Parker v. Bethel Hotel Co.

• Decision Date: 22 February 1896
• Citation: 34 S.W. 209,96 Tenn. 252
• Parties: PARKER et al. v. BETHEL HOTEL CO. et al.
• Court: Tennessee Supreme Court

34 S.W. 209

96 Tenn. 252

PARKER et al. v. BETHEL HOTEL CO. et al.

Supreme Court of Tennessee.

February 22, 1896

Appeal from chancery court, Maury county; A. J. Abernathy Chancellor.

Bill by J. Milton Parker and others against the Bethel Hotel Company and others to annul a trust deed, and to dissolve and wind up the defendant corporation. From a judgment of the court of chancery appeals affirming in part, and in part overrulling the decree of the lower court, certain parties appeal. Modified and affirmed.

G. T Hughes, Fussell & Wilkes, W. S. Fleming, Jr., Granbery & Marks, and John T. Williamson, for complainants.

Figures & Padgett, E. H. Hatcher, and W. J. Webster, for defendants.

BRADFORD Special Judge.

On the 24th day of May, 1880, P. C. Bethel, W. D. Bethel, Lucius Frierson, Eugent Pillow, J. M. Mayes, and L. W. Black became incorporated, under the laws of the state of Tennessee, as the Bethel Hotel Company. The business of the corporation, as declared in its charter, was the erection, furnishing, and operation of an hotel in the town of Columbia, Tenn.; the hotel building to include storehouses and a concert hall. The charter was taken out under chapter 142 of the Acts of 1875 and is in the form prescribed for hotel companies, except that words were added authorizing it to build and own storehouses and a concert hall. The corporation was duly and regularly organized, with a capital stock of $100,000, divided into shares of $50 each. After its organization the building contemplated by the charter was erected on a lot owned by the corporation.

The building was so designed and constructed that the part used for hotel purposes was on the second floor, with an entrance on the first floor. The stores were on the first floor, under that part of the building used as an hotel; but the precise situation of the concert hall, or, as it is called, the "opera house," does not appear. The corporation occupied and used the building, or leased it, or both, from the date of its completion until September 1, 1885. On that date the Bethel Hotel Company and Lucius Frierson, for the consideration of $22,500, payable in 10 annual installments, evidenced by the notes of the purchasers, conveyed to Mayes & Dodson certain parts of the building, particularly described, which were designated as the "hotel proper" part of said building, including the part from the second floor up, and all appurtenances and privileges incident thereto. The deed to Mayes & Dodson was signed, "Bethel Hotel Company; W. D. Bethel, President; Lucius Frierson, Secy. & Treas.; and Lucius Frierson." The sale and conveyance to Mayes & Dodson were authorized by the stockholders of the corporation at a meeting held shortly before, at which a majority, but not all, of the stockholders were present or represented. This meeting was the last ever held by the stockholders of the Bethel Hotel Company. At the time the sale aforesaid was made to Mayes & Dodson, and at the date of the meeting of the stockholders which authorized it, the great majority of the stock of the corporation was owned by Lucius Frierson and by W. D. Bethel, individually and as administrator of the estate of P. C. Bethel, deceased. The holdings of Frierson amounted to $34,000, or thereabouts, and those of Bethel to $61,000. On the 28th day of August, 1886, Frierson purchased from Bethel all the stock held and owned by him individually and as administrator. Some time, either before or after the purchase of the stock from Bethel,-it does not appear which,-he acquired such of the stock as was not owned by him and Bethel, and thus became the owner of the entire capital stock of the corporation. The consideration Frierson paid and agreed to pay Bethel for said $61,000 of stock was the following: The transfer and assignment to Bethel of the Mayes & Dodson notes, payable to the Bethel Hotel Company, aggregating $22,500; notes of McEwen & Dale for $400, payable to Frierson; and his own notes, six in number, for $658.33 each. To secure the payment of Frierson's notes and the McEwen & Dale notes, and guaranty the indorsement of Frierson and the Bethel Hotel Company on the Mayes & Dodson notes, the stock was left in the possession of Bethel, to whom was reserved "all the power usual to such a pledge in the case of default in payment and satisfaction of said notes." The contract between Frierson and Bethel was in writing. In September, 1885, immediately after the sale to Mayes & Dodson, and the stockholders' meeting authorizing it, Frierson took possession of the residue of the property of the corporation, and used and treated it as his own. He leased it, collected the rents, used them for his own purposes, and accounted to no one. He used and controlled the property in this manner, without protest or interference from any one, until January, 1892, when it was conveyed in trust to defendant W. J. Webster, as will hereafter appear. During this long period of seven years, the corporation slept, or was dead, as will be hereafter determinated, No meetings of the stockholders and directors were held, no officers were elected, and no business seems to have been transacted by the corporation. The explanation of this anomalous condition of affairs will be found in the claim made by Lucius Frierson that the corporation had ceased to exist after he acquired all its stock, and that he became and was the real owner of its property. He says and claims that it was understood by the stockholders, at the meeting which authorized the sale to Mayes & Dodson, that the corporation would go into liquidation, and that he, as the owner of all its stock, would become the owner of all its property, and that a resolution to that effect was adopted.

