Montgomery Light Co. v. Lahey

• Citation: 121 Ala. 131,25 So. 1006
• Parties: MONTGOMERY LIGHT CO. ET AL. v. LAHEY ET AL.
• Decision Date: 10 May 1899
• Court: Alabama Supreme Court

25 So. 1006

121 Ala. 131

MONTGOMERY LIGHT CO. ET AL. v. LAHEY ET AL.

Supreme Court of Alabama

May 10, 1899

Appeal from city court of Montgomery; A. D. Sayre, Judge.

The bill in this case was filed by Lucy W. Lahey and Sallie G. W Thorington against the Montgomery Light Company, F. M Billing, I. Pollak, S. Roman, J. W. Dimmick, W. W. Coghill J. C. Cheney, W. L. Pelzer, and Josiah Morris & Co. From a decree overruling demurrers to bill, defendants appeal. Reversed.

The bill avers that the complainants are the owners of an undivided two-thirds interest in and to 58 shares of the capital stock of the Montgomery Light Company, a corporation chartered and doing business under the general laws of Alabama; and then charges that the defendants, while acting as the directors and in other fiduciary capacities and relations for the Montgomery Light Company, joined in many and permitted the perpetration of many other wrongs to said company, which resulted in the waste and conversion of a large amount of the company's assets, and in the deterioration in value of the shares of the capital stock owned by the complainants. The specific statements and the various acts of wrongdoing and breaches of trust by the several defendants are set out in detail in the bill, and are alleged to have taken place at various times in the year 1889 up to the time of the filing of the bill, which was on January 17, 1898. After averring the doing of the several acts and the commission of the wrongs complained of, the bill then avers: That "complainants further show that they have looked in vain to the board of directors of the Montgomery Light Company to right the grievous wrongs to their company above complained of. That over three weeks before the filing of this bill, complainants, through their attorney, addressed a communication to the president and directors of the Montgomery Light Company, calling to their attention, as the governing body of said company, the specific wrongs and collusive acts hereinabove set forth, and demanding that they proceed, in the name of the company, to right the same, and to call to account the negligent and wrongful acts, and the others who, so acting with them, had wrought these great injuries to said complainant's company. But said president and board of directors have wholly failed to institute proceedings, or to do anything to right said wrongs. That, owing to the failure caused by the aforesaid wrongful and grossly negligent acts of the directors of said company, acting with such other persons, to pay the interest due on said bonds for the past year and more, or to pay anything into said sinking fund, the Farmers' Loan & Trust Company, the trustee under said mortgage or deed of trust, has filed its bill in the circuit court of the United States for the Middle district of Alabama for a foreclosure of said mortgage or deed of trust on the grounds of said failure to pay the said installments of said annual interest due, as aforesaid, on said bonds. That no serious attempt has been made to resist said suit. That without an objection on the part of the complainants' said company, a receiver of all the properties and assets of said company has been appointed by said court, and said receiver is the said F. M. Billing; and he has been required to give, and has only given, a bond for $5,000 for the performance of his duties as such receiver. That the said court has decreed a sale of all the properties, privileges, and franchises of said company, which sale will take place in the near future. Complainants further say: That there have been a number of directors of complainants' said company during the time in which the wrongs herein mentioned were done. That repeatedly, as the exigency of the occasions might require, one or more of the directors would resign, either for the purpose of bringing some suit against the company, and obtaining judgment against it, or to temporarily let in other members; and, when the particular occasion was passed, would again be elected, and continue as such directors. That in May, 1894, the said Billing resigned, and remained out of the directory to consummate said wrongful acts, and make said wrongful and unjust charges against complainants' company, so as to lend an appearance of fairness and mere similitude to such a transaction, and within about four months after this injury was accomplished and entered on the company's books he again secured his election by such board of directors by the use of said Pollak's (his debtor) holding the said majority of stock, which stock was, some time about the latter part of 1894, or perhaps later, turned over by said Pollak to said Billing, or said firm of Josiah Morris & Co., in satisfaction or part payment of said debt due by said Pollak. Complainants charge that by reason of the failure and refusal of said board of directors of said Montgomery Light Company to take any steps to right the many wrongs aforesaid inflicted on the said company by them and those with whom they acted in the company's name they and the said company are remediless in the premises unless aided by your honor's court." The prayer of the bill was to hold the said defendants liable for alleged misappropriation of alleged corporate funds, and for the other wrongs alleged to have been committed against the Montgomery Light Company. All of the defendants demurred to the bill. The court sustained the demurrers interposed by J. C. Cheney and J. W. Dimmick. The defendants F. M. Billing, Josiah Morris & Co., W. L. Pelzer, and S. Roman moved to dismiss the bill for the want of equity, and also demurred to the bill upon the following grounds: "(1) That the said bill of complainant is without equity. (2) That the said bill of complaint is vague and indefinite, in this: that it does not appear from the allegations thereof at what time, or from whom, the said complainants acquired the undivided two-thirds interest in and to the fifty-eight shares of the stock of the defendant corporation alleged to be owned by them. (3) That said bill of complaint is insufficient, in this: that it does not appear but that the said complainants acquired the two-thirds interest in the said fifty-eight shares of the stock of the defendant corporation alleged to be owned by them since the alleged wrongful acts complained of in said bill, and from some of the parties guilty of the said alleged wrongful acts. (4) Said bill of complaint is insufficient, in this: it does not appear but that the said complainants acquired their alleged interest in the shares of stock of the defendant corporation alleged to be owned by them after the commission of the alleged wrongful acts complained of in said bill of complaint, and with knowledge and notice of the same. (5) That it appears in and by the allegations of said bill of complaint that the said complainants are guilty of laches, which bars them of any remedy against these defendants. (6) It does not appear in and by the allegations of said bill of complaint when the said complainants acquired knowledge or information of the said alleged acts complained of in said bill of complaint. (7) It does not appear in and by the allegations of said bill of complaint but that suit would have been instituted in the name of the corporation to redress the alleged wrongs had proper application been made to the stockholders of the said company. (8) It does not appear by the allegations of the said complaint that the complainants ever sought to have the said alleged wrongs redressed by the corporation, as required by law." On the submission of the cause upon these motions to dismiss, and upon the demurrers of these defendants, the chancellor overruled both the motions and the demurrers. From this decree the said defendants appeal, and assign the rendition thereof as error.

Watts Troy & Caffey, for appellants.

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