North American Coal & Coke Co. v. O'Neal
| Decision Date | 26 March 1918 |
| Docket Number | 3302. |
| Parties | NORTH AMERICAN COAL & COKE CO. v. O'NEAL ET AL. |
| Court | West Virginia Supreme Court |
Submitted March 5, 1918.
Rehearing Denied May 9, 1918.
Syllabus by the Court.
Where some of the promoters, who are also directors, officers and agents of a corporation, have surrendered to the corporation all the profits of a conspiracy to defraud the corporation and no further relief is desired or could be obtained against them, they are not necessary parties to a bill subsequently filed by the corporation against the other parties to the fraud to clear up the title to property, the subject matter of such fraud, and for an accounting by them for money and other property fraudulently obtained thereby.
Nor are the vendors who took from one or more of such conspirators notes and hold liens on such property for deferred payments of purchase money, not parties to the fraud, and who subsequently and before suit sold and transferred said notes to some of the parties to the fraud, and who have no further interest in the subject matter of the litigation, necessary parties to such suit.
Nor is such a bill bad for multifariousness, where its object is to undo the wrongs and injuries perpetrated upon it by its directors, officers, and agents, and obtain good and clear title to the property and an accounting by the parties to the fraud of the money or other property the fruits of the conspiracy to defraud the corporation.
Where one of the parties to such a conspiracy and who secured the options from the original owners of the property and as a part of the scheme fraudulently and secretly agrees with one or more of the other promoters and directors of the corporation to allow and pay them out of the price which he is to receive from a syndicate of which he is also a member and by and through which the property is to be by them so fraudulently transferred to the corporation at a price which will net to the syndicate a greater profit, he will be liable to account to the corporation for the sum so paid or agreed to be paid, in addition to other sums recoverable against him.
The general rule applicable to the facts in this case is that promoters or directors of a corporation, and those colluding with them, who in breach of their trust and in fraud of the corporation take to themselves secret profits, are liable to account to the corporation therefor.
While dealings between persons standing in the relationship of brother-in-law and sister and affecting injuriously the rights of others are not presumptively fraudulent, yet such relationship when fraud is charged calls upon the court for careful and close scrutiny of the transactions and conduct of and evidence offered by such persons and when such transactions involve the payment of large sums of money the testimony of such parties when uncorroborated by receipts memoranda, and other documentary evidence must be clear positive, definite, consistent with other evidence offered and free from contradiction.
And if the party claiming the benefit of such transaction when assailed as fraudulent has it within his power to establish the facts relied on by satisfactory proof, his failure to do so constitutes a badge of fraud.
When an infant has once ratified his contracts after arriving at full age he can never afterwards elect to hold them void.
Appeal from Circuit Court, Barbour County.
Bill by the North American Coal & Coke Company against S.D O'Neal and others. Decree for defendants, and plaintiff appeals. Decree reversed, and cause remanded, with instructions to render a new decree.
W. T. Ice, Jr., of Philippi, and Jesse A. Fenner and Young, Stocker & Fenner, all of Cleveland, Ohio, for appellant.
Blue & McCabe, of Charleston, and Arthur S. Dayton, and J. Hop. Woods, both of Philippi, for appellees.
The only questions, as we view the case, fairly arising upon the record and of which we will take cognizance, are presented by the errors and counter errors assigned and relied on by appellant and appellees.
Three preliminary questions involve the sufficiency of the bill: First, is the bill defective for want of necessary parties? Second, is it multifarious? Third, is relief barred by laches or limitation? All three questions were presented by the demurrer overruled by the circuit court.
Plaintiff predicated its right to the relief sought on conspiracy to defraud it in the sale to and purchase by it in 1903 of one thousand acres of coal and mining rights in Barbour county, originally conceived and perpetrated on it by its directors Knupfer, Berchtold, Scott, Clark, and Peters, and certain of its other officers and agents, and participated in by the defendant S. L. O'Neal, who, as part of the scheme, was to be and was made a director, and subsequently joined in by the defendants Lucy O'Neal, wife of said S. L. O'Neal, and by her brothers, the defendants J. L. and J. H. Knapp, if not also by the defendant the First National Bank of Philippi and others.
