Highland v. Davis, 8588.
| Citation | 195 S.E. 604 |
| Decision Date | 07 December 1937 |
| Docket Number | No. 8588.,8588. |
| Court | Supreme Court of West Virginia |
| Parties | HIGHLAND. v. DAVIS et al. |
HIGHLAND.
v.
DAVIS et al.
No. 8588.
Supreme Court of Appeals of West Virginia.
Dec. 7, 1937.
Rehearing Denied March 21, 1938.
1. "A pledgor of personal property, hypothecated to secure a debt, may waive demand for payment of the obligation and notice of sale of the collateral." Point 2, syllabus, Berry, Rec'r, v. Neuhardt, 117 W.Va. 67, 183 S.E. 858. In the absence of fraud, a pledgee may buy the pledged property sold under the pledge agreement, where the agreement expressly so provides.
2. A pledgee, in making sale of the pledged property, must act in good faith with reasonable diligence to secure a fair price for the property and protect the pledgor's interest as well as his own interest.
3. Where a pledgee, under the express terms of the pledge, purchases the pledged property at his own sale, without notice to the pledgor, the sale will not be set aside at the instance of the pledgor, unless it is clearly established that, with the intent to do so, the pledgee obtained the property at such a grossly inadequate price as to indicate bad faith.
4. This court will not consider questions not acted upon by the trial court.
5. "In equity the bar of the unclean-hands rule is raised only because of con-
[195 S.E. 605]duct connected with the particular transaction from which relief is sought." Bias v. Bias, 109 W.Va. 621, 155 S.E. 898.
6. The findings of the trial chancellor will not be disturbed on appeal unless clearly wrong.
HATCHER, J., dissenting.
Appeal from Circuit Court, Harrison County.
Suit in equity by Cecil B. Highland, executor and testamentary trustee of the last will and testament of Virgil L. Highland, deceased, against J. Hornor Davis and others. From a decree in favor of the plaintiff, the defendants appeal.
Decree reversed and case remanded.
R. S. Spilman, of Charleston, and Steptoe & Johnson and James M. Guiher, all of Clarksburg, for appellants.
Robinson & Stump and Lawrence R. Lynch, all of Clarksburg, for appellee.
RILEY, Judge.
Cecil B. Highland, sole executor and testamentary trustee of the last will and testament of Virgil L. Highland, deceased, brought this suit in equity in the circuit court of Harrison county against J. Hornor Davis, in his own right, the Exponent Company, a corporation, J. Hornor Davis and Anthony F. McCue, trustees, and Clarksburg Publishing Company, a corporation. From a final decree, wherein the court set aside a sale of 568 shares of class A common stock of the Clarksburg Publishing Company, made by J. Hornor Davis to the Exponent Company, on February 17, 1935, under a pledge as collateral security upon a note of the Highland estate, and permitted Highland in his fiduciary capacity to redeem the stock, Davis and the Exponent Company brought this appeal.
On July 1, 1927, the Clarksburg Telegram, a Republican evening paper, and the Clarksburg Exponent, a Democratic morning paper, were being published in Clarksburg. The decedent, Virgil L. Highland, owned a majority of the stock of the corporation which published the Clarksburg Telegram, and the appellant, J. Hornor Davis, owned a majority of the stock of the Exponent Company, which published the Clarksburg Exponent. At that time, the Telegram had no up-to-date newspaper plant, and the Exponent was being published in a newspaper plant, constructed for that purpose. This being the situation in the newspaper field in Clarksburg, a new corporation was formed known as the Clarksburg Publishing Company, capitalized at $500,000, of which 2, 000 shares of preferred stock in the amount of $200,000 were issued, and 3, 000 shares of common stock in the total amount of $300,000. The common stock was divided into two classes, class A stock with 1, 800 shares and class B stock with 1, 200 shares. All the assets of the Clarksburg Telegram and the Exponent were sold and conveyed to this corporation. In consideration thereof, the stock of the corporation was issued as follows: To the nominees of Virgil L. Highland, 1, 000 shares of the preferred stock in the amount of $100,000; to the Exponent Company, 1, 000 shares of preferred stock in a like amount of $100,000; to Virgil L. Highland, or his nominees, the 1, 800 shares of class A common stock; and to the Exponent Company, the 1, 200 shares of class B common stock. At the institution of this suit, the class A common stock was owned as follows: 1, 656 shares by the estate of Virgil L. Highland; 72 shares by Wilbur E. Morrison, an old employee of Virgil L. Highland in the Clarksburg Telegram; and 72 shares by the plaintiff, Cecil B. Highland, individually. All of the 1, 200 shares of the class B common stock originally issued to the Exponent Company was still owned by that company at the time this litigation was begun.
