Lunsford v. Shannon

• Decision Date: 02 November 1922
• Docket Number: 6 Div. 241.
• Citation: 208 Ala. 409,94 So. 571
• Parties: LUNSFORD ET AL. v. SHANNON.
• Court: Alabama Supreme Court

94 So. 571

208 Ala. 409

LUNSFORD ET AL. v. SHANNON.

6 Div. 241.

Supreme Court of Alabama

November 2, 1922

Appeal from Circuit Court, Walker County; J. J. Curtis, Judge.

Bill by J. S. Shannon against Nora L. S. Lunsford and others. From a decree for the complainant, respondents appeal. Reversed and remanded.

Cabaniss Johnston, Cocke & Cabaniss, of Birmingham, and A. F. Fite, of Jasper, for appellants.

McGregor & McGregor, of Jasper, for appellee.

THOMAS J.

The appeal is from a decree confirming the report of the special master on a bill and cross-bill praying an accounting. Grand Bay Land Co. v. Simpson, 205 Ala. 347, 87 So 186; Hamilton v. Terry Co., 206 Ala. 622, 91 So 489.

There may be liability and accounting in a joint adventure that does not contravene public policy and is in conformity with law. Christie v. Durden, 205 Ala. 571, 88 So. 667; Saunders v. McDonough, 191 Ala. 119, 67 So. 591; s. c. 201 Ala. 321, 78 So. 160; James v. Hendree's Adm'r, 34 Ala. 488. The joint adventure for consideration in this case came about as follows: On July 10, 1914, J. S. Shannon and his wife, Alice Shannon, a party to the bill, executed a mortgage in favor of Nora L. S. Lunsford and Sarah E. Malone to secure the payment of notes of $5,000 to respective mortgagees, executed by the Shannons in favor of Mrs. Lunsford and Mrs. Malone, respectively. On January 19, 1915, Shannon and Mrs. Lunsford (through her husband, acting as her agent) entered into a written agreement, attached as Exhibit B to the bill, which recites that Nora L. S. Lunsford is to furnish Shannon money for the development of the "Diamond Coal Company on property leased from the University of Alabama and others, if such lands are leased from others, and the properties formerly belonging to the Oak Leaf Coal Company." The agreement further recites:

"That this money is to be furnished out of the balance of the money heretofore agreed to be loaned on a mortgage that was made by J. S. Shannon to the said Nora L. S. Lunsford for the sum of $10,000.00 on property in Walker county, Ala.; that said Nora L. S. Lunsford agrees to furnish the balance of said money to said Shannon, and in addition thereto will furnish an equal amount with the said Shannon for the purpose of developing the Diamond Coal Company and neither to seek to take advantage of the other by putting up or offering to put up more than an equal amount. It is further agreed that they are to own the Diamond Coal Company share and share alike and all its properties, the stock in said company, when organized to be distributed fifty per cent. each," etc.

The agreement further provided that the parties would "sell" to F. D. Rimer "$100.00 worth of the stock," "making a total of $200.00 worth of the stock," and that W. G. Lunsford and the complainant Shannon were to have equal salaries for services to the company, "said salary for each to be fixed hereafter." It is undisputed that at the time the Shannons executed a mortgage to Mrs. Lunsford and Mrs. Malone the mining venture for which accounting is sought was not contemplated, the mortgage transaction being a straight loan by the mortgagees to Shannon and in which the parties were brought together through the agency of Hobbs. Shannon testified that his tentative agreement with the board of trustees did not antedate the agreement of 1914. The agreement in question referred to the properties of the Oak Leaf Coal Company, a corporation then in bankruptcy, and sold pursuant to the order of court. This company had owned some mine track and other mine equipment, and had operated a coal mine on lands belonging to the University of Alabama under lease from the authorities of that institution. No lease from the University authorities was ever obtained, and though Shannon, who was the active man in the venture, proceeded to repair the properties and mine coal from the lands, he did so having no lease from the University authorities and was merely a trespasser so far as the mining of coal was concerned. The corporation which was to be named the Diamond Coal Company was never formed, and in so far as there was any legal relationship between Mrs. Lunsford and Shannon at all, it was that of partners; and it was that relationship which formed the basis of the suit for accounting brought by Shannon. It is undisputed that Mrs. Malone had absolutely no interest in the mining venture, her sole connection with the matter having been the loan of her funds through her agent W. G. Lunsford to Shannon, which was secured by the mortgage. Whether Shannon ever received the $5,000 from Mrs. Malone's funds in return for his note to her for that amount remains to be later considered. It is contended that she was in no sense a proper party to the suit for accounting or rightfully involved in it, and should not be bound by the decree.

Since the joint adventure terminated (after notice by the trustee for the University coal lands to Lunsford and by the latter to Shannon) for all practical purposes during the years 1916-17, no credits should be allowed Shannon for expenditures without authority after such practical termination, or beyond a reasonable time to conclude the business of the partnership.

Is the decree as to Mrs. Malone erroneous in enjoining her foreclosure of the mortgage given by Shannon to secure the sum of money advanced thereon? Mrs. Malone, the comortgagee was not a party to the original adventure. Therefore any agreement in the matter of that joint enterprise between Mrs. Lunsford and Shannon could not deprive Mrs. Malone of the unimpaired right to her security and of the timely foreclosure of her mortgage to the extent of the amount actually loaned...