Montgomery Iron Works v. Roman

• Decision Date: 30 June 1906
• Citation: 41 So. 811,147 Ala. 434
• Parties: MONTGOMERY IRON WORKS ET AL. v. ROMAN.
• Court: Alabama Supreme Court

41 So. 811

147 Ala. 434

MONTGOMERY IRON WORKS ET AL. v. ROMAN.

Supreme Court of Alabama

June 30, 1906

Appeal from City Court of Montgomery; A. D. Sayre, Judge.

"To be officially reported."

Action by Sigmund Roman against the Montgomery Iron Works and others. From a judgment for plaintiff, defendants appeal. Reversed and rendered in part, and affirmed in part.

This was a bill filed by Sigmund Roman against the Montgomery Iron Works and certain stockholders thereof alleged to be solvent and not filed against certain other stockholders on account of their alleged insolvency. The case made by the bill is the organization of the corporation, the fixing of the capital stock at $50,000, and the paying of said stock by a delivery to the corporation of certain land, houses and machinery alleged to be worth, then and now, not more than $25,000, and the issuance of bonds for $50,000, running 10 years, with interest at the rate of 8 per cent., secured by a trust deed on the property of the corporation, with one Hannon as trustee, and with the rights and power of foreclosure usual in such trust deeds on the failure to pay interest coupons attached to the bonds. The bill further alleges that Dimmick Baldwin, and Craik are the only solvent stockholders; that Dimmick subscribed $5,000 to the capital stock, Baldwin $5,000, and Craik $2,500; and that each had paid only one-half of their subscription. The bill further alleges That of the $50,000 worth of bonds issued $25,000 were put in circulation as follows: To Dimmick, $5,000; to Baldwin, $5,000; to Craik, $2,500; to Chambers, $5,000; to Bibb, $7,500. That these bonds were issued and turned over to the above-named parties without pay or promise to pay, without any labor being done, and without money or property actually received for them. That it was a fictitious increase of indebtedness of the corporation. The transfer by all these parties of these bonds before they were due, and the liability of the parties named to the creditors of the corporation for the money value of said bonds, which is alleged to be of the par value of $100 each. The bill further alleges that the complainant was the holder, for value and without notice of the fraudulent issue of the same, of bonds to the amount of $2,200, which he alleges he has filed with the trustee under the deed; but, as the assets cannot pay more than 30 or 35 cents on the $1, this bill is introduced against the defendants for the purpose of having them account for the balance due on their subscription to the stock of the corporation and for the value of the bonds. The bill alleges a judgment in favor of the complainant against the Montgomery Iron Works, an execution thereon, and a return of "No property found." The prayer is for general relief, for service, and for an accounting against Dimmick, Baldwin, and Craik for the balance due on their stock subscription, and for the amount due by them on the bonds. Demurrers were filed to the bill, and motion to dismiss it for want of equity, which were overruled. Afterwards the defendants moved to require the complainant to elect whether he would proceed in this cause by bill herein filed or with the garnishment suit alleged to be pending in the circuit court in Montgomery county issued on a judgment obtained by complainant against the Montgomery Iron Works in which these defendants were garnished. The court required them to elect. The defendants answered the bill, incorporating therein pleas of the statute of limitations of six years, and in said answer each defendant set up as a bar to the action a garnishment writ sued out at the instance of the complainant in this bill on a judgment obtained by him against the Montgomery Iron Works for the amount he seeks to recover by this bill, the service of garnishment upon each defendant, and the answer of the garnishee thereto denying indebtedness, and averring that no contest was instituted testing the answer denying indebtedness. The other facts sufficiently appear in the opinion.

Dowdell and Denson, JJ., dissenting in part.

Horace Stringfellow and Thomas H. Watts, for appellants.

Gunter & Gunter, for appellee.

SIMPSON J.

From an examination of the testimony we find that there is no controversy about the facts that the property of the Montgomery Iron Works Company was purchased by the promoters of the new company for $25,000, with probably an additional agreement to pay certain debts of that company, which are stated to be $3,000 or $4,000; that said promoters had the amount of the consideration stated in the deed to them as $50,000; that said promoters subscribed for $50,000 of the stock of the new company, and paid for the same by conveying said property, and as a part of the agreement were to receive, in addition to the $50,000 of stock, $30,000 of an issue of bonds to the amount of $50,000, which were to be secured by a deed of trust on the property, and they did receive $25,000 of said bonds. Afterwards the property was sold under the deed of trust, and the bondholders realized only about 20 per cent. of the amount due on their bonds There is a good deal of testimony as to the real value of the property which was conveyed to the company, and, taking all of the testimony we think that $50,000 would be a full estimate of its value.

It is contended by appellants that the bonds were not received until some time after the organization of the corporation; consequently, that the whole amount of property conveyed should be applied to the payment of the stock, and that, whatever liability there may be on account of the bonds, it cannot be recovered in this action under the previous decisions of this case. Roman v. Dimmick, 115 Ala. 233, 22 So. 109. This position is not tenable, because it is testified to by the parties themselves that the property was sold to the company for $80,000, which was to be paid for by $50,000 of the stock and $30,000 of the bonds, so that the time of the actual issue of the bonds does not alter the fact that their reception was a part of the original transaction. If a party owes $50,000, and conveys property worth $50,000 with a $25,000 mortgage on it, he certainly has paid only $25,000 of the debt. So in this case, even at the valuation mentioned, the parties paid only 50 per cent. of the par value of their stock.

There is no merit in the pleas of the statute of limitations, as the statute did not commence to run as to these parties until the judgment and return of nulla bona (Vaughn v. Ala. Nat. Bank, 42 So. 64), and the judgment of the city court was correct in holding that the pleas setting up the foreclosure proceeding were "patently insufficient."

It is next insisted that the liability of the respondents on account of their stock subscription is res adjudicata, having been determined in the previous proceedings by garnishment in which the parties as garnishees were discharged. It is replied that, because there was no contest of the answer of the garnishees, there was no determination...