Morris v. Elyton Land Co.

• Decision Date: 17 April 1900
• Parties: MORRIS v. ELYTON LAND CO. ET AL.
• Court: Alabama Supreme Court

28 So. 513

125 Ala. 263

MORRIS v. ELYTON LAND CO. ET AL.

Supreme Court of Alabama

April 17, 1900

Appeal from chancery court, Jefferson county; John C. Carmichael Judge.

Bill by Susie Martin Morris against the Elyton Land Company and others. From a decree in favor of defendants, complainant appeals. Reversed.

On the 9th day of September, 1899, the appellant, Mrs. Susie Martin Morris, as the holder of 26 1/3 shares of stock in the Elyton Land Company, filed her bill for the purpose of annulling and setting aside a sale and conveyance of the property of said company to the Elyton Company, another corporation, with different powers, and to set aside and annul a mortgage executed by said Elyton Company to the Maryland Trust Company, as trustee, to secure certain bonds issued by the Elyton Company. The transactions in question were presented to this court in Land Co. v. Dowdell, 113 Ala. 177 20 So. 981, which contains a statement of the salient facts to which case reference is here made; but for the purpose of this appeal the following additional statement is made, the essential facts not being a matter of dispute between the parties: The Elyton Land Company was incorporated in 1870 with meager powers, and later, in February, 1889, its charter was amended by special act of the legislature, set forth in section 2 of the bill, whereby it was enacted that the Elyton Land Company should continue to exist as a corporation for the term of 50 years, and whereby its powers were enlarged but were not made near so extensive as those conferred upon the other corporation, the Elyton Company, by the act approved February 10, 1893, incorporating the latter company, which act is also set forth in the third section of the bill. The incorporation of the Elyton Company was procured for the purpose of acquiring the property of the Elyton Land Company, and was and remained without capital or assets, other than the property conveyed by the Elyton Land Company. About October 1, 1894, the officers of the Elyton Land Company, pursuant to a vote of the majority, but not of all, of the stockholders, and without the consent of complainant, who was then about 15 years old, conveyed all the property of the company to said Elyton Company, for stock and bonds in the latter company. At that time only a part of the Elyton Land Company's property was incumbered, and that part was security for 1,796 dividend trust bonds. Under the scheme, $2,000,000 fully paid up stock of the Elyton Company was to be issued for the $200,000 of the capital stock of the Elyton Land Company, and the former was to issue $2,500,000 of bonds, secured by a mortgage upon the entire property; and this scheme was carried out, the officers and directors of the two companies being identical. The complainant was born June 30, 1879, so that when this bill was filed she was only 20 years old, but she had intermarried with Louis C. Morris on January 25, 1899, and, as appears from the answers of respondents, her disabilities of minority were removed by decree of the chancery court on January 12, 1899. It appears further, however, from the bill and affidavits of complainant and her husband, that she was not informed of the transactions complained of until the summer of 1899, whereupon she promptly employed counsel to assert her rights and repudiated said transactions; the bill being filed, as above stated, on September 9, 1899. At the time the bill by Mrs. Morris was filed, there was pending in the same court cause No. 2,104, of Semmes v. Elyton Land Co. et al., which proceeding is fully referred to in the bill and the papers which were embraced in the submission of the application for a receiver. This cause originated as follows: On the 5th day of January, 1898, a bill was filed in the same court by Semmes and Tompkins, as holders of dividend trust bonds of the Elyton Land Company, against the Elyton Company, the land company, and the Maryland Trust Company, in and by which it was sought to have the dividend trust bonds established as a first lien upon the purchase-money notes and property which had been set aside by the Elyton Land Company as a trust fund for the security of said dividend trust bonds, and to have a receiver of said notes and property appointed. But this bill did not seek to establish any lien of any kind against the other property of the Elyton Land Company not embraced in said trust fund. Although this bill was filed on January 8, 1898, and due service had, there was no pleading or appearance in the cause until after an amendment was filed, which was done on the 31st of May, 1898, which amendment extended the scope of the original bill, and attacked the organization of the Elyton Company and the mortgage to the Maryland Trust Company for fraud, as hindering and delaying creditors of the Elyton Land