Simultaneously with the transfer of the assets of the two newspapers to the Clarksburg Publishing Company, a voting trust agreement was executed, which provided for the voting control and operation of the Clarksburg Publishing Company from the execution of the agreement on July 1, 1927, until January 1, 1943. Under this agreement, the holders of class A and class B stock were given equal control and voice in the business affairs and operation of the Clarksburg Publishing Company. The agreement also provided for a separate identity of the two newspapers in so far as their news policies and political positions were concerned. It further provided that the publishing company was to be run by a board of six directors, three directors being chosen from the class A stockholders and three directors from the class B stockholders. No corporate action of importance could be taken without the affirmative vote of at least four directors. This trust agreement contained no interdiction upon the
[195 S.E. 606]right of the class A stockholders to acquire the whole or any part of the outstanding class B stock, and, on the other hand, the class B stockholders were not prevented from acquiring or buying a part or all of the outstanding class A stock. In this regard, it might be well to note that paragraph Third of the trust agreement contains the following provisions:
"Third: Common Stock. For the purpose of distinguishing and of identification, and for no other purpose, the shares of the common stock shall be divided into classes, A and B, and in the first instance there shall be issued one thousand, eight hundred (1, 800) shares of class A stock, and one thousand, two hundred (1, 200) shares of class B stock. Each share of both classes of common stock shall be equal in all respects with respect to the earnings and assets of the company with every other share, and with respect to the voting rights, and with respect to the voting rights or the rights of the holders of the legal title to such shares to vote the same at all meetings of the stockholders of the corporation and for all corporate purposes."
In 1930, Virgil L. Highland died. At the time of his death, the West Virginia Bank of Clarksburg had his collateral note, together with a trust certificate representing 568 shares of the class A stock as collateral security. This note was in the amount of $50,000, and contained an unrestricted right of the pledgee in the event of default to sell the collateral at public auction or private sale, after default without demand, advertisement, or notice. This provision, verbatim, reads:
"Full authority is hereby given to the said West Virginia Bank, or any other holder of this note, to sell the said collaterals at public auction or private sale, at any time after the maturity and non-performance of this promise, without demand, advertisement or notice; such demand, advertisement and notice being hereby expressly waived."
This note became due on December 4, 1930. Some time after maturity it was reduced to $45,000. On September 24, 1933, Cecil B. Highland, Melvin G. Sperry, and the Empire National Bank of Clarksburg, the then executors of Virgil L. Highland's will, executed a new note in the amount of $45,000, payable to the order of the West Virginia Bank, 120 days after date. The original note was not surrendered to the executors when the new note was executed. In his bill of complaint, the appellee takes the position that the original note was not surrendered. On the other hand, in the answers, the appellants claim that the note of $45,000 was a renewal of the $50,000 note. Their position is not resumed in their briefs and oral argument. On the contrary, they say that the $45,000 note, together with the 568 shares of stock, were both collateral security to the original note of $50,000. The $45,000 note embodies a contract or pledge which reads, in part, as follows:
"Upon nonpayment of this note * * * this note * * * shall forthwith, at the option of the holder, become due and payable, without demand or notice, and full power and authority are hereby given to any holder hereof thereupon to sell, assign, and transfer the whole of said securities and property or any part thereof, or any substitutes thereof, or any additions thereto, at public or private sale, at the option of the holder, at such time or times, at such price and upon such terms as he or it may determine, without either demand, advertisement, or notice of any kind, all of which are hereby expressly waived. At any such sale, the holder thereof may purchase the whole or any part of the property sold, free from any right of redemption on the part of the undersigned, which is hereby waived and released."
On December 30, 1933, the West Virginia Bank was closed and E. A. Rinehart appointed its receiver. Theretofore, the Highland loan had been hypothecated by said bank with the Reconstruction Finance Corporation at its Richmond office. Both notes, together with the trust certificate representing the 568 shares of class A stock, were held by said corporation. During the course of the administration of the estate of Virgil L. Highland, which, so far as the record discloses, has not been completely settled, the...
To continue reading
Request your trial