Peoples Loan Co. v. Allen

• Decision Date: 08 June 1945
• Docket Number: 15154.
• Citation: 34 S.E.2d 811,199 Ga. 537
• Parties: PEOPLES LOAN CO. et al. v. ALLEN et al.
• Court: Georgia Supreme Court

34 S.E.2d 811

199 Ga. 537

PEOPLES LOAN CO. et al. v. ALLEN et al.

No. 15154.

Supreme Court of Georgia

June 8, 1945

Rehearing Denied July 6, 1945. [Copyrighted Material Omitted]

Syllabus by the Court.

1. The petition as here brought against a judgment debtor and other defendants, alleging that they entered into a conspiracy in bad faith to hinder, delay, or defraud the petitioner in the collection of her two judgments, and that in pursuance of such conspiracy various properties of the judgment debtor were secreted and fraudulent conveyances were made, with the result that the property of the judgment debtor in this State not so concealed or conveyed was insufficient to discharge the amount due under the two judgments, and seeking to set aside such fraudulent conveyances and the appointment of a receiver and other relief, stated a cause of action against the four defendants who are plaintiffs in error in the bill of exceptions brought to this court, and the court did not err in overruling the general grounds of their demurrer.

2. The additional grounds of demurrer filed to the petition as finally amended are without merit.

Statement of facts by DUCKWORTH, Justice.

Mrs. E W. Allen filed on June 9, 1944, in the superior court of Fulton County an equitable petition against E. W. Allen, Mary B. Allen, Noah J. Stone, R. B. Pullen, J. Earle Smith, J. H. Geffken, W. E. DuPre, Magnolia Cemetery, Incorporated, Peoples Loan, Incorporated, John W. Grant, Jr., and Annie Inman Grant, individually and as trustees under the will of John W. Grant, and Peoples Loan Company, a corporation. The petition was several times amended by adding and striking allegations so voluminous that, to have a proper understanding of the rights sought to be asserted by the petitioner, it was first necessary to set out in extenso that allegations of the petition as finally amended, comprising in all about 58 pages. From a careful consideration of such a draft we think that it would serve no useful purpose to set forth here, in all of their amplifications, the manifold and detailed allegations, but that, for the purpose of testing the demurrers interposed, the following summary will suffice.

The petition as amended seeks to charge against the defendants a conspiracy to forestall the petitioner in the collection of certain money judgments or decrees of the superior court of Fulton County, and sets up various alleged wrongful acts in pursuance of such alleged conspiracy, seeks equitable relief as hereinafter mentioned, and the recovery of expenses of litigation in the sum of $10,000 and exemplary damages in the sum of $20,000. It was alleged that all of the defendants entered into the conspiracy in August, 1943, in bad faith to aid and assist E. W. Allen to hinder, delay, or defraud the petitioner in the collection of the said judgments or decrees, and that 'the bad faith arises out of the actual intention of the defendants to hinder, delay, or defraud her as herein alleged, and by virtue of the said defendants joining in a conspiracy with the said intention to so hinder, delay, or defraud' the petitioner. On November 29, 1941, the petitioner filed in the superior court of Fulton County a suit No. 136,606, against E. W. Allen, her then husband, to recover certain moneys from him as an implied trustee. On February 4, 1944, she obtained a verdict and decree for $3917.78 principal with interest from November 24, 1917, $7184.86, making a total of $11,102.64, with future interest at seven per cent. per annum. A copy of the suit was attached to the petition in the present action. Subsequently, on September 11, 1944, the judgment was affirmed by this court. Allen v. Allen, 198 Ga. 269, 31 S.E.2d 483. On November 29, 1941, the petitioner filed in the superior court of Fulton County a petition for a partial divorce, suit No. 136,607. During the pendency of the said cause, the court on December 10, 1943, entered an order enjoining the defendant until further order of the court from disposing of or changing the custody or status of $23,000 which Allen had withdrawn from a savings deposit or credit with Peoples Loan, Incorporated, and was concealing; and he was further enjoined from disposing of or changing the custody or status of other property listed in the divorce petition of Mrs. Allen, as follows: 482 shares of preferred stock and 542 shares of common stock of Peoples Loan, Incorporated, of the fair market value for cash of at least $55,000; a printing business, individually owned by E. W. Allen, the E. W. Allen Printing Company, of a fair market value for cash of at least $7500; a one-half undivided interest in a 65-acre tract of land in DeKalb County, Georgia, known as the Simmons-estate property, said interest being of the fair market value for cash of $10,000; various and sundry properties, including real estate and personal property, which could not be itemized by the petitioner and the value of which was unknown to her. On May 5, 1944, the jury returned a verdict for partial divorce as prayed for, and awarded to her as alimony $5000 cash and in addition $200 per month during her lifetime, payable in $100 installments on the 1st and 15th of each month. On June 1, 1944, a decree was entered in conformity with the verdict, and the court also allowed $258.46 as expenses of litigation and $500 for attorney's fees.

E. W. Allen was on May 9, 1944, the owner of 531 shares of preferred stock and 542 shares of voting common stock in Peoples Loan, Incorporated. The total number of shares of preferred stock in said corporation was 1787 and the total number of common voting shares was 909, all being of the par value of $25 per share, and Allen being the owner of 40 per cent. of the entire stock. As a part of the preconceived scheme to prevent the petitioner from collecting under her two aforesaid judgments or decrees, he, as such majority owner of stock, called a meeting of all the stockholders of Peoples Loan, Incorporated, for May 9, 1944. Present were E. W. Allen, president, representing his aforementioned shares of stock; W. E. DuPre, vice president, secretary and treasurer, representing 104 shares of common stock and 43 shares of preferred stock and 50 shares of preferred stock belonging to DuPre Manufacturing Company; J. Earle Smith, general manager, representing 2 shares of common stock and 7 shares of preferred stock; P. S. Etheridge, representing 40 shares of common stock; R. L. McConnell, trust officer of Trust Company of Georgia, representing 221 shares of common stock and 253 shares of preferred stock owned by the estate of John D. Simmons, deceased, which the Trust Company of Georgia was handling in a representative capacity; R. B. Pullen, the compny lawyer; Norbert A. Dempsey, a security analyst of the Trust Company of Georgia, who accompanied the said McConnell. DuPre, a long time friend and associate of E. W. Allen, derived his knowledge of the business and assets of the corporation largely from Allen and Smith. The said Etheridge had been for a number of years, before ascending to the bench of the superior court of Fulton County, the company's attorney, and his knowledge of the business and assets had been derived almost entirely from E. W. Allen. The said McConnell and Dempsey knew little of the business and assets except as reflected in financial statements of the corporation and relied on information given them by Allen. Allen, as majority stockholder, stated to the stockholders that the purpose of the meeting was to consider an offer to buy the assets of the corporation and to liquidate it, and that J. Earle Smith desired to make such an offer. Smith thereupon made a purported offer to purchase all the assets for $75,348, or $28 per share, and in addition agreed, pursuant to the conspiracy, to assume all outstanding liabilities of the corporation, which petitioner charges did not exceed $2,000; and at that time the said Smith was not financially able to pay for said assets. Allen and Smith, pursuant to the conspiracy, represented to the stockholders that the offer was a fair price for the assets, whereas in truth and in fact the assets were worth at least $35,000 more on a fair market value for cash, a fact unknown to all present except Allen, Smith, and Pullen. These three failed to disclose this fact to the others, and it was not otherwise known to them. These three were in a fiduciary and confidential relationship to the stockholders by virtue of the majority ownership of stock by Allen and the fact that they had acquired this information, which they knew the others did not know, and they were under the duty to disclose the true market value of the assets. Their failure to disclose such fact and the fraudulent representation by Allen and Smith that the offer was a fair one was a fraud on the stockholders and part and parcel of the preconceived scheme of the conspirators to acquire secretly and hold for Allen assets in the value of $35,000 above the said purchase-price. The other stockholders, relying on such representation, voted to accept the fraudulent offer of Smith. Allen also caused the matter of appointing a liquidating agent and the disolution of the corporation to be brought up and considered by the stockholders; and Allen and Smith and the rest of the stockholders, relying on such representation, voted to appoint Smith as the liquidating agent and to dissolve the corporation.

The defendants J. Earle Smith 'and/or' R. B. Pullen 'and/or' J. H. Geffken did on May 9, 1944, take possession of all of the assets of the corporation under the guise of an alleged sale to J. Earle Smith. By reason of the assets being worth $35,000 more than the offer, and the alleged ownership by Allen of 40 per cent. of the stock of the corporation and the...