National Surety Co. v. Graves

• Decision Date: 26 June 1924
• Docket Number: 6 Div. 30.
• Citation: 101 So. 190,211 Ala. 533
• Parties: NATIONAL SURETY CO. ET AL. v. GRAVES ET AL.
• Court: Alabama Supreme Court

101 So. 190

211 Ala. 533

NATIONAL SURETY CO. ET AL. v. GRAVES ET AL.

6 Div. 30.

Supreme Court of Alabama

June 26, 1924

Appeal from Circuit Court, Jefferson County; William M. Walker Judge.

Bill in equity by W. D. Graves and others against the National Surety Company and others for apportionment of the surety of certain bonds. From a decree overruling a demurrer to the bill respondents appeal. Affirmed.

Sterling A. Wood, Basil A. Wood, and Eugene H. Hawkins, all of Birmingham, for appellants.

Cabaniss Johnston, Cocke & Cabaniss, of Birmingham, for appellees.

BOULDIN J.

The purpose of the bill is the adjustment and apportionment of the security afforded by bonds, given under the Blue Sky Law of 1919, among the beneficiaries entitled to share therein. Gen. Acts 1919, p.946.

The bill is filed by stockholders of Walker Consolidated Petroleum Oil Company, for the benefit of themselves and all others similarly situate who will join in the suit, against National Surety Company, the surety on the several bonds given under the statute, and certain individual stockholders.

It is averred, in substance, that in its application for a permit to sell stock, and in selling its stock to investors, Walker Consolidated Petroleum Oil Company made certain fraudulent misrepresentations touching its assets and its actual and prospective income; that complainants and many other investors in Alabama bought stock in reliance upon these representations, resulting in aggregate losses and damages in excess of the penalties of the several bonds given the state for their protection; that certain individual stockholders were suing at law upon these bonds, and other stockholders were threatening a like course, which would result in the exhaustion of the penalties of the bonds, leaving many stockholders without remedy; that jurisdiction should be taken for the collection of the full penalties of the bonds the proceeds to be administered for the benefit of all stockholders so defrauded. The bill prays for injunction against the suits at law and for general relief. The appeal is from a decree overruling demurrers to the bill.

The primary equity of the bill is the adjustment of claims and the equitable apportionment of a fund provided by law, which is insufficient to pay claimants in full. The other relief sought is incidental-to do complete equity. The basic principle of the bill is sound. Equality is equity.

In Dimmick v. Register, 92 Ala. 458, 9 South, 79, a purchaser of all the property of another assumed all the debts of the seller not to exceed a fixed amount. The debts exceeded that amount, and a creditor filed a bill for accounting and recovery of his pro rata. It was held that any creditor could sue at law upon his claim; that the equity of the bill depended on whether the debts exceeded the fund provided therefor, saying:

"If they did not, then each creditor had a plain and adequate remedy at law. If, on the other hand, the debts exceeded that sum, each could claim only his pro rata share, which would require an accounting that equity alone is competent to adjust properly. Vincent v. Rogers, 30 Ala. 471; Id., 33 Ala. 224; Cummings v. National Bank, 101 U.S. 153; National Bank v. Commonwealth, 9 Wall. 353."

See, also, Moody v. Keller, 127 Ala. 630, 638, 29 So. 68; Interstate Land & I. Co. v. Logan, 196 Ala. 196, 72 So. 36; 21 C.

J. 132, § 110; Id. 133, § 111; 1 Pom. Eq. § 410.

The doctrine of equitable apportionment between creditors having claims against a common fund rests on the same ground as contribution between debtors owing a common debt. Do these principles apply to the bonds taken by the state, for the protection of investors against fraudulent sales of securities, under our statute? This statute says:

"The said bonds shall be payable to the state of Alabama, and be conditioned upon the truth of the statements set forth in the application for such permit, and of the evidence and other probative matter offered to the state official or officials, and upon which the application is based, and upon compliance with the provisions of this act in the sale of the stock of such corporation, proposed corporation, partnership, or unincorporated association. Said bond must be made with a surety company authorized to do business in the state of Alabama, and the bond shall be approved by the superintendent of banks. Any person who shall be induced to purchase any stock of any corporation, proposed corporation,

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