Hughes v. Charlton

• Decision Date: 13 December 1927
• Citation: 141 S.E. 1,104 W.Va. 640
• Parties: HUGHES et al. v. CHARLTON et al.
• Court: West Virginia Supreme Court

141 S.E. 1

104 W.Va. 640

HUGHES et al. v. CHARLTON et al.

Supreme Court of Appeals of West Virginia.

December 13, 1927

Submitted October 25, 1927.

Rehearing Denied Jan. 16, 1928.

Syllabus by the Court.

Where in a deed the grant is to the grantee as trustee, or in a contract one of the parties thereto is described as trustee, with duties and obligations thereby imposed of a trust nature, the term "trustee" so employed will not be regarded simply as descriptio personae but as having been used advisedly, and as creating in the trustee the trust relationship implied, and as binding him as trustee only, and of which all persons dealing with him as such must take notice.

Where in a contract for the sale and purchase of stock of a corporation, made between persons claiming to be the owners of all the stock and another as trustee, the parties agree on terms, and such owners agree to have the stock transferred to the name of the purchaser as such trustee, part of which is to be paid for in cash and the residue to be represented by the several notes of the company which the purchaser agrees to procure the company to execute to the vendor, which together with the cash payments and the certificates of stock are to be placed in escrow in the hands of a third person and when collected to be applied by him to pay obligations of the company for which the sellers are liable, the contract will not be construed as binding the purchasing trustee personally for such deferred purchase money, but the company only, and considered together with corroborating facts and circumstances, like those in this case, as constituting a plan of reorganization of the company.

Appeal from Circuit Court, Cabell County.

Suit by James A. Hughes and others against W. A. Charlton, trustee, and others. From a decree for plaintiffs, defendants W. A. Charlton and another appeal. Reversed, and bill dismissed.

Woods and Litz, JJ., dissenting.

George S. Wallace, of Huntington, for appellant Charlton.

Wells Goodykoontz, of Williamson, and T. W. Peyton, of Huntington, for appellant Pancake.

Vinson, Thompson, Meek & Renshaw and Harry Scherr, all of Huntington, for appellees.

MILLER J.

These appeals were awarded upon the several petitions of the defendants W. A. Charlton and D. J. Pancake from the final decree pronounced in the cause on July 24, 1926, whereby they were adjudged to be liable to pay to plaintiffs the sum of $17,400.00, the amount which the decree ascertains to remain due plaintiffs for purchase price of certain stock of the Pence Springs Water Company by virtue, first, of a contract between plaintiffs and W. A. Charlton, trustee, dated June 1, 1923, second, of a contract between said Charlton, trustee, and said Pancake, dated October 22, 1923, by which latter contract the said Charlton purported to sell to said Pancake all his rights under said contract of June 1, 1923; and by which decree the circuit court further adjudged that of the said balance of $17,400.00 there was then due and payable the sum of $16,004.80, and that the said plaintiffs do recover of said Charlton and Pancake the sum of $16,004.80, with interest and costs and awarding execution against them unless paid within thirty days, and retaining the cause on docket for further decree against them for the balance.

The contract of June 1, 1923, pleaded and exhibited with the bill purports to be between Hatfield and Hughes describing themselves as owners of all outstanding stock of the Pence Springs Water Company, as parties of the first part, and W. A. Charlton, trustee, party of the second part, and whereby in consideration of $10.00 cash in hand paid, the receipt whereof was thereby acknowledged, and the payments and covenants to be paid and performed as thereinafter provided, the said first parties did thereby agree to sell to the said second party the stock of the Pence Springs Water Company, namely, $44,000.00 issued of this date, upon the following terms, that is to say:

"Total consideration for the purchase of said $44,000.00 stock shall be $2,500.00 cash in hand paid, on the execution of this contract, receipt of which is hereby acknowledged; $2,500.00 to be paid on or before the 15th day of July, 1923, the residue of $20,000.00 to be paid at the rate of $500.00 per month, commencing on the last day of September, 1923, all of which deferred payments are to be evidenced by notes of the said company."

