Jacksonville Public Service Corporation v. Profile Cotton Mills

• Decision Date: 14 April 1938
• Docket Number: 7 Div. 496.
• Citation: 180 So. 583,236 Ala. 4
• Parties: JACKSONVILLE PUBLIC SERVICE CORPORATION ET ALS. v. PROFILE COTTON MILLS.
• Court: Alabama Supreme Court

180 So. 583

236 Ala. 4

JACKSONVILLE PUBLIC SERVICE CORPORATION ET ALS. v. PROFILE COTTON MILLS.

7 Div. 496.

Supreme Court of Alabama

April 14, 1938

Appeal from Circuit Court, Calhoun County; Lamar Field, Judge.

Bill in equity by Profile Cotton Mills against the Jacksonville Public Service Corporation, Jacksonville City Water Works and W. I. Greenleaf, for cancellation of a note, declaration of a resulting trust, accounting, and discovery. From a decree overruling a demurrer to the bill, respondents appeal.

Affirmed.

Jas. F Matthews, of Anniston, for appellants.

Knox Acker, Sterne & Liles, of Anniston, and Martin, Turner & McWhorter, of Birmingham, for appellee.

THOMAS Justice.

The bill was for accounting of mutual accounts between the Profile Cotton Mills, plaintiff-appellee, and the Jacksonville Public Service Corporation, for the cancellation of a note purportedly issued by appellee to the Jacksonville Public Service Corporation (hereinafter referred to as the Jacksonville Corporation) for declaration of a resulting trust in favor of appellee with respect to certain properties of the Jacksonville Corporation and Jacksonville City Water Works (referred to hereinafter as the water works company) and/or with respect to the stock of such companies paid for with the funds of appellee. The bill also avers that a discovery is necessary in aid of its averments as to the resulting trust sought to be imposed.

The bill shows that from May, 1920, to April 28, 1934 (except for a short period when Profile Cotton Mills was in receivership), the defendant W. I. Greenleaf absolutely dominated and controlled the business and affairs of all three corporate parties; that the affairs of these corporations were conducted as a single business, the properties of the water works company being used and operated by and under the name of the Jacksonville Corporation and the Jacksonville Corporation being operated as a department of Profile Mills; that all the funds for the conduct of the business of the Jacksonville Corporation and the water works company, including both operating expenses and capital expenditures, were supplied by appellee Profile Mills, and the income from the business conducted under the name of the Jacksonville Corporation was taken by Profile Mills and credited to an account on the books of Profile Mills of the affairs of the Jacksonville Corporation. The bill shows that all or substantially all of the properties now owned by the Jacksonville Corporation and the water works company were purchased or constructed with funds advanced by Profile Mills for such purposes; that the defendant W. I. Greenleaf negotiated the investment of the funds of Profile Mills in the property of the two defendant corporations and that he claims to own the beneficial interest in the stock of such corporations; that the plaintiff does not know who owns the legal title to such stock nor on what the claim of ownership of such stock by Greenleaf is based. The bill shows that shortly before defendant Greenleaf ceased to control Profile Mills he caused a negotiable promissory note to be executed to Jacksonville Corporation in the name of plaintiff as maker for approximately $43,000, such sum apparently being claimed by such defendants as being due to the Jacksonville Corporation on its account with plaintiff; that at the time such note was issued plaintiff was not indebted to the Jacksonville Corporation; and that the latter was largely indebted to appellee Profile Mills.

The bill prays that a resulting trust be declared in favor of appellee with respect to the property of the two defendant corporations purchased or constructed with funds of Profile Mills; for an accounting of the transactions between Profile Mills and the Jacksonville Corporation, and as an incident to such accounting, the cancellation of the note of Profile Mills to the Jacksonville Corporation.

The bill shows that defendant W. I. Greenleaf is no longer in charge of the affairs of Profile Mills, that since his resignation as president the new management of the company has found that the records of Profile Mills do not record correctly the account between Profile Mills and the Jacksonville Corporation and has demanded an accounting from the defendants Greenleaf and the Jacksonville Corporation, but such defendants have failed to make such accounting.

The several questions of law necessary for a decision are well understood. Where there is a transfer of property to one person and the purchase price is paid by another, a resulting trust arises by operation of law in favor of the person by whom the purchase price was paid, in the absence of circumstances rebutting such operation of law. Haney v. Legg, 129 Ala. 619, 30 So. 34, 87 Am.St.Rep. 81; Miles v. Rhodes et al., 222 Ala. 208, 131 So. 633; DeFreese et al. v. Vanderford et ux., 220 Ala. 360, 361, 125 So. 228.

In Blanks v. Atkins et al., 217 Ala. 596, 598, 117 So. 193, 194, it is said that, "A resulting trust is the creature of equity, founded on the principle that the beneficial ownership is in him who furnishes the consideration. In the absence of special circumstances, as where a husband causes title to be made to his wife, or a parent to his child, indicative of a gift, it is sufficient to aver and prove that the property was paid for by one and the title taken in another, and that such money, or its equivalent, was so invested at the time of the purchase, or pursuant to an obligation so to do. Montgomery v. McNutt, 214 Ala. 692, 108 So. 752."

The rules governing accounting in equity are stated in Julian v. Woolbert, 202 Ala. 530, 81 So. 32.

The bill showing a complicated state of facts in accounts between the parties, rendering necessary a proper accounting in equity, it should be submitted to the register or a master of the court's nomination to ascertain and report the respective accounts and interests disclosed on discovery and due accounting. Buck Creek Cotton Mills, a Corp., et al. v. Stokely, Ala.Sup., 181 So. 100; Dewberry v. Bank of Standing Rock, 227 Ala. 484, 150 So. 463; Marx v. Marx, 226 Ala. 684, 148 So. 418; Comer v. Birmingham News Co., 218 Ala. 360, 118 So. 806.

It is further an established rule that when there are mutual accounts between persons who are not merchants in the usual sense, that time is computed from the date of the last item, with the exception that when the account is liquidated and a balance is struck between the parties, then the computation of time as to such agreed balance begins to run. First National Bank of Oneonta v. Lowery, 234 Ala. 56, 59, 173 So. 382; Causler v. Wharton, Adm'r, 62 Ala. 358; Bradford v. Spyker's Adm'r, 32 Ala. 134; Prestridge v. Patrick Irwin & Co., 46 Ala. 653; Cannon v. Copeland's Adm'r, 43 Ala. 201.

In City of Mobile v. McCown Oil Co., 226 Ala. 688, 148 So. 402, 404, it is said: "The rule of our decisions on the subject of accounting is thus stated in our recent case of Ingram et al. v. People's Finance & Thrift Co. of Ala. , 146 So. 822, 823: 'A bill for accounting states a case of equitable relief on facts showing a complicated nature of the account, or necessity for discovery of matters peculiarly within the knowledge of respondent, or fiduciary or trust relationship, or species of fraud or such wrong dealing as would authorize a court of equity to take cognizance thereof.' Julian v. Woolbert, 202 Ala. 530, 81 So. 32."

The authorities have been recently adverted to, indicating that the statute of limitations does not begin to run against a resulting trust so long as there is a recognition of such trust by the trustees. Bromberg et al. v. First Nat. Bank of Mobile, Ala.Sup., 178 So. 48; Snodgrass v. Snodgrass, 185 Ala. 155, 64 So. 594; Haney v. Legg, 129 Ala. 619, 30 So. 34, 87 Am.St.Rep. 81. That is to say that each recognition of the trust affords a new beginning of time and each case stands upon the facts and circumstances affecting such question. Whetstone v. Whetstone's Executors, 75 Ala. 495; Snodgrass v. Snodgrass, supra; Bromberg et al. v. First Nat'l Bank of Mobile, Ala.Sup., 178 So. 48, 53. So of the question of nonclaim. Foster v. Featherston, 230 Ala. 268, 160 So. 689.

In this connection, it is well to observe that the attempt is likewise to call the executive head or director of a corporation to account by the corporation and owners thereof for alleged wrongdoing or breach of his trust, no official capacity or authority, consent, or approval being shown. Such was declared in Adams v. Alabama Lime & Stone Corp., 221 Ala. 10, 15, 127 So. 544; Montgomery Light & Power Co. v. Lahey et al., 121 Ala. 131, 137, 25 So. 1006, 1008.

The defense of laches is not available to a director of a corporation when called upon to account by the corporation for his wrongdoing in such official capacity which was not approved or acquiesced in by that corporation. The rule is stated in Montgomery Light & Power Co. v. Lahey et al. supra, as follows: "Much, of course, depends upon the relation the respective parties to the suit bear to each other in the application of this doctrine. The defendant directors occupied a fiduciary relation towards the stockholders and the corporation of which they are directors. In the control of the assets and funds of the corporation, and in the direction and management of its business affairs, they are trustees. Bent v. Priest, 86 Mo. [ 475], 478; Parker v. Nickerson, 112 Mass. 195; Butts v. Wood, 38 Barb. [ (N.Y.) 181], 188; Abbott v. American Hard Rubber Co., 33 Barb. [ N.Y.] 578; Perry, Trusts,§ 207. When called upon to account by the corporation, or by the shareholder when he is authorized to maintain suit in his own name, the unfaithful director cannot cover his mala fides with the plea of laches on account of...