Randolph v. East Birmingham Land Co.

• Decision Date: 09 August 1894
• Citation: 104 Ala. 355,16 So. 126
• Parties: RANDOLPH v. EAST BIRMINGHAM LAND CO. ET AL.
• Court: Alabama Supreme Court

16 So. 126

104 Ala. 355

RANDOLPH v. EAST BIRMINGHAM LAND CO. ET AL.

Supreme Court of Alabama

August 9, 1894

Appeal from chancery court, Jefferson county; Thomas Cobbs, Judge.

Action by Ryland Randolph, Jr., against the East Birmingham Land Company and others to set aside two deeds of land. A demurrer to the complaint was sustained, and plaintiff appeals. Reversed.

The bill in this case was filed by Ryland Randolph, Jr., by his next friend, against the East Birmingham Land Company, Ryland Randolph, Sr., James E. Webb, H. C. Tompkins, and D. H Sumner, and alleges that Ryland Randolph, Sr., the father of complainant, desiring to donate to his son the lands in question, purchased them from one Briggs, who was then the owner, for the use and benefit of the complainant, and on the 6th day of March, 1874, said Briggs, at the request of plaintiff's said father, and for the consideration expressed in the deed, conveyed to him the said land, in trust for the benefit of complainant, who accepted the trust by executing the deed, which deed was duly probated and recorded in the proper office on the 10th day of March, 1874. On the execution of said deed said Ryland Randolph, Sr., took possession of said land pursuant to and under the trust therein set forth, and afterwards paid said Briggs in full for the same. By the deed the lands were conveyed to said Ryland Randolph, Sr., in trust for the use and benefit of complainant, and said trust was established and ingrafted upon the same as follows: "That the said Ryland Randolph, Sr., should control, manage and direct the said lands until the termination of the trust, and use and appropriate the rents, profits and income of the same for complainant's use and benefit as he may see proper; to lease, mortgage or sell the same for complainant's use reinvest the proceeds in such manner as he might think best for complainant's use and benefit, to make a good fee-simple title to the purchaser with covenants of warranty said trust to terminate upon the said Ryland, Jr., arriving at the age of 21 years, and then he shall have the right to take charge of the property." Ryland Randolph, Sr. retained possession of said lands under said trust until the 6th day of December, 1886, when he sold the same to the East Birmingham Land Company under the following circumstances: Said lands are situated in the suburbs of Birmingham, where at that time the price of real property had become by reason of reckless speculation greatly inflated and fictitious. This had given rise to a large number of private corporations, which were intended for speculation in lands and stocks, and which were certain to result in disaster to the ultimate holders of the stock in such companies. For the purpose of organizing a company of this sort, George Kelley and others bargained with the said Ryland Randolph, Sr., that they would organize said East Birmingham Land Company, and that the latter would convey said lands to the company at the price of $1,000 per acre, and receive payment therefor in the stock of said company, at the face value of $100 per share. Pursuant to said agreement said East Birmingham Land Company was organized, and said land conveyed on the 6th day of December, 1886. Though the deed recites a consideration of $1,000 per acre, nothing was really paid for said land except as stated in the bill. In consideration of said deed, and in payment for the land, said company issued to said Ryland Randolph, Sr., in his own name, its stock to the amount of $80,000, which was the sole consideration for the execution of the deed. The capital stock of the company was originally $850,000. Each of the parties named as organizers of the company subscribed for 850 shares, except one West, who subscribed for 840, and Ryland Randolph, Sr., for 10. This stock was paid for by a conveyance of lands to the company, including that above described, and at the same time or soon after about $400,000 of the stock of said company was issued to the above-named and other organizers and promoters of said company. This $400,000 of stock was issued without any consideration whatever, and was claimed by said parties as compensation for their skill and ability in inducing innocent third parties to put their lands in the enterprise. In consequence of the wild and crazed condition of the public mind, said stock was selling at that time at about par, and said parties, well knowing that this condition of things would not last, obligated the said Ryland Randolph, Sr., not to dispose of his stock for 30 days, so as not to flood the market, and in the meantime sold their own stock, which cost them nothing, at about par. Pursuant to said agreement, said Randolph, Sr., did not sell the said stock, and in about two months afterwards it became almost worthless, and was either wholly lost or disposed of by him at a nominal price. At the time of the said transaction the said company and its officers, who were composed exclusively of the promoters mentioned, knew of said trust, and they and the said Ryland Randolph, Sr., were guilty of a deliberate breach of said trust, and the rights of complainant, in the conveyance of said land to said company and in converting said trust property into stock, which they well knew would soon become utterly worthless, and issuing and taking the certificates of stock in the individual name of Ryland Randolph, Sr. At the extravagant and inflated prices then existing said lands were not worth more than $400 per acre, yet they were conveyed to the company at $1,000 per acre, and the stock was immediately watered to the extent of $500 per acre. At the time of said conveyance, it was the purpose of the company and its aforesaid managers to issue and sell said stock on speculation. Under these circumstances they well knew, and it was a fact, that they were destroying the trust property.

The bill further charges that about the 11th day of April, 1891, the East Birmingham Land Company made a general assignment of its property, including the lands above mentioned, to D. H. Sumner, for the purpose of securing the payment of its past indebtedness. Said Sumner had notice of the trust. On the 7th day of July, 1891, Sumner, as trustee and assignee, sold the lands under the power contained in the deed of assignment to the defendants Webb and Tompkins, and executed a deed to them, a copy of which is attached as an exhibit to the bill. This deed did not convey or purport to convey anything more than the interest of the East Birmingham Land Company in said lands, and the vendees took the same subject to the claims and equities of complainant, and Webb and Tompkins bought the land well knowing that the said Sumner could not convey the fee-simple title thereto, and cognizant of the facts set forth in the bill. Said East Birmingham Land Company and Ryland Randolph, Sr., are both insolvent. The bill prays that the deed made by Ryland Randolph, Sr., to the East Birmingham Land Company, the deed of assignment of said company to D. H. Sumner, and the deed made by said D. H. Sumner to Webb and Tompkins, so far as they purport to convey the above-described land, be set aside and annulled, and the trust enforced against the land in the hands of defendants Webb and Tompkins, and for general relief. The defendants demurred to the bill on the following grounds: First. That the bill shows that the complainant is not entitled to the relief sought, nor to any relief. Second. That the bill shows that these defendants are innocent purchasers of the lands described therein. Third. That the bill shows that the said Ryland Randolph, Sr., had a perfect right to convey said lands as he is shown to have conveyed them. Fourth. That the bill shows that the complainant Ryland Randolph, Jr., had no interest nor equity in the said lands at the time of the conveyance to said company. Fifth. That the bill and exhibits thereto show that these defendants have acquired a perfect and indefeasible title to said lands. The chancellor sustained the above demurrers, and from this decree the complainant appeals, and assigns the same as error.

White & Howze and Carmichael & Thach, for appellant.

James E. Webb, for appellees.

HARALSON J.

1. Ryland Randolph, Sr., purchased the land in question from J W. Briggs, for which he paid him $1,760. The purchase was made by him for the use and benefit of his son, Ryland Randolph, Jr. The deed recites, that he was desirous, in making the purchase, to invest that amount of money in this land for the use and benefit of his said son, and make a donation of it...