Patterson v. Woolridge
| Decision Date | 13 June 1916 |
| Citation | 170 Ky. 748 |
| Parties | Patterson, et al. v. Woolridge, et al. |
| Court | Kentucky Court of Appeals |
Appeal from Bullitt Circuit Court.
CHARLES CARROLL and J. F. COMBS for appellants.
C. B. SEYMOUR, S. L. TRUSTY, A. C. POPHAM and C. P. BRADBURY for appellees.
Prior to October 8, 1909, the appellant, G. S. Patterson (defendant below) was engaged in the retail mercantile business in Shepherdsville, Ky. On the date mentioned, or shortly previous thereto, an agreement was entered into between appellee, W. C. Woolridge, and the defendant, Patterson, whereby the latter sold to the former a one-half interest in the mercantile business in Shepherdsville. The consideration for this interest was a farm owned by either appellee or his wife, which was deeded to Patterson. Twenty-five hundred dollars of the valuation of the farm was credited on the purchase price of some real property, consisting of a residence and business house in Shepherdsville which the appellee at the same time purchased from Patterson, and he and his wife executed their note to Patterson for $5,000.00, being the remainder of the sum agreed to be paid for such real property. After that the mercantile business was conducted in the name of Patterson & Woolridge until January 20, 1910. On the latter date the business was incorporated pursuant to an understanding to that effect from the beginning as the Shepherdsville Merchandise Company. The capital stock was fixed at the sum of $30,000.00, one-half of which was issued to Patterson and the other half to Woolridge, with the exception of three shares of the par value of $100.00 each, which were issued to Mary C. Woolridge, the wife of W. C. Woolridge. From the time of the formation of the partnership Patterson seems to have been a dominant spirit in the management and conduct of its affairs, and when it became incorporated he was elected president and Woolridge held some minor position therein. The corporation was some time in November, 1910, thrown into bankruptcy, and its assets fully administered by the court, leaving nothing for the stockholders. At the beginning it seems to have been agreed largely upon the representations of Patterson, if not entirely so, that the assets of the business were worth $25,000.00, and the good will thereof was valued at $5,000.00, making the sum total of the capital stock of the corporation which was eventually formed.
On August 7, 1911, the appellees, W. C. Woolridge and Mary E. Woolridge, filed this suit in the Bullitt circuit court against the defendant, G. S. Patterson, charging that while the business was being conducted he was the chief manager and was in complete control of it and that he "willfully, maliciously, fraudulently, and for the purpose of destroying the credit and the probable good will of said corporation and of bankrupting same," charged up against it large sums of his in-individual indebtedness; that he made false entries upon the books, to the prejudice of the corporation and to his individual advantage; that he sold to himself large quantities of goods, lumber and merchandise from the stock of the partnership or corporation, for portions of which he failed to charge himself or to account for it, and all of it, whether accounted for or not, at only the price which the partnership or corporation had paid for it with the cost of carriage added, and that he "in many other ways mismanaged the affairs intentionally and for the purpose of defrauding the corporation and its stockholders out of vast sums of money, and by reason of all this it was finally thrown into bankruptcy." The consequence of these willful, intentional, malicious and fraudulent acts on his part as charged in the petition, resulted in a loss of $6,000.00 profits which the corporation or partnership either made or could have made by proper management, and the good will of the concern, valued at $5,000.00, was lost, and that its entire stock, amounting to $30,000.00, was thereby dissipated. These items amounted in the aggregate to $41,000.00, and judgment was asked against him for one-half thereof, or $20,500.00.
The petition was afterwards amended, in which the corporation was made a party defendant and the allegations in the petition were made more specific and stated with greater elaboration. The pleadings of the defendant may be said to consist of a general denial and the pleading of a set-off for the amount of $2,875.95, which represents the balance of a judgment in favor of defendant against the plaintiffs, obtained in the Bullitt circuit court. This judgment was obtained on the note for $5,000.00, which had been executed by plaintiffs as part purchase price for the residence and store-room conveyed to them by defendant at the beginning of the business relations and for which they agreed to pay $7,500.00, only $2,500.00 of which was paid at the time. In the proceedings to enforce the collection of that note the property was sold and bought by the defendant for the sum of $3,000.00, out of which he paid some past due taxes and other charges against the property, leaving the amount of the pleaded set-off unsatisfied. The right to plead this set-off is questioned by the plaintiffs in this case, but we will not consider that question until later on in this opinion.
Although this action is brought for a tort and necessarily in ordinary, it was afterwards transferred to equity and the case was referred to a special commissioner to take proof and report to the court his findings upon the matters presented by the pleadings, which were separated by the order of reference into thirteen separate items, upon each of which the commissioner was directed to make a report. It can serve no purpose either to the profession or to the parties litigant to restate those items in this opinion. Suffice it to say, that the commissioner reported as directed and stated that the good will of the Shepherdsville Merchandise Company was without value; that the amount of business done by the firm of Patterson & Woolridge up to the time of the incorporation was $9,343.12, and the business done by the corporation during its existence was $32,669.90; that he could not tell because of the extremely confused condition of the books and the obscure, inefficient and incomplete method by which they were kept, the amount of money, if any, which Patterson obtained, and did not account for, belonging to either the partnership or the corporation; that at one time Patterson subtracted from a charge to himself on the books of $2,965.00, the sum of $2,000.00, leaving it $965.00, and that at the same time he erased a charge against Woolridge of $2,000.00, thereby depleting, according to the view of the commissioner, the assets of the corporation $4,000.00; that a stock of goods located at Cane Springs, in Bullitt county, which defendant sold to the corporation for $3,000.00 was worth only $2,000.00 at the time; that because of the confused condition of the books, he could not tell the amount of goods which Patterson, in his individual capacity, sold to the corporation at a profit, and for the same reason he concluded that neither the firm of...
To continue reading
Request your trial