The main purposes of the bill were to clear up the title to the coal purchased by requiring defendants to surrender the purchase money notes, some of them executed by F. L. O'Neal, a nephew of S. L. O'Neal, to the original land owners, and the others by said Knupfer to said F. L. O'Neal, representing the conspirators, alleged to have been paid off and discharged out of moneys paid through said Knupfer to said S. L. O'Neal, or his wife Lucy O'Neal, and held by alleged assignments thereof to some of defendants, and to obtain releases of said liens, and also to obtain a surrender and cancellation of the shares of stock of the plaintiff, fraudulently issued to the said S. L. O'Neal and Lucy O'Neal, as part of the fraud and conspiracy aforesaid, and for an accounting by said S. L. O'Neal and Lucy O'Neal for the moneys alleged to have been paid them by plaintiff, through its said directors, or some of them, as part of said scheme and for general relief. The bill also alleges in substance that said Knupfer, Clark, Scott, Peters, and Berchtold, had surrendered to plaintiff all of the stock which had been issued to them respectively pursuant to the said fraudulent contract, but that the said S. L. O'Neal and Lucy O'Neal, to whom other shares had been issued, though also called upon had declined to surrender the shares so issued to them or to account for the moneys received by them belonging to plaintiff.
With these general objects and purposes in view, it is contended by the demurrants, though the demurrer was general and not special, that Knupfer, Clark, Scott, Peters, and Berchtold, and also the original vendors of said coal, were necessary and proper parties to the bill. We do not think this point of demurrer is well founded. The bill alleges that Knupfer, Clark, Scott, Peters, and Berchtold, had each surrendered the benefits and all the benefits which they had received, so that no relief could be and none was demanded of them on this ground. And, moreover, so far as the allegations of the bill go, these parties had accounted to the other defendants for all moneys which had been paid to them; so that they have no rights or interests to prosecute or defend rendering them necessary parties, nor can they be materially interested in any decree that was or could be properly pronounced in the cause, wherefore not necessary parties. Bragg v. United Thacker Coal Co., 70 W.Va. 655, 74 S.E. 946. The general rule that all persons interested in the subject matter of the suit should be made parties to the bill, either as plaintiffs or defendants, as laid down in Beckwith v. Laing, 66 W.Va. 246, 66 S.E. 354, is inapplicable.
But were the original or subsequent vendors having vendor's liens reserved in the deeds in question necessary parties? The bill prays that the present claimants and holders of the notes, the Knapps and others, be required to surrender the notes for cancellation and release the liens. It does not appear that the vendors have or will decline to join in such releases. The statute, section 2, chapter 76, requires the assignee of such lien to join therein, and section 6, of said chapter, provides for the execution of such release on mere notice, and until such vendor has declined to execute the release upon demand or request of the grantee, one holding under him, it would be unfair to involve such vendor in an expensive litigation, in which he has no other interest, and particularly such a litigation as this involving fraudulent transactions between other parties. Morgan v. Ice, 80 W.Va. 273, 92 S.E. 340. The case of Bryan v. McCann, 55 W.Va. 372, 47 S.E. 143, holding that the trust creditor is a necessary party to a suit by the trustee to remove cloud, ascertain the amount of the trust debt, and sell the trust subject, cited and relied upon by counsel for appellant, is, therefore, inapplicable.
Now with respect to the question of multifariousness relied upon. The rule against multifariousness is generally regarded as one of convenience. And where the matters contained in the bill are not wholly distinct and separate, and it is more convenient to litigate and dispose of them in one suit than in two or more, and this can be done without injustice to any one, the objection of multifariousness will be disregarded. Johnson v. Sanger, 49 W.Va. 405, 38 S.E. 645; Dillard v. Dillard, 97 Va. 434, 34 S.E. 60; Dudley v. Niswander, 65 W.Va. 461, 64 S.E. 745; Pack v. Whitaker, 110 Va. 122, 65 S.E. 496; Johnson v. Black, 103 Va. 477, 49 S.E. 633, 68 L.R.A. 264, 106 Am.St.Rep. 890; Ross v. Ross, 72 W.Va. 640, 78 S.E. 789. And as was said in Baker v. Berry Hill, etc., Co., 109 Va. 776, 65 S.E. 656, in cases involving the question of fraud, a very great latitude is allowed in pleading, both as...
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