Lowry Watkins Mortg. Co. v. Turley-Bullington Mortg. Co.

• Decision Date: 21 March 1933
• Citation: 248 Ky. 285,58 S.W.2d 591
• Parties: LOWRY WATKINS MORTGAGE CO. v. TURLEY-BULLINGTON MORTGAGE CO.
• Court: Kentucky Court of Appeals

58 S.W.2d 591

248 Ky. 285

LOWRY WATKINS MORTGAGE CO. v. TURLEY-BULLINGTON MORTGAGE CO.

Court of Appeals of Kentucky

March 21, 1933

Appeal from Circuit Court, Jefferson County, Common Pleas Branch Fourth Division.

Action by the Turley-Bullington Mortgage Company against the Lowry Watkins Mortgage Company and others in which defendant mortgage company and another filed a set-off and counterclaim. Judgment for plaintiff, and defendants appeal.

Affirmed.

Cary Tabb and Peter, Lee, Tabb, Kreiger & Heyburn, all of Louisville, for appellant.

J. H Gold, of Louisville, for appellee.

CREAL Commissioner.

On November 19, 1927, the Jefferson Mortgage Company, a corporation, executed and delivered to the Turley-Bullington Mortgage Company, also a corporation, a note for $500, due in 30 days and bearing interest from maturity. Thereafter, Lowry Watkins purchased practically all the capital stock of the Jefferson Mortgage Company, and, by amended articles of incorporation, its corporate name was changed to Lowry Watkins Mortgage Company.

The Turley-Bullington Company instituted this action against Lowry Watkins and E. C. Moon, seeking to recover on the note and in separate paragraphs of its petition set up other claims. The court dismissed all of the petition except the first paragraph. In addition to the allegations necessary to state a cause of action on the note as against the Lowry Watkins Mortgage Company, it was alleged that by a written agreement dated January 21, 1928, Lowry Watkins and E. C Moon agreed to pay the note with accrued interest.

By joint answer, set-off, and counterclaim, defendants the Lowry Watkins Mortgage Company and Lowry Watkins alleged in substance that under the agreement referred to in the petition dated January 21, 1928, and a supplemental agreement dated May 9, 1928, Lowry Watkins purchased from T. J. Turley and J. P. Bullington of Memphis, Tenn., 225 shares of the stock of the Jefferson Mortgage Company for $2,500 cash, the amount which they had paid on their subscription for the stock and assumed their further liabilities thereon. By the terms of the agreement, Turley and Bullington guaranteed the correctness of an audit purporting to show the assets and liabilities of the Jefferson Mortgage Company. It is alleged that the audit included in the list of assets an item of interest amounting to $891.96, which proved to be worthless, and that the defendant company had been forced to expend in attorney's fees the sum of $250 in an attempt to realize on notes which Turley and Bullington represented would be taken by the New York Life Insurance Company, but which it refused; that the defendant company was also required to pay corporate license and other taxes not shown in the audit in the sum of $147.50. It is further alleged that Moon was not a party to the supplemental agreement because Watkins had bought his part of the stock, and that Watkins is now the owner of all the stock of the Lowry Watkins Mortgage Company except such shares as are held by directors for the purpose of complying with the statute; that Turley and Bullington own practically all the stock of Turley-Bullington Mortgage Company and are the officers of and manage, control, and dominate it; that they are the real parties in interest in the action and any money recovered would inure to their benefit; that they are nonresidents of this state and have avoided subjecting themselves to the jurisdiction of the court because of the knowledge that their guaranty has failed, and that Lowry Watkins and the Lowry Watkins Mortgage Company have the aforementioned claims against them; that, if plaintiff is permitted to recover judgment on the notes sued on before Turley and Bullington are required to pay the sums due under their guaranty as set out in the answer, a fraud will be perpetrated upon the answering defendants. They asked that the petition be dismissed, and...