Company; and by this amendment there was a prayer for a receiver of all the lands, notes, money, and other property of the Elyton Company which had been conveyed to it by the Elyton Land Company. Shortly thereafter, on the 30th of June, 1898, F. M. Billing was, by consent, appointed receiver of all the property and assets of said Elyton Company, with power to sell lots, make collections, and otherwise carry on the business in which the Elyton Land Company and the Elyton Company had been engaged, since which time the said Billing, as receiver, has administered the property in said cause under the decree of the court. Matters remained in this condition, without litigation, for some time, and afterwards, on the 20th day of April, 1899, the Maryland Trust Company filed its cross bill in said cause No. 2,104, seeking a foreclosure of the mortgage executed to it by the Elyton Company to secure the payment of the 5 per cent. bonds. Thereupon the cause remained in statu quo until after the complainant in this cause, to wit, Susie Martin Morris, filed her bill; her bill charging that said suit No. 2,104 was a friendly suit, and was kept on the docket to carry out a proposed reorganization of the Elyton Company, referred to in the bill, the details of which are set forth in an exhibit to the affidavit of William M. Martin. The bill in this cause prayed the appointment of a receiver, or, if that might not be, for the extension to this cause of the receivership existing in case No. 2,104. On the 28th day of September, 1899, Susie Martin Morris, the complainant, amended her bill by showing that on the 11th day of September, 1899, two days after she filed her bill, the parties to cause No. 2,104 appeared in the court, filed answers admitting the averments of the cross bill of the Maryland Trust Company to be true, consenting that a decree might be passed therein for the foreclosure of the mortgage, and thereupon presented to the chancellor an elaborate decree of foreclosure, which was then and there signed. Said amendment charged that this decree was consented to and procured to be entered in pursuance of the determination of the parties controlling the Elyton Company and the Elyton Land Company to ignore and defy her rights as a stockholder of the Elyton Company. Pursuant to the prayer contained in the original bill, the complainant, Susie Martin Morris, filed in the cause on the 22d day of September, 1899, a formal application, of which due notice was given, for the appointment of a receiver, or the extension of the receivership in cause No. 2,104 to her bill. Thereafter the defendants answered her bill as amended, and on October 11, 1899, the application for a receiver, or for the extension of said receivership, was submitted to the chancellor for decision upon motion and petition, bill of complaint, and affidavits on file, and upon the file of papers in cause No. 2,104, and on behalf of the defendants, and upon their answers and affidavits in opposition to said petition. Application was also made to remove F. M. Billing as receiver, but, in view of the decree which was made, it is not necessary to refer to this feature of the case. In the amendment of complainant's bill made on September 28, 1899, as above stated, it was charged (and these facts are admitted by the answers) that prior to the 20th day of April, 1899, the Elyton Company had failed to pay the taxes accrued upon its property, and no provision had been made for paying the same, and that said company had not the ability to pay the same, by reason of the lack of funds, and that on April 20, 1899, when the Maryland Trust Company filed its cross bill, the Elyton Company had made default in the payment of all coupons due upon the bonds secured by the mortgage to said trust company; that said default had continued for six months; that the company, by reason of the lack of funds, was unable to pay the bonds, and was so financially embarrassed that it had consented in June, 1898, to the appointment of a receiver of all its property.

The answers of the defendants originally set forth that G. W Hewitt, the guardian of the complainant, had exchanged certain dividend trust bonds belonging to her for 5 per cent. mortgage bonds of the Elyton Company; that these passed to complainant's later guardian, Florence E. Haskell, and that after complainant's disabilities of minority were removed she accepted said bonds, with full knowledge of the facts, from Florence E. Haskell, whereby it was claimed that she had ratified their supposed exchange, and thereby ratified the transactions in which said 5 per cent. bonds were issued. Upon the complainant filing certain affidavits showing that the facts set up in the answers were untrue, defendants amended their answers, whereby they set up that they were mistaken in the averments made, that G. W. Hewitt, as guardian, had exchanged dividend trust bonds, but averred the fact to be that said Hewitt, as guardian, had...