Memorial Shrines, Inc. v. McConnell

• Decision Date: 21 January 1960
• Docket Number: 1 Div. 821
• Citation: 117 So.2d 684,270 Ala. 266
• Parties: MEMORIAL SHRINES, INC. et al. v. Harry E. McCONNELL.
• Court: Alabama Supreme Court

Page 684

117 So.2d 684

270 Ala. 266

MEMORIAL SHRINES, INC. et al. v. Harry E. McCONNELL.

1 Div. 821.

Supreme Court of Alabama.

Jan. 21, 1960.

Caffey, Gallalee & Caffey and John M. Tyson, Mobile, and Nicholas S. Hare, Monroeville, for appellant Memorial Shrines.

Tipler & Fuller, Andalusia, for appellant Mason Plan.

Foreman & Brown, Mobile, for appellant Interstate Finance & Discount Co.

Inge & Twitty, Mobile, for appellee.

STAKELY, Justice.

The basic question for decision in this case is whether there can be a strict foreclosure of a vendor's lien divesting the title of the vendee and revesting it in the vendor so as to cut off the statutory right of redemption without a sale of foreclosure.

Harry E. McConnell (appellee) owned 80 acres of land in Mobile County. On August 18, 1955, Memorial Shrines, Inc. (appellant), was organized for the purpose of purchasing or otherwise acquiring real and personal property and for the purpose of selling or disposing of such property as cemetery lots and cemeteries and of furnishing services, care and maintenance of such properties and engaging in any business incident to the cemetery business.

After the cemetery corporation had been organized and had made plans for a cemetery for Negroes, Harry E. McConnell entered into an agreement with it to sell to it the aforesaid eighty acres of land for use in establishing and operating a Negro cemetery.

According to the testimony of Harry E. McConnell, the value of the property was at that time 'about $300.00 per acre.' Immediately after the contract was entered into Memorial Shrines, Inc., applied to the Board of Revenue of Mobile County for a license to use the property for a cemetery and obtained such a license on December 13, 1959. The license for use as a cemetery having been granted, Harry E. McConnell executed a deed conveying title to Memorial Shrines, Inc., for a total consideration of $79,000 or approximately $1,000 per acre, $4,000 of which was paid in cash and $75,000 of which was secured by a vendor's lien reserved in the deed. The deed contains a power of sale at public outcry if any default occurs in the payment of the indebtedness. Thereupon Memorial Shrines, Inc., subdivided about two acres of the entire eighty acre tract into small cemetery lots and began selling such lots at from $300 to $400 per lot. According to the allegations of the verified bill of complaint the sales were by Memorial Shrines, Inc., and it had sold approximately 1,450 lots from the two acre parcel on installment contracts for a total consideration of from $435,000 to $580,000 up to the date Harry E. McConnell filed his original bill of complaint on November 20, 1956. Memorial Shrines, Inc., respondent, had collected on account of the sale contracts $110,360 prior to the filing of the original bill of complaint.

The original bill of complaint filed by Harry E. McConnell sought the appointment of a receiver of the corporate assets, relief against two of the incorporators or promotors and against eleven individuals who had been salesmen of the cemetery lots. The relief sought against the salesmen was for commissions received for sales of cemetery lots and repayment of alleged 'excessive and unjustified commissions.'

The bill also sought relief from the other two individual respondents, Phillip Gabriel and Wallace L. Johnson, for alleged excessive promotional and organizational expenses, excessive travelling and entertaining expenses, alleged withdrawals of large amounts from petty cash for unknown expenses, payment of excessive and unjustified commissions to salesmen of cemetery lots, excessive car expenses and allowances, incurring alleged exhorbitant discount expenses, unnecessary interest expenses and generally for alleged dissipation of funds of the corporation, 'not in accordance with good business principles.'

The relief sought against Phillip Gabriel and Wallace L. Johnson was, however, primarily for the alleged issuance to them of 17,550 shares of the capital stock of the cemetery corporation allegedly without consideration and against Phillip Gabriel and his corporation, Gabriel's Inc., for the alleged diversion of $13,500 of the funds of Memorial Shrines, Inc., in the guise of a purchase of debenture bonds of Gabriel's Inc., an insolvent corporation, later adjudged bankrupt.

Harry E. McConnell in his bill prayed that a receiver of the assets of Memorial Shrines, Inc., 'be immediately appointed * * * to immediately take over the affairs of the corporation upon his giving bond in an amount to be set by the court.'

