Lebeck v. Ft. Payne Bank

• Decision Date: 01 May 1897
• Parties: LEBECK v. FT. PAYNE BANK ET AL.
• Court: Alabama Supreme Court

22 So. 75

115 Ala. 447

LEBECK v. FT. PAYNE BANK ET AL.

Supreme Court of Alabama

May 1, 1897

Appeal from chancery court, Dekalb county; W. H. Simpson Chancellor.

Bill by Lou Lebeck against the Ft. Payne Bank and others. Upon the submission of the cause upon the demurrers and motion to dismiss the bill for want of equity, most of the grounds of demurrer and the motion were sustained, and the bill was dismissed. From this decree the complainant appeals, and assigns the rendition thereof as error. Reversed.

Mountjoy & Tomlinson, for appellant.

L. L Cochran and Davis & Haralson, for appellees.

HEAD J.

On March 20, 1889, the Alabama Sanitarium was incorporated under the laws of Alabama. C. O. Godfrey, A. S. Loventhal, and E W. Godfrey were the corporators. Authorized capital was $40,000, and all was subscribed for by said corporators. C O. Godfrey was elected president. This corporation became the owner of a block of land in Ft. Payne, Ala., an hotel or sanitarium building located thereon, and all the furnishings in the building, which constituted all of its property. On June 24, 1890, said C. O. Godfrey and eight others were likewise incorporated under the name of Ft. Payne Educational Association. On January 23, 1891, the sanitarium sold and conveyed by deed all its said real property to the educational association for the recited consideration of $25,000 cash; and on January 27, 1891, the educational association executed to the First National Bank of Ft. Payne, as trustee, a deed of trust to said property, to secure an issue of 300 bonds of the educational association, numbered from 1 to 300, inclusive, each for $100, maturing September 1, 1895, interest 6 per cent. per annum, payable semiannually. The deed of trust recited that the bonds and proceeds of their sale were to be devoted "solely to the payment for the academy building and the needs and purposes of the school." The deed is nowhere set out in the record, and we have no information of its contents other than as above stated. It is inferable that it authorized the trustee to sell on default in payment of the bonds. Afterwards the First National Bank resigned as trustee, and E. W. Godfrey was appointed its successor, and he, in the fall of 1892, advertised the property to be sold on October 4, 1892, in default of payment of interest on the bonds. On September 28, 1892, the Ft. Payne Bank, as an alleged creditor of the Alabama Sanitarium, filed its bill in the chancery court of Dekalb county against the sanitarium, the educational association, Godfrey, as trustee, and divers others alleged to be holders of the bonds, to set aside the said sale by the sanitarium to the educational association as fraudulent, and to subject the property to the payment of complainant's debt; and such proceedings were therein had that on November 14, 1894, the complainant obtained a decree granting the relief prayed. The property was condemned to sale, and sold by the register for the satisfaction of the complainant's demand; the threatened sale by the trustee having been enjoined. On July 24, 1895, the complainant in the present cause, Lou Lebeck, filed this bill against the Ft. Payne Bank, the sanitarium, the educational association, and Godfrey, the trustee, alleging that in the spring of 1891 he became the purchaser from A. S. Loventhal, for value, without notice of any infirmity either in the bonds or the conveyance of the property to the educational association, of 60 of said trust bonds, paying therefor $6,000. The bonds were payable to holder, and then had several years to run to maturity. They recited the execution of said trust deed for their security. The record of the former suit of the Ft. Payne Bank, above referred to, was made a part of the present bill, and from it it appears that 250 of the 300 bonds, when issued, were delivered to the sanitarium, and by it distributed to its stockholders, one of whom was said A. S. Loventhal, leaving the Ft. Payne Bank, as a creditor, unprovided for; and it was in this way that Loventhal became possessed of the 60 bonds he sold to Lebeck, the present complainant. But Lebeck alleges in his bill that he had no notice of how Loventhal acquired the bonds, and supposed he had purchased the same from the educational association, that issued them, and had no notice that the Ft. Payne Bank was a creditor of the sanitarium, or that it owed any debts to any one. He was not made a party to the former suit, and alleges that he resided in Nashville, Tenn., and had no notice of the suit. The bill complains that the former decree is erroneous on its face, in that it fails to decree relief to complainant therein, subject to the rights of any and all bona fide holders of said bonds, without notice, etc., who were not before the court; and with this view prays, if the court should deem it a proper measure of relief, that said decree be reviewed and corrected, and the rights of the present complainant as a bona fide holder of said bonds be protected, etc., and, if this be not the appropriate relief, that the register's sale be set aside, and complainant's lien upon the property be enforced, and for general relief.

There were assigned many grounds of demurrer to the bill. We will endeavor to state the principles decisive of those grounds which we deem it necessary to advert to. The bill does not assail the character of the Ft. Payne Bank as the creditor of the sanitarium it professed to be, nor does it deny the alleged fraudulent character of the sale which was set aside. It is impliedly conceded that, subject to the supposed erroneous failure to provide for bona fide holders of the bonds, the said Ft. Payne Bank was entitled to the relief it obtained, as against the parties to its bill, who could not defend the same as bona fide holders of bonds. So the inquiry now is whether Lebeck, the present complainant, is entitled to protection as a bona fide holder; and this involves the consideration of two questions: First, whether...