk carried out with a number of the said subscribers, of all of which the said Fox Henderson was well informed. That in the case of the said Fox Henderson, on account of his relations to said company, or for some other reason, for his supposed security it was arranged that he should pay up his stock subscription of thirty thousand dollars in full, and that J. W. Woolfolk and the said Saportas should buy his stock, and execute to him their notes, each for ten thousand dollars, due, respectively, at 30, 45, and 60 days from date, and that these notes should be charged up to and paid by said Ala. Ter. & Imp. Co., as a purchase by it of said stock. And so orators aver the said plan was carried out. The said Woolfolk and Saportas gave their three notes for the amounts, and for the time above stated, for the stock, the said Henderson retaining the stock as collateral security for their payment, and on the same day, to wit, 5th January, 1891, the said notes were entered on the books of said company in the bills payable account of the company as follows:

Bills Payable. Dr.

Jany. 5, 1891. 3 notes, acct. of A. C. Saportas and J. W. Woolfolk for

the A. T. & I. Co., for $10,000 each, due as follows:

One note 30 days after date ......................................... $10,000

One note 45 days after date ............................................ 10,000

One note 60 days after date ............................................ 10,000

-------

$30,000

"The corresponding entry on the credit side of the cash book of said company being:

Investment Account. Dr.

Bought of Fox Henderson 3,000 shares, capital stock of A. T. & I. Co.

In suspense ......................................................... $30,000"

The complainants then aver that said notes were renewed from time to time, and continued upon the books of said company as its obligations, and were from time to time paid in part out of the fund of said company, "of all of which the said Fox Henderson had full knowledge"; and that at the time of said payment the said Henderson had good reason to know that the Alabama Terminal & Improvement Company was largely indebted, if not wholly insolvent, and that the use of its assets in the payment and discharge of said notes was a fraud upon the creditors of said company, including the complainants; that said Fox Henderson received all the money and assets of said company in the manner as stated above after January 5, 1891, the sum of, to wit, $25,000, which sum is still due, with interest. The bill then continues as follows: "And orators further aver that said Fox Henderson never in fact paid up his said subscription in full; that the said Woolfolk, in making a settlement with him, allowed him credit for $15,000, or other large sum which he was not legally entitled to, and that such amount, with interest, in addition to said sums received by him from the assets of said company since the said 5th of January, 1891, is still due and unpaid upon said subscription to the capital stock of said company by said Fox Henderson. So that orators aver that the said Fox Henderson has never in fact made any bona fide payment of his said subscription to the capital stock of said company, but that he still owes the same, and besides is indebted to the amount of $30,000, or other large sum of money, assets of the said company, received by him since the said 5th day of January, 1891. But, if orators are mistaken in the foregoing averment as to the subscription to the...