On the date that Harry E. McConnell filed his bill for the appointment of a receiver, he filed a verified motion for the appointment of a receiver alleging that the assets of the corporation were in jeopardy and that irreparable injury would result from delay in the appointment of a receiver. On November 21, 1956, Harry E. McConnell filed the necessary bond to secure the appointment of a receiver and on the same date the court, acting on his motion, entered an order appointing a receiver 'of all property, assets and estates of the said Memorial Shrines, Inc., with authority to take immediate possession of said property, premises, books and all other property of every kind belonging to said corporation,' and authorizing the receiver to 'continue to carry on the business of the said Memorial Shrines, Inc.,' and to collect all debts due to it. The receiver qualified by giving bond on the same date.

In thus seeking and obtaining the appointment of a receiver, Harry E. McConnell alleged 'that many contracts of sale of lots were executed by colored citizens in and about Mobile for the purchase of lots' in the cemetery and that approximately 1,450 such lots had been contracted to be sold on installment contracts at a price of from $300 to $400 each.

Harry E. McConnell further alleged that while he was entitled to foreclose his vendor's lien because of default in the payment of three monthly installments of $2,000 each, he was not seeking a foreclosure because 'Many people have purchased stock in Memorial Shrines, Inc. and creditors have extended credit all in good faith and he believes that said corporation can ultimately become a going concern and if he forecloses said lien, innocent people will suffer.'

His bill for a receivership concludes by alleging that 'A receiver ought to be appointed to take over the affairs of the corporation for the benefit of the bona fide stockholders and creditors' and that 'unless a receiver is appointed for the corporation, grave injustices will be suffered by stockholders and creditors who will be caused to lose great sums of money through no fault of their own.' He further alleged the belief on his part 'that when the affairs of the corporation are set in order the same can be run on a profitable and business-like basis.'

Thereafter the receivership proceedings instituted by Harry E. McConnell proceeded in the usual manner for over a year. The court on the motion of the receiver fixed the time for filing claims and notice of said order was duly published for four consecutive weeks. Pursuant to the order and notice some twenty-five claims were filed in the cause within the time limit. Among the claims to be so filed was the claim of Harry E. McConnell for $10,000, representing installments on his vendor's lien alleged to be in arrears. Among the claims filed was one by Mason Plan Company, Inc., and one by Interstate Finance and Discount Company, whereby it was agreed that they would take transfers of sales contracts made by Memorial Shrines, Inc., at discount with full right of recourse. The receiver denied one claim as filed too late. He denied twelve other claims but asked the court to fix a time at which each claimant might prove his claim in open court.

On February 10, 1958, Harry E. McConnell filed what is designated as an 'Amended and Supplemental Bill of Complaint.' Paragraphs 'b' to 'e', inclusive, were stricken on motion. The bill as thus amended, without seeking a decree determining the amount of the indebtedness secured by the vendor's lien and without asking the court to fix a time within which the indebtedness must be paid, sought only a strict foreclosure of the vendor's lien of Harry E. McConnell, vesting in Harry E. McConnell the absolute title to all of the property covered by the vendor's lien 'without any right of redemption,' excepting only so much thereof as has heretofore been released by written instruments of release executed by the complainant and his wife.

Memorial Shrines, Inc., demurred to the amended and supplemental bill. The bill as thus amended was again amended by alleging that the complainant is willing to take a strict foreclosure of all of the property covered by said lien subject to the right of all purchasers of cemetery lots located on said premises, under contracts of purchase which are valid and subsisting contracts at the time of the filing of this amended and supplemental bill of complaint. The bill as last amended did not make any of the contract purchasers of lots in the cemetery or their assignees or transferees parties to the suit. The demurrer was refiled to the bill as last amended and was overruled. This ruling is assigned as error.

As a basis for claiming a strict foreclosure of the vendor's lien, cutting off all right of redemption, the amended bill alleged that Memorial Shrines, Inc., 'is an insolvent corporation,' and that the original bill was filed for the purpose of marshalling the assets thereof for the benefit of creditors. It further alleges that the amount owing complainant and secured by the vendor's lien, including interest and attorney's fees to date, was $78,000; that the property covered by the lien is clearly insufficient to pay said debt, and that if the property covered by the lien were sold at foreclosure by public auction, it could not reasonably be expected that any responsible bid would be received...