Frierson appears to have been an active trading man. His business required the use of considerable money, and he was compelled to borrow largely from others. Both before and after the date of the alleged resolution of the board of directors putting the corporation into liquidation, he made a large number of loans from divers persons. To secure these loans he used as collateral his stock in the Bethel Hotel Company. On May 3, 1882, he borrowed from J. M. Mayes, trustee for Mrs. Annie Jackson and her children, $4,000, executing his note therefor, and depositing, as collateral to secure the same, 100 shares of Bethel Hotel Company stock. The note was subsequently renewed, and 40 shares more of the stock were added as collateral. This note, with the collateral (140 shares) attached, came into the hands of G. T. Hughes, who succeeded Mayes as trustee. The Second National Bank loaned Frierson $5,000 on the 2d day of August, 1882, taking his note for that amount, with $6,000 of the stock of the Bethel Hotel Company attached as collateral. This loan was renewed nine different times. At the date of the last renewal, December 31, 1887, it was increased to $6,000. The increased loan was renewed from time to time, until it was taken up on December 28, 1891, by A. N. Aiken and W. M. Mayes, who, at Frierson's request, and for his accommodation, executed four notes; three of which were for $2,000 each, and one for $325 (the latter being for interest and discount), payable to Frierson's order, which notes were delivered to the bank. The hotel company stock on the original loan was retained as collateral on the new notes executed by Aiken and Mayes. It may as well be stated here that these notes were renewed from time to time, and finally, on February 10, 1893, some payments having been made by Aiken, Mayes and Aiken executed their three notes; two of them being for $2,000 each, and one for $1,700. J. Milton Parker made Frierson a loan in October, 1883, and took as security 100 shares of the hotel company stock. Payments were made by Frierson, and it was reduced to $1,994.61, and a note was executed for that amount on November 22, 1891, with the stock attached. Mrs. S. B. Francis loaned Frierson $4,000 on November 1, 1883. This loan was secured by collateral of some kind, but what it was is not shown. In October, 1884, Frierson substituted for the original security 100 shares of Bethel Hotel Company stock. There were several payments on and renewals of this loan. The last note in renewal executed by Frierson was for $2,737, dated April 21, 1891. The hotel stock, 100 shares, was attached as security. On the 14th day of April, 1892, Mrs. Francis recovered a judgment on said note in the chancery court of Maury county for $2,901.22, and an order for sale of the stock. The order of sale was not executed. J. W. Frierson, Jr., is the administrator of the estate of Mrs. E. K. Mayes. He discovered, after qualifying, a note of Lucius Frierson for $1,750, dated April 6, 1886, payable to Mrs. Mayes, with 40 shares of Bethel Hotel Company stock attached as collateral. A new note was executed and delivered by Lucius Frierson to the administrator, April 6, 1892, for $1,890, with the same security. W. B. Wilson holds a note of Frierson for $1,700, dated April _____, 1891, for money loaned. He holds as security 30 shares of the hotel company stock. This note is in renewal of one made in 1888. On February 10, 1891, Walter Steele loaned Frierson $2,500, taking his note therefor. To secure this note, Frierson pledged 50 shares of the hotel company stock. On July 1, 1891, Frierson reduced the note, by payment, to $1,500.

On the 12th day of January, 1892, Lucius Frierson conveyed, by deed to defendant W. J. Webster, the real estate owned by the Bethel Hotel Company, and the stock of that company purchased by him from W. D. Bethel. The purpose of said deed was to secure the payment of certain debts owing by said Frierson to sundry parties, aggregating about $45,000. One of his creditors, W. C. Wooten, was preferred to the amount of...