Shields v. Clifton Hill Land Co.

• Decision Date: 20 November 1894
• Parties: SHIELDS et al. v. CLIFTON HILL LAND CO. et al.
• Court: Tennessee Supreme Court

28 S.W. 668

94 Tenn. 123

SHIELDS et al. v. CLIFTON HILL LAND CO. et al.

Supreme Court of Tennessee.

November 20, 1894

Appeal from chancery court, Hamilton county; T. M. McConnell Chancellor.

Bill by W. S. Shields and others against the Clifton Hill Land Company and others. Decree for defendants, and plaintiffs appeal. Affirmed.

G. W Pickle, and White & Martin, for appellants.

Cooke Frazier & Swaney and Andrews & Barton, for appellees.

CALDWELL J.

This is a suit by vendors of real estate, to collect balance of purchase money remaining unpaid after enforcement of vendors' lien, by resale of the land and application of proceeds. On the 3d day of February, 1887, Mrs. Annie N Watkins, a widow lady, and her daughter, Miss Alice M. Watkins, in consideration of $1,000 to them paid, executed to Charles A. Lyerly, president of the East End Land Company, an option on their farm of 190 acres of land, near Chattanooga, Tenn. By the terms of the option, the ladies bound themselves to execute to said Lyerly, "or his indorsee" of the option, a warranty deed to said land, if said Lyerly, "or his indorsee," should, within 25 days thereafter, pay to them $35,000 in cash, and further execute to them five several promissory notes for $18,000 each, due, respectively, at 1, 2, 3, 4, and 5 years, "with interest from date at 6%, payable semiannually, and secured by a vendor's lien on the land." On the 28th of February (the day of option expired), the directors of the East End Land Company, in regular meeting, decided that their company would not purchase the land, and upon motion, regularly made and carried, directed that the option "be transferred to another company or purchasers, preferring the stockholders of" the East End Land Company. On the same day, Charles A. Lyerly paid to J. A. Caldwell, agent and attorney for the vendors, $8,500, as a part of the cash payment for the land; a few days later, on the 7th of March, 1887, he made a still larger payment to the same person; and 10 days thereafter he paid the balance, taking a receipt in the words and figures following: "10,350.00. Received of Chas. A. Lyerly ten thousand three hundred and fifty dollars ($10,350.00), balance cash payment on his purchase of our Oakland farm in 9 and 17 districts, upon the terms and conditions mentioned in our contract, dated 5 (3) Feby., 1887; deed to be made as therein stipulated, upon the request of said Lyerly or his assignee. This the 17th of March, 1887. [Signed] Mrs. A. N. Watkins. Alice M. Watkins, By J. A. Caldwell, Agt." On the day this last payment was made, the persons who had decided to organize "another company" to purchase the land, and who had furnished Lyerly the money with which to make the cash payment of $35,000, procured the same Mr. Caldwell to draft a charter for such other company, the latter to be known as the "Clifton Hill Land Company." The charter was drawn as desired, