Jones v. McPhillips

Decision Date26 May 1887
Citation2 So. 468,82 Ala. 102
PartiesJONES v. MCPHILLIPS.
CourtAlabama Supreme Court

Appeal from chancery court, Mobile county.

Bill in equity by creditors of insolvent bank, asking removal of assignee, appointment of receiver, and administration of trust.

The original bill in this cause was filed on the ninth of July 1884, by James McPhillips and others, depositors and creditors of the Bank of Mobile, on behalf of themselves and other creditors, against the said bank as a corporation, and against Winston Jones, as trustee or assignee, in a deed of assignment executed to him by said bank on July 8, 1884, for the benefit of its creditors; and sought to remove the assignee, to have a receiver appointed, and the trust administered and settled under the orders of the court. The defendants demurred to the bill, specifying numerous causes of demurrer, all of which were overruled by the chancellor but, while he refused to appoint a receiver, he made a decretal order assuming jurisdiction of the trust. The assignee appealed from this decretal order, and here assigned as error the overruling of the several demurrers, and the order assuming jurisdiction of the trust; on which appeal the decree of the chancellor was reversed by this court, but the cause was remanded, in order that the complainants might have an opportunity to amend their bill, if they desired to do so. Jones v. McPhillips, 77 Ala 314-323. In the mean time, on August 29, 1884, the assignee himself filed a bill in the same court, against the bank and its creditors, asking that the court would take jurisdiction of the trust created by the assignment, instruct him in the discharge of his duties, require the creditors to come in and propound their claims, settle all conflicting liens and equities, and administer the assets as required by law and equity. On February 10, 1885, the complainants in the first bill made a motion for the consolidation of the two causes and the chancellor, while overruling the motion, "ordered that hereafter the two causes will be heard and considered at the same time and together, and that any order, decree, or other action of the court in one of them shall be held and to be taken notice of in the other, whether the same shall be preparatory to a final decree, enforcing the same, or a final decree settling the equities." The principal contest, under the bill filed by the assignee, was with Williams, Deacon & Co., bankers in London, who asserted a prior lien on a great part of the assets of the bank, and filed an answer and cross-bill, stating therein the facts particularly on which their claim was founded. See the case reported in 77 Ala. 294-309, and in 79 Ala. 119-132. There were also several litigated claims, one of which was brought to this court. Ex parte Jones, 77 Ala. 330.

On August 1, 1885, McPhillips et al., the complainants in the bill first filed, asked leave to amend their bill in several particulars; and the register, on August 3d, allowed the amendment, against the objections of the assignee. The amendment alleged and charged, among other things, that Jones, the assignee, was a director of the bank for a year or more prior to its insolvency, and actively participated in the mismanagement which resulted in its financial ruin, voting with the majority for the election of Danner as president, and for the increasing loans to him which caused the ruin of the bank; and it repeated the charges as to the youth of the trustee, his inexperience, and the inconsiderable value of his property as compared with the assets belonging to the bank. The amendment alleged, also, the various conflicting liens and equities asserted by Williams, Deacon & Co. and other creditors, the great number of the creditors, their residences in various parts of the world, and other facts showing a necessity for the administration of the trust by a court of equity, substantially as the facts had been stated in the bill filed by the assignee. An affidavit to the amendment, made by said McPhillips, was in the usual form, but further stated: "The allegations of said amended bill are of facts existing when the original bill was filed, but which at that time were not available to complainants."

The assignee filed a demurrer to the amended bill, specifying 31 grounds or causes of demurrer; and the bank adopted this demurrer. The assignee filed an answer, also, in which he again stated the facts as in his former bill and answer, and also stated, in substance, that all the controverted matters, except the claim of Williams, Deacon & Co., and one other, had already been determined and settled in the other suit. The chancellor overruled the demurrers, and, on final hearing on pleadings and proof, rendered a decree taking jurisdiction of the trust as prayed, but further added: "And it further appearing that, under a proceeding commenced in this court on August 29, 1884, by said trustee, this court took jurisdiction of said trust before August 1, 1885, when these complainants first made and filed allegations sufficient to confer jurisdiction on the court, it is therefore ordered, adjudged, and decreed that no action in the administration of the trust be taken in this case until the further order of this court, pending its administration in said case begun on August 29, 1884." The appeal is sued out by the assignee, who here assigns as error the overruling of the demurrers to the amended bill, and the decree taking jurisdiction of the trust under the bill.

Gaylord B. Clark and F. B. Clark, Jr., for appellants.

Hannis Taylor, contra.

STONE C.J.

This cause was before us at a former term. Jones v. McPhillips, 77 Ala. 314. It was before us then on the demurrer to the original bill for want of equity, and the chancellor's ruling thereon, overruling the demurrer, and taking jurisdiction of the trust. Accompanying the original bill, and made also a part of its prayer, was an application to the chancery court to remove Jones as assignee, and to place the trust and its administration in the hands of a receiver. This part of the prayer was denied by the chancellor, and, as we have said, he overruled the demurrer to the bill, and made a decretal order that the trust be administered in the chancery court. From that decretal order the appeal was taken to this court. The error assigned was the granting of the order by the chancellor, taking jurisdiction of the trust, on the averments as they appeared in the original bill.

The averments of the original bill are fully set out in the opinion of the court delivered on the former appeal, (77 Ala. 314,) and need not be here repeated. The assignment was executed July 8, 1884, and the bill in this case was filed the next day. The gravamen of its charges was directed against the capacity and fitness of the assignee, Jones, to administer the trust; and it presented no question of complication in the accounts, or of actual or apprehended error in the administration of the trust, which called for instructions from the chancery court. The only charge looking in that direction is the following: "That the said trust is, from its very nature and terms, one which cannot be effectually managed and discharged, and dividends duly declared, except under the jurisdiction and direction of a court of equity." The assignment was a general one, made for the benefit of all the creditors, without specifying who they were, and without describing the property conveyed, or any part of it. We there said: "It should require a strong case-much stronger than is here shown-to justify the court in interfering with the trustee's administration of the trust at the very threshold of his duties. Dishonesty, faithlessness, fraud, incompetency, or inefficiency, sufficiently averred, in its constituent facts, would justify the displacement of the trustee or assignee, and the transfer of the trust to the chancery court. Without a cause shown sufficient to remove or displace the trustee or assignee named in the assignment, a bill filed as this was is without equity, unless it sets forth, with proper averment of facts, some special equitable ground why the trustee shall not proceed without instructions from the chancery court, and shows further that the trustee persists in the execution of the trust without invoking such instructions. There are many cases of questionable interpretation in which it is both the privilege and duty of the assignee to obtain the court's instructions. Refusing to do so, and assuming to act on his own unaided judgment, we will not say a beneficiary, who shows himself injured by the erroneous judgment of such assignee, may not himself, at any stage of the administration, invoke and obtain a decree of the chancery court correcting such erroneous judgment of the assignee, and properly administering the trust. Of course, such bill by a dissatisfied beneficiary would be at the risk and peril of establishing and fastening error on the assignee, and should not be resorted to except in cases of threatened injury, for which there is no other adequate means of redress or prevention." We added: "It is not our purpose, however, to decide the question last discussed." In that case we held that the demurrer to the bill should have been sustained; and we "remanded the cause, that the bill be dismissed in the court below, unless so amended as to cure the defects in the present bill."

It will be discovered in what is stated above, and in the statements of our former opinion, that the original bill in this case had one controlling purpose,-the removal of Jones, the assignee, from the trust. It set forth some grounds why he should be removed, but both the chancellor and this court held the grounds insufficient. The bill also prayed that the chancery court take...

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