Scott v. Flint River Pecan Co.
| Decision Date | 14 January 1925 |
| Docket Number | 4144. |
| Citation | 126 S.E. 769,159 Ga. 668 |
| Parties | SCOTT ET AL. v. FLINT RIVER PECAN CO. ET AL. |
| Court | Georgia Supreme Court |
Motions for Rehearing Denied February 20, 1925.
Syllabus by the Court.
"The remedy of mandamus does not lie to compel the transfer of stock in an incorporated company, except in the case of a judicial sale thereof."
The transfer and assignment of stock in a corporation, either by absolute sale or by way of pledge as security for a debt passes to the vendee or pledgee the title to such stock. Where one takes shares of stock in a corporation in this state as a pledge or security for debt, with an assignment of the stock to the pledgee in blank, who fills in the blank with the name of the pledgee, and the agents of the company refuse to recognize the rights of the pledgee, or to allow a transfer of the stock on the books of the company, the pledgee may bring an equitable proceeding against the pledgor and the company to restrain the former from interfering with the rights of the pledgee, in good faith and under reasonable regulations, in examining the books of the company, and to compel the company to make the transfer of the shares of stock and to recognize the pledgee as a shareholder.
A decree requiring a corporation to make a transfer of stock on the books of the corporation cannot be rendered at an interlocutory hearing; but under the pleadings and evidence in this case the stockholders had the right to examine the books of the corporation under reasonable regulations, and the evidence showed that they were denied this right, and the injunction on this ground should have been granted.
The trial judge did not err in allowing the intervention filed in this case.
Error from Superior Court, Dougherty County; W. V. Custer, Judge.
Suit by Townsend Scott and another against the Flint River Pecan Company and others. Judgment for defendants, and plaintiffs bring error. Reversed.
Townsend Scott and Arnold Elzey Waters, as trustees, brought an equitable petition against Flint River Pecan Company, Dermot Shemwell as president of the company, and H. H. Hedrick as vice president, and alleged in substance the following Plaintiffs, as trustees, own in their representative capacity 1,200 shares of the capital stock of the Flint River Pecan Company, which stock was conveyed to plaintiffs under and by virtue of a certain trust agreement, copy of which is attached to the petition. Plaintiffs as stockholders have made demand on the defendant and its officers to transfer said stock on the books of the company, and to place the same in the name of plaintiffs as trustees. Prior to this demand Dermot Shemwell announced that he would not transfer the stock and when demand was made he declined to consider the transfer of the stock to the trustees. Both the company and the officers thereof have declined to permit plaintiffs to exercise their right as stockholders to investigate or inspect the books of the Flint River Pecan Company. The notes secured by the stock in accordance with the trust agreement have all become due and collectible, by reason of the stipulations contained therein, wherein Foy & Shemwell, as partners and as individuals, agreed not to mortgage or put a loan on the properties owned by the Flint River Pecan Company, but contrary to the agreement did mortgage the property in the sum of $200,000. By reason of the ownership of said stock plaintiffs are entitled to have it transferred on the books of the company, or certificates to issue in their name in lieu of the certificates held by them; they are entitled to vote in all matters concerning the stockholders which according to law they have a right to vote on, and to investigate the books of the company, and to exercise all other rights incident to the right of a stockholder. The prayers of the petition (after amendment striking one of the prayers) are that the Flint River Pecan Company, Dermot Shemwell, president, and H. H. Hedrick, vice president, both in their official and individual capacities, be enjoined from interfering with plaintiffs in the exercise of their rights as stockholders, and from interfering with plaintiffs in investigating the books and affairs of the company and in exercising any other right within the purview of the rights of a stockholder; that the defendants, both in their official and individual capacity, be compelled to issue a certificate to plaintiffs in lieu of the present certificates held by them in their names as the holders thereof. There is also a prayer for general relief and for process.
