Riley v. Wilkinson, 6 Div. 232.

Citation247 Ala. 231,23 So.2d 582
Decision Date30 June 1945
Docket Number6 Div. 232.
CourtSupreme Court of Alabama
PartiesRILEY et al. v. WILKINSON et al.

Rehearing Denied Nov. 1, 1945.

Horace C. Wilkinson, of Birmingham, for appellants.

Bradley Baldwin, All & White, of Birmingham, for appellees.

FOSTER Justice.

This appeal relates to a proceeding which occurred pending the administration of the estate of Edward Wilkinson, Sr., deceased. He left a will in which was created a trust. He had executed before he died five living trusts. He named his son Edward Wilkinson, Jr., and his daughter, Mrs. Lanier, coexecutors and cotrustees. Mrs. Lanier resigned as such, and the court appointed in her place Bethea McCall. Decedent owned at the time of his death one hundred and fifty-one shares of the common stock of the Western Grain Company, a corporation. He had placed one hundred and twenty other shares of the corporation in the living trusts. Pending the administration, removed to equity, a demand was made by the internal revenue collector for the payment of a claim of approximately $50,000 for a deficiency estate tax. He seized a certificate of stock representing one hundred and fifty shares and a certificate representing one share issued to the said Edward Wilkinson, Sr., in his lifetime, and threatened the sale of it, worth largely more than the tax claim. In lieu of the certificates another had been issued in the name of the executors. This had not been seized.

The instant petition, known as that of October 16, 1943 (M.R. 1, page 206 B, this record page 9), was to the court of equity administering the estate by the coexecutors seeking direction as to the payment of that tax. The court overruled the demurrer to the petition, and ordered a sale of enough of the stock in the corporation to discharge the claim (M.R. 1, page 285, this record page 92). Some of the parties have appealed to this Court The issues so presented are here involved

In ordering the sale, the court directed as follows: 'The executors are hereby authorized and directed to sell a sufficient number of shares of the common stock of the company held by the estate of the decedent to yield an amount not less than $51,700, and not more than $55,000, the sale to be made in the following manner: at 11 o'clock A. M., on Friday, January 21, 1944, the executors shall offer said stock for sale in this court in the presence of the special judge, and sell the same to the highest and best bidder for cash. The highest and best bidder shall be the person who offers the highest price per share for such stock, unless two or more bidders offer the same price per share, in which case the bidder who offers to buy the larger number of full shares (within said limit as to maximum price) shall be deemed the highest and best bidder. No fractional share shall be sold.'

The Cross-Bill.

In respect to the petition, a cross-bill was filed, in which it was sought to have the court inquire into the bona fides of case No. 55708, pending as an independent suit in that court. That suit is not incidental to the administration, but relates to a controversy between the heirs and beneficiaries of the estate, in which their interest in it is affected as well as a certain claim of the Western Grain Company, which we will call the corporation. A previous suit between them had been settled which released the claim of the corporation against decedent. Case No. 55708 made an attack against that settlement as being fraudulent and void.

The instant cross-bill asked the court to decree (as quoted from appellant's brief) '(1) that case No. 55708 was collusively filed and should be dismissed; (2) that the grandchildren of the decedent had no right, title or interest in the one hundred and fifty-one shares of common stock of the Western Grain Company held in his estate and that they had no right, title or interest in suit No. 55708, and were not entitled to file and maintain it; (3) the removal of Edward Wilkinson, Jr., as executor and trustee; (4) appointment of a disinterested person to succeed him; (5) that the disinterested executor be authorized to negotiate with the Western Grain Company for a sufficient sum of money with which to pay the taxes mentioned in the petition, on the terms and conditions agreeable by him to be approved by the court; (6) that this cross-bill and case No. 55708 be consolidated and heard at the same time; (7) that Edward Wilkinson, Jr., individually, and as executor of the will of the decedent be enjoined from instituting vexatious litigation against the Western Grain Company; (8) that the directors of the Western Grain Company were under no duty to declare a dividend for the year 1943; (9) that it was the duty of the executors to sell all of the common stock of the Western Grain Company in the five living trusts and held in the five living trusts and held in the estate of the decedent; (10) that any sale of stock be made free of all liens and claims against the stock be transferred to the proceeds of the sale; (11) that the executors to instructed it was their duty to submit differences respecting the administration of the estate to arbitration and the cross-respondents (complainants) prayed for general relief.'