And thereby it was further-

"mutually understood and agreed that all of the said outstanding stock of said company will be issued in the name of W. A. Charlton, trustee, and placed in the hands of Z. Taylor Vinson, in escrow, to be delivered to W. A. Charlton, when paid for; it being understood that upon the payment of each one of the deferred payments, or the cash payment herein provided, such proportion of $44,000.00 of stock as represented by said $2,500.00 shall be issued forthwith to said W. A. Charlton, trustee, that is to say; upon the payment of $2,500.00 in cash this day received, a certificate for $4,400.00 of stock of the said Pence Springs Water Company will be issued to the said W. A. Charlton, trustee, and upon the payment of any of the other deferred purchase-money notes, above described, a like proportion of the stock will be issued to said W. A. Charlton, trustee."

By a subsequent provision the second party was given the right to anticipate the payment of any of said notes before maturity and, if he deems it necessary, it was thereby " further understood and agreed that he may increase the capital stock of said corporation and sell same for the purpose of liquidating the notes herein described."

Another provision supporting our construction of the contract is:

"That all of the cash payments this day received, and all subsequent payments, shall be applied to paying the accounts payable to the Pence Springs Water Company, amounting to $14,402.07, as of this date, before any distribution among the stockholders, and all balances of accounts receivable after settlements and adjustments, as of the 1st day of June, 1923, are to be turned over to the said party of the second part as part of the Water Company assets."

The contract also contains some further provisions not material to the proper disposition of the case as now presented.

Supplementing this contract and signed by the same parties and pleaded in the bill, is a letter addressed to Z. T. Vinson, dated June 13, 1923, advising him that Hatfield and Hughes had that day "contracted to sell our stock in the Pence Springs Water Company to Mr. W. A. Charlton, trustee, a copy of which contract" was therewith enclosed to him and providing "that all of the stock which is mentioned in said contract" was to be turned over to said Charlton, trustee; and that the certificate therefor would be duly signed in blank and deposited with him, and that as the payments from said Charlton, trustee, as provided in said contract, were made to him, he was to turn over to Charlton, trustee, "the stock so deposited with him in the proportion stipulated in the contract."

And Vinson was further advised by said letter that it was-

"further understood that said Charlton, trustee, will cause to be executed by the Pence Springs Water Company, notes for all the deferred payments mentioned in said contract, which notes, likewise, will be deposited with you for collection, and upon all payments made to you, either before the execution and delivery of notes, or such payments as may be made upon said notes to you, you will distribute to the creditors of the Pence Springs Water Company, a list of whom and all amounts due from the said company, will be filed with you, and with the exception of the amount due from the Pence Springs Water Company to the Pence Springs Company, the payments upon said debts shall be made as the said Hatfield and Hughes shall direct. And after all of the debts of the Pence Springs Water Company have been so paid, then the residue of the purchase money arising from the sale of said stock, you are to pay the same all to Thomas Hatfield as and of the receipt of the purchase price as the same is paid to you by said Charlton, trustee."

The defendant Pancake was brought into the cause and sought to be rendered liable to plaintiffs along with defendant Charlton personally by virtue of the second of the contracts pleaded, providing as follows:

That for the consideration thereinafter mentioned, the party of the first part, Charlton, trustee, thereby sold and assigned unto the party of the second part the contract of June 1, 1923, and it was thereby further agreed between the parties thereto, that all of the stock of the Pence Springs Water Company, which had been paid for under the Hatfield contract by the first party thereto should likewise be assigned to the said Pancake.

The consideration for the above assignment and transfer to be paid by the second party to the first party was as follows:

"First. Five thousand dollars, two thousand dollars in three months, and three thousand dollars in six months, represented by notes, and as a further consideration the second party is to have five thousand dollars of the paid-up capital stock of the company, the increased capitalization of which is provided for in an agreement entered into the 20th day of October, 1923, between D. J. Pancake, W. A. Charlton and A. I. Balacaier." This contract further provided that Pancake should perform all the obligations undertaken by the first party in the Hatfield contract, and should receive all of the stock which the said Hatfield and Hughes therein agreed to sell to the said Charlton, trustee.

It was thereby further agreed that Charlton, trustee, should pay all the obligations, bills and claims of said Pence...