Schwab v. Carter

• Decision Date: 12 January 1933
• Docket Number: 6 Div. 168.
• Citation: 145 So. 450,226 Ala. 173
• Parties: SCHWAB v. CARTER ET AL.
• Court: Alabama Supreme Court

145 So. 450

226 Ala. 173

SCHWAB v. CARTER ET AL.

6 Div. 168.

Supreme Court of Alabama

January 12, 1933

Rehearing Denied March 2, 1933.

Appeal from Circuit Court, Jefferson County; Wm. M. Walker, Judge.

Bill in equity by W. M. Carter and another against H. J. Schwab and others. From a decree overruling a demurrer to the bill, the named respondent appeals.

Reversed and remanded.

The bill is filed by W. M. and Ella Carter, husband and wife against Madam Greenley Manufacturing Company, Incorporated L. J. Greenley, O. K. Williams, Minnie Greenley, G. F Riddle, W. C. McCullough, and Harold J.Schwab. It is averred that complainants prior to July, 1930, were the owners of a certain described real property; that the individual respondents, other than Schwab, approached complainants and represented to them that the Madam Greenley Manufacturing Company was a newly organized corporation, its financial condition good by reason of a large number of persons having invested therein large sums of money in payment for subscriptions to the capital stock; that all the stock subscribed for and to be issued by the corporation, in large amounts, had been paid for in cash, or its equivalent; that the corporation was earning a large profit for its stockholders, and was in such good financial condition that it would pay to its stockholders a dividend of 8 per cent each three months, and that the stock of respondent corporation was in every way well worth the purported or represented par value of $10 per share; that said individual respondents represented to complainants and induced them to believe that it would be advantageous to them to convey to respondents all the real estate belonging to complainants in consideration of the future issuance to complainant of 200 shares of the capital stock of respondent corporation, together with the additional and further consideration that complainant Wm. Carter would be made an officer in respondent corporation, and, as such, would be paid a good salary. It is averred that complainants, believing as true and acting upon such representations, and in reliance thereon, were induced to make conveyance to respondents of their said real estate. It is averred that thereafter respondents Greenley and the corporation executed to respondent Schwab a certain abortive mortgage deed to the property, and said Schwab was served notice on complainants to deliver up possession of said property; the same having been sold under foreclosure of said mortgage. It is averred that the representations made by the individual respondents (other than Schwab) to the complainants were falsely and fraudulently made by said respondents to complainants as an inducement to complainants to deed away their property rights; said respondents well knowing that the stock of the corporation was not earning and paying dividends as represented, and that large amounts of cash by such numbers of subscribers as represented to complainants had not been made or paid to said corporation, and that said corporation was not in good financial condition. It is averred that the notice given by respondent Schwab was and is false and fraudulent, in that no valid sale of said property under foreclosure proceedings was had or appeared of record at the time of service of said notice, and that said notice was served by him for the purpose of wrongfully dispossessing complainant, with the knowledge on the part of Schwab that he did not have or hold such lien, right, title, claim, or interest in and to said real estate by virtue of said abortive mortgage deed, or otherwise, as that a lawful sale and possession by Schwab could be had, and said notice was falsely and fraudulently made and served on complainant with the false and fraudulent purpose and intent of said Schwab of unlawfully wresting from complainants their right, title, and possession of complainant's said property. The prayer of the bill is for cancellation of all said instruments, and restoration of said property to defendants.

The application for stock, and the several instruments referred to, are made exhibits to the bill.

The several respondents demur to the bill, all of which were overruled. The respondent Schwab alone appeals from the decree, assigning as error the overruling of his demurrer to the bill.

William Vaughan and Arthur L. Brown, both of Birmingham, for appellant.

J. B. Ivey, of Birmingham, for appellees.

THOMAS Justice.

This appeal challenges the overruling of the demurrer to the bill to set aside conveyances procured as the result of the fraud alleged.

The original bill and exhibits, and the amendment thereto will be considered together as one pleading, and one may supplement the other. Woodall v. Southern Mfg. Co., 223 Ala. 262, 135 So. 446; Grimsley v. First Ave. Coal & Lumber Co., 217 Ala. 159, 115 So. 90; Federal Automobile Ins. Ass'n v. Abrams, 217 Ala. 539, 540, 117 So. 85; State ex rel. Garrow v. Grayson, Judge, 220 Ala. 12, 14, 123 So. 573; Central Lumber Co. v. Jacks, 222 Ala. 475, 477, 132 So. 721; Hobson v. Robertson, 224 Ala. 49, 138 So. 548; United States Fidelity & Guaranty Co. v. First Nat. Bank of Lincoln, 224 Ala. 375, 140 So. 755.

For the purposes of the demurrer, the averments of the bill are taken as true....