Cross-complainants contend by their cross-bill that the pendency of case No. 55708 cast a cloud upon the title of the estate to that stock and that the claim of its collusion and fraudulent character ought to be heard and considered with this petition, and disposed of so as to free the stock from that cloud and justify the expectation that the price at the sale would be thereby improved.

The controversy with respect to case No. 55708 was primarily between the heirs and beneficiaries under the will of decedent. If that cause was so collusive and fraudulent as that it should be dismissed, it is contended, the effect would be to fix a status whereby the claim of indebtedness by the corporation against decedent, which it is alleged creates a lien on his capital stock in it, would stand discharged by the decree in the former suit, so as to free the stock from the burden of that claim. As to whether the lien for its security takes priority over that of the United States for estate taxes, see United States v. Waddill, 323 U.S. 353, 65 S.Ct. 304, 89 L.Ed. 294.

But it is insisted that if case No. 55708 be prosecuted to a successful end the effect would be to leave in existence a controversy as to the validity of that claim and the priority and effectiveness of its lien. So that, it is contended, as long as case No. 55708 is pending that cloud exists; and that therefore on the cross-bill, the court upon hearing the instant petition should inquire into the collusive charge affecting the bona fides of the suit, and if found to be a fraud upon the court, that declaration be made to that effect whereby that suit will be disposed of.

We do not think the contention can be maintained in a cross-bill filed in respect to the pending petition, nor any of the matters there sought to be adjudicated. There are two good reasons why this is so. The first is that a cross-bill must set up matter germane to the original bill. Lowery v. Rosengrant, 216 Ala. 364, 113 So. 237; Ashe-Carson v. Bonifay, 147 Ala. 376, 41 So. 816; Howell v. Randle, 171 Ala. 451, 459, 54 So. 563. That means that its object and purpose must be defensive and seek to defeat a recovery in whole or in part, or to modify a recovery. Maryland Casualty Co. v. Holmes, 230 Ala. 332, 160 So. 768; Emens v. Stephens, 233 Ala. 295, 172 So. 95.

The instant cross-bill is not defensive, it does not submit matter sufficient to defeat or modify a recovery. To that extent it differs from the case of Howell v. Randle, supra.

The purpose of the petition is to determine whether the stock should be sold or some other means be resorted to to meet a debt which the court thought was urgent. That debt was secured by a lien which may or may not be superior to that of the corporation. Whatever right the estate had in that stock could be sold subject to the priorities of claimants. On such a petition, the court will not stop to entertain a cross-bill bringing forward a controversy in respect to a third party as to the existence and priority of his claim as a lien, and settle complicated issues involving the bona fides of an independent cause now pending which may affect that issue, nor enter into a trial of the merits of that cause, if the charge of collusion is found not to be fatal to it, nor enter into a trial of other collateral matters not defensive in scope.

The second reason is that the court in which case No. 55708 is pending has plenary power to determine whether its jurisdiction is collusively sought and whether the case should be dismissed on that account. United States v. Johnson, 319 U.S. 302, 63 S.Ct. 1075, 87 L.Ed. 1413; Rhea v. Hackney, 117 Fla. 62, 157 So. 190; 1 Corpus Juris Secundum, Actions, § 19, page 1060, notes 36 to 39.

When a party to a case has ample opportunity in that proceeding and before that court to have the question determined as to such fraud or collusion as well as any other theory on which it should be dismissed (or if a judgment, that it be vacated), a court of equity will not entertain an independent suit to accomplish that purpose, Kelley v. Chavis, 225 Ala. 218, 142 So. 423; Barton v. Burton Mfg. Co., 202 Ala. 180, 79 So. 664; Hatton v. Moseley, 229 Ala. 240, 156 So. 546; Leath v. Lister, 233 Ala. 595, 173 So. 59: nor a cross-bill in a collateral proceeding, Penton v. Brown-Crummer Inv. Co., 222 Ala. 155(15), 131 So. 14.

Another reason why the court cannot be reversed insofar as the cross-bill is concerned is that there was no ruling by the court which is subject to review or which is assigned as error. The assignment in that...

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