The defendants made in substance the following answer Townsend Scott & Son is a partnership, the members of which live in Baltimore, Md.; the business of the partnership is a general investment and banking business. The Georgia-Alabama Power Company is a corporation having several hydro-electric power plants in Southwest Georgia and in Alabama. Georgia-Alabama Power Company was built through the efforts of Foy & Shemwell, and financed by them and Townsend Scott & Son. In 1921 Townsend Scott & Son became the owners of practically all of the voting stock of Georgia-Alabama Power Company. Foy & Shemwell, and other citizens of Southwest Georgia, continued to own large holdings of preferred stock of Georgia-Alabama Power Company. Townsend Scott & Son have so used their control over Georgia-Alabama Power Company as to cause that company to pay to them numerous and improper charges for its refinancing, and to issue to them bonds of that company in the sum of several hundred thousand dollars in lieu of the stock which Townsend Scott & Son had agreed to buy from Georgia-Alabama Power Company. These acts were fraudulent and were for the purpose of making a large profit for Townsend Scott & Son through an improper use of their control of Georgia-Alabama Power Company. Great injury was worked thereby, and Foy & Shemwell, and the other preferred stockholders, filed their equitable petition against Townsend Scott & Son and the Georgia-Alabama Power Company, alleging that these acts were fraudulent. Townsend Scott & Son caused the Georgia-Alabama Power Company to present to Foy & Shemwell a claim for $183,000, and demanded payment of that sum. The claim is wholly unfounded, and Foy & Shemwell claim that Georgia-Alabama Power Company is indebted to it, and have filed suit to recover the amount so claimed to be due. Both these suits have been removed from the superior court of Dougherty county to the United States District Court for the Southern District of Georgia; and motion to remand the suit has been made, and is now pending. Townsend Scott & Son then caused suit to be filed by Georgia-Alabama Power Company against the Citizens' First National Bank of Albany, Ga with which Foy & Shemwell are affiliated, seeking to recover of the bank a large amount of money upon the claim that the money of Georgia-Alabama Power Company was improperly paid to it, when the money has been paid for the use and benefit of Georgia-Alabama Power Company, with the knowledge and consent of Townsend Scott & Son, and the transactions were perfectly fair and proper. The suit was wholly without foundation, and was filed for the purpose of harassing Foy & Shemwell and to cause them to abandon their suit, and for the purpose of injuring the bank because it was affiliated with Foy & Shemwell. The purpose of the suit was to create false impressions as to the bank, and it was brought out of a malicious purpose to undertake to force Foy & Shemwell to abandon their efforts to protect the preferred stockholders of Georgia-Alabama Power Company against the plaintiffs' illegal and fraudulent acts.
Townsend Scott & Son then caused Arnold Elzey Waters and Townsend Scott, who claim to be acting under a certain indenture. to declare due certain indebtedness of Foy & Shemwell, growing out of the allegations to the effect that Foy & Shemwell had agreed in a certain contract that the indebtedness therein mentioned might be declared to be due if the Flint River Pecan company issued a mortgage upon its property, when the fact is that the mortgage was issued with the knowledge and consent of Townsend Scott & Son and of the trustees, and the former participated in the funds of the mortgage, the details of which are set out in the answer. Every detail of the transaction was known to Townsend Scott & Son for four or five months prior to the filing of the stockholders' suit, and fully acquiesced in by them during that time and until after the stockholders' suit was filed. Townsend Scott & Son were then holders of all the notes secured by the trust instrument, or the notes were held for their benefit and by their agents and business associates. Townsend Scott and Arnold Elzey Waters are members of the firm of Townsend Scott & Son, and were caused by that firm to declare due prior to maturity and by acceleration, the notes secured by the trust instrument, and then place the notes in the hands of Wm. W. Moss, of Norfolk, Va., who, acting for Townsend Scott & Son, and wholly in their behalf, caused Moss to file suit against Foy & Shemwell on the notes. Thereupon Townsend Scott & Son, acting through their counsel, who are the same that represent Moss and Georgia-Alabama Power Company, made demand on Foy & Shemwell that a bond be given by them to protect Moss in any judgment that he might recover. Foy & Shemwell offered to give this bond if Townsend Scott & Son would themselves come into the jurisdiction of the courts of this state and submit themselves thereto, but they refused to do so. Thereupon Townsend Scott & Son, acting through Moss, caused garnishment to be issued and served upon various persons who were supposed to be debtors of Foy & Shemwell. This act was done for the purpose of harassing and...
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