Mobile Towing & Wrecking Co. v. Hartwell

• Decision Date: 02 November 1922
• Docket Number: 1 Div. 242.
• Citation: 208 Ala. 420,95 So. 191
• Parties: MOBILE TOWING & WRECKING CO. v. HARTWELL.
• Court: Alabama Supreme Court

95 So. 191

208 Ala. 420

MOBILE TOWING & WRECKING CO. v. HARTWELL.

1 Div. 242.

Supreme Court of Alabama

November 2, 1922

Appeal from Circuit Court, Mobile County; Claude A. Grayson, Judge.

Bill of Guy J. Hartwell against the Mobile Towing & Wrecking Company and Harry T. Hartwell. Decree for complainant, and the Mobile Towing & Wrecking Company appeals. Reversed and rendered.

See also, 201 Ala. 419, 78 So. 797.

Where complainant indorsed a certificate of corporate stock in blank and delivered it to his brother, a shareholder and officer of the corporation for the latter to use as collateral, the corporation was authorized to accept the surrender of such certificate and to reissue another to the brother, which new certificate thereupon became subject to the lien of the corporation for the brother's indebtedness.

The bill alleges that Guy J. Hartwell was the owner of 60 shares of the capital stock of the Mobile Towing & Wrecking Company that on March 16, 1914, respondent Harry T. Hartwell, brother of complainant, requested complainant to lend him said 60 shares of stock in order that he might use the same as collateral to protect an indebtedness owing by him to the First National Bank of Lakeland, Fla.; that complainant did so lend said stock, for the purpose, indorsing the certificate in blank; that on May 15, 1914, Harry T. Hartwell wrote and delivered to complainant a letter acknowledging the loan of the stock and inclosed therewith his demand note for $22,500, the estimated value of the stock. A copy of the letter is exhibited with the bill, and reads:

"For and in consideration of the loan to me of your sixty shares of the Mobile Towing & Wrecking Company stock which I am to use as collateral with the First National Bank of Lakeland, Fla., to protect an indebtedness with this bank for account of myself and Mr. Arthur Bailey, I herewith inclose you my note for $22,500.00 dollars for you to hold to protect your interest in the transaction.

"Mr. Bailey is now ill and as soon as he recovers I will have him indorse the note."

It is alleged that while Harry T. Hartwell had promised to have the note indorsed by Arthur Bailey, said Bailey did not indorse the same and denied liability thereon.

On the 16th of March, 1914, it is alleged, there was standing on the books of Mobile Towing & Wrecking Company in the name of Harry T. Hartwell 139 shares of stock, and in the name of the complainant the 60 shares so loaned; that at that time, and long prior thereto, Harry T. Hartwell was vice president, secretary and treasurer of the Mobile Towing & Wrecking Company; that the aggregate stock owned by Harry T. Hartwell and complainant was a majority of the 385 total authorized shares of stock of the corporation; that Harry T. Hartwell was in practical control of the corporation from 1907 until 1915, and voted complainant's stock at all meetings.

It is alleged that Harry T. Hartwell in contravention of his agreement with complainant, and without complainant's knowledge, wrongfully and fraudulently surrendered to the corporation complainant's certificate of stock, issued to himself a new certificate for said 60 shares, signed the same as secretary, and procured the name of the president thereto, and indorsed said new certificate and attached it as collateral to his note or notes to the First National Bank of Lakeland; that complainant's first knowledge of such surrender and reissue was in June, 1916, after publication by the Mobile Towing & Wrecking Company of notice of sale by it of the said stock.

It is alleged that in May, 1916, the Mobile Towing & Wrecking Company claimed that Harry T. Hartwell was indebted to it by reason of his use of the funds of the corporation without its knowledge or consent, and on May 19, 1916, addressed a letter to Harry T. Hartwell demanding payment; that said Hartwell failing to pay said indebtedness, the corporation, after giving notice, attempted to sell the stock in question at public outcry, and, being the highest bidder, itself became the purchaser at and for the sum of $2,000, which was credited on the indebtedness of Harry T. Hartwell to it; that prior to such attempted sale Harry T. Hartwell wrote a letter to the corporation notifying it that the stock in question was the property of complainant; that it had been loaned by complainant to him for the purpose heretofore stated; and that the facts relative to such loan were well known to the corporation and its officer.

It is alleged that the complainant did not know at the time of loaning his stock to Hartwell, nor for some time thereafter, that Hartwell was indebted to the corporation in any manner.

It is alleged that since the stock was never at any time the property of Harry T. Hartwell, the Mobile Towing & Wrecking Company never acquired any lien thereon; that the corporation had notice of the limited purpose for which the stock was loaned, and prior to its attempted sale had written notice of the status of the stock.

The bill further alleges that the First National Bank of Lakeland brought suit against Harry T. Hartwell, recovered judgment for $13,354.98, and the same remaining unpaid on June 23, 1916, offered the stock in question for sale, and it, being the highest bidder, purchased the stock for $1,500, which it credited on said judgment; that on June 11, 1917, Harry T. Hartwell and Arthur Bailey paid the judgment except to the extent of $1,500, for which they received credit on account of said stock, agreeing that the title of the bank to the stock should remain unimpaired, but that the debtors in the judgment did not warrant the title to the stock obtained at such foreclosure.

It is alleged that on June 24, 1916, after demand on the Mobile Towing & Wrecking Company to make transfer on its books of the stock, in question, and after its refusal, the First National Bank of Lakeland brought suit against the corporation and Harry T. Hartwell to establish its title to such stock and to compel such transfer; that in said litigation, in which the rights of this complainant were not involved, relief was granted to the Mobile Towing & Wrecking Company. 201 Ala. 419, 78 So. 797.

It is alleged that on March 6, 1920, complainant entered into an agreement with the First National Bank of Lakeland by which the bank released all claims against the stock in question to complainant; that in making such agreement it was complainant's desire to obtain the certificate for 60 shares of stock issued to Harry T. Hartwell in order that he might surrender the same to the corporation in making demand for a certificate issued in his own name.

The bill further alleges that on March 22, 1917, complainant believing that the First National Bank had title to the stock in question, and that the same was lost to him, he brought suit against Harry T. Hartwell and Arthur Bailey on the note given by Harry T. Hartwell to complainant; that thereafter he took a nonsuit in said action under an agreement with said Hartwell and Bailey that, unless said Hartwell delivered to complainant a certificate for 60 shares of stock in the Mobile Towing & Wrecking Company, or paid to him the sum of $24,750, within 12 month, complainant should reinstate the action; that thereafter the Supreme Court rendered its decision in the case of Mobile Towing & Wrecking Co. v. First National Bank of Lakeland, 201 Ala. 419, 78 So. 797, and complainant abandoned the idea of attempting to collect said note.

The bill further alleges that since the attempted sale by the Mobile Towing & Wrecking Company on June 26, 1916, the corporation has treated said 60 shares of stock as treasury stock; that since that time the corporation has declared and paid to its stockholders two dividends, one on September 18, 1918, for $48 a share, and one, on December 19, 1919, for $30 a share; that no dividends were paid on the stock in question and that complainant is entitled to dividends amounting to $4,680; that on March 9, 1920, complainant made demand on Mobile Towing & Wrecking Company for issue to him of certificate for 60 shares of stock, and payment of dividends due thereon; and that said corporation has refused to comply with such demand.

Complainant offers to surrender the certificate for 60 shares of stock to Harry T. Hartwell, surrendered to him by the First National Bank of Lakeland, upon issue of a new certificate to him by the Mobile Towing & Wrecking Company.

The prayer of the bill is that the 60 shares of stock in question be declared the property of complainant; that the Mobile Towing & Wrecking Company be required to transfer same to complainant on its books, and to issue a new certificate therefor; and that the corporation be ordered to pay complainant $4,680 as dividends.

Smiths, Young, Leigh & Johnston, of Mobile, for appellant.

Stevens, McCorvey, McLeod & Goode, of Mobile, for appellee.

THOMAS J.

The bill was filed March 13, 1920, amended November 12, 1921, and on hearing there was a decree for complainant.

The decree fixed the ownership of 60 shares of stock in a corporation and awarded a money judgment for dividends from the time the corporation began to treat the stock as being treasury stock, acquired in the enforcement of its statutory lien against a stockholder for his indebtedness to the corporation. Section 3476 of Code of 1907; Montgomery Bank & Trust Co. v. Jackson, 190 Ala. 416, 67 So. 235; Walsh et al. v. State ex rel. Cook, 199 Ala. 123, 131(10), 74 So. 45, 2 A. L. R. 551; Rowe v. Bank of New Brockton, 207 Ala. 384, 92 So. 643.

The bill avers that of two dividends that have been declared by the corporation, all had been paid to stockholders, other than alleged stockholder whose stock was sold and purchased by the corporation and treated as being retired,...