Hall v. Henderson

• Decision Date: 15 April 1897
• Citation: 114 Ala. 601,21 So. 1020
• Parties: HALL ET AL. v. HENDERSON ET AL.
• Court: Alabama Supreme Court

21 So. 1020

114 Ala. 601

HALL ET AL. v. HENDERSON ET AL.

Supreme Court of Alabama

April 15, 1897

Appeal from city court of Montgomery; John G. Winter, Judge.

Suit by Hall and Farley, trustees, against Fox Henderson and others. Demurrer to bill was sustained, and complainants appeal. Reversed.

The bill in this case was filed by the appellants, Hall and Farley, as trustees, against Fox Henderson and the Alabama Terminal & Improvement Company and the Farley National Bank to collect a judgment which was recovered by the receivers of the Farley National Bank against the Alabama Terminal &amp Improvement Company, and subsequently transferred to the complainants. This judgment is sought to be collected from the respondent, Fox Henderson, who, as averred in the bill has assets of the Alabama Terminal & Improvement Company in his hands and is indebted to said corporation. The averments of the bill and the purposes for which it was filed are sufficiently stated in the opinion. This bill was demurred to upon the following grounds:

"(1) To the whole bill-that it is nowhere stated in said bill who Hall and Farley are trustees for; that they sue only as trustees, without giving the names of the cestui que trust.

"(2) That said bill is multifarious in this: Said bill is filed in the alternative, or in a double aspect, presenting inconsistent and repugnant claims for relief. The relief that could be granted in one aspect would be materially variant from the relief that could be granted in the other in this Said bill in one of its aspects charges that respondent has never, in fact, made any bona fide payment of his said subscription to the capital stock of the Alabama Terminal & Improvement Company, but still owes the same; and in the other aspect, it charges that if a bona fide payment of the stock subscription was made, then he is liable for the assets of the company, with interest thereon received by him knowingly, without proper or legal consideration, of said company. The relief that could be granted in the first aspect, would be to be held as trustee in invitum for the assets converted.

"(2 1/2) Said bill is filed in a double aspect upon antagonistic rights. The relief prayed for in the phase of no bona fide settlement having been made, is to hold the respondent liable under his contract of subscription, and the relief prayed for in the phase of respondent being trustee in invitum is to hold him liable for his tort in converting the assets of the company. The remedy being inconsistent, and calling for an election of remedies.

"(3) Respondent demurs to so much of said bill, or to the aspect thereof, that seeks to hold respondent liable for the stock subscribed for, on the grounds that his settlement for the sum was colorable and not real, and assigns the following grounds: The bill fails to aver as a fact that respondent did sell his stock to J. W. Woolfork or A. C. Saportas, or to the A. T. & I. Co., and fails to aver such facts from which it could be inferred that such sale was made.

"(4) Said bill fails to allege any fact showing why said corporation could not purchase its own stock.

"(5) Said bill fails to allege that said corporation was insolvent at the date of the sale of the stock by respondent, or at the time the payments were made therefor.

"(6) Because the complainants have a full, complete and adequate remedy at law for the recovery of the stock that was subscribed for by respondent.

"Respondent demurs to so much of, or to such part of the bill presenting the aspect of holding the respondent liable as trustee in invitum for the value of the assets of said corporation improperly received and converted by him, and assigns the following grounds:

"(7) Because the bill fails to allege that said corporation was indebted to J. W. Woolfork and A. C. Saportas, one or both of them, in an amount equal to the amount claimed to have been paid to this respondent.

"(8) Because said corporation is not alleged to have been insolvent at the time such payments were made to respondent.

"(9) Because no fact is charged showing that respondent as a director or as treasurer of said corporation knew that the funds with which he was paid for said stock belonged to the A. T. & I. Co.

"(10) Because it is not shown by what right complainants seek to condemn in the hands of respondent, trust funds received and converted by him.

"(11) Because the bill is not filed for the benefit of the other creditors of said corporation.

"(12) Because the trust funds converted by respondent would be subject alone to a general creditors' bill.

"(13) The funds of the corporation which is insolvent are trust funds for the benefit of the creditors of said corporation, and, to condemn the same, the bill must be filed by the creditors of the corporation.

"(14) The complainants have a full, complete and adequate remedy at law for the recovery of the trust funds, received and converted by respondent."

"(15) Because it is not averred that respondent knew, or had knowledge of the insolvency of said corporation at the time he received the assets in payment for his stock."

On the submission of the cause upon the demurrers, the chancellor decreed that the 1st, 11th, 12th, and 13th grounds of the demurrer were well taken, and sustained them, and overruled all the other grounds of demurrer. After this decree, the bill was amended by adding, after the averments of the bill as to the recovery of the judgment by the receiver of the Farley National Bank, the reinstating of the bank, and the transferring of the judgment to the present complainants, the following averment: "And by said transfer and assignment invested orators with all the rights and powers of said Farley National Bank in reference to said debt and against all persons in any manner liable therefor, including the right to credit the same for the benefit of the stockholders of said bank."

The cause was then resubmitted upon the same grounds of demurrer, and as thus amended, all the grounds of demurrer were overruled except the 11th, 12th and 13th, and these grounds were sustained. From this decree the complainants appeal, and assign the rendition thereof as error.

Tompkins & Troy and Gunter & Gunter, for appellants.

J. M. & P. W. White and R. L. Harmon, for appellees.

HARALSON J.

This bill was filed not to administer the assets of an insolvent corporation for the benefit of all its creditors, on the theory, no longer obtaining in this court, that the stock and other property of a corporation is deemed a trust fund for the payment of the debts of the corporation; but it is one by appellants, single judgment creditors of the corporation, with a return of execution, "No property found," to reach equitable assets of the corporation in satisfaction of their judgment at law, and filed for such purpose on two theories, in reference to the same transaction:

1. The defendant, Henderson, as is shown, subscribed to the capital stock of the Alabama Terminal & Improvement Company, a corporation under the laws of this state, the sum of $30,000, which by the terms of subscription, became due and payable. He was a director and the treasurer of said corporation, and cooperated with J. W. Woolfork, who was president and general manager, and who, as such, had the entire control and management of the business of said corporation, as said Henderson well knew. A. C. Saportas was also a director, who, it is alleged, was entirely under the control and management of said Woolfork, in reference to the management of the business of the said terminal company. It is alleged, as presenting Henderson's claim, that he asserts, that he has paid his said subscription of stock in full, and that afterwards, he sold and transferred the same to said J. W. Woolfork and A. C. Saportas,-to one or both of them,-and that they or the one buying his stock, agreed to pay him $30,000 therefor.

The bill avers, touching this transaction, that if said sale and assignment were made to said Woolfork and Saportas, as claimed by Henderson, it was merely colorable, and was in fact a sale of said stock to the said terminal company that said Henderson was of ample ability to pay and satisfy his said debt and liability to said company, but was anxious and desirous to escape therefrom; and that he knew that said Wookfork was largely indebted to said company for his own subscription of stock and otherwise, and said company was also largely indebted, and hastening to insolvency. It is also averred, that said Henderson well knew that said Woolfork was, at the time, carrying out a scheme for withdrawing a very large amount of the assets of said company from its treasury, by buying up at par, in the name of the company, large amounts of the stock of the subscribers to its capital stock, and paying for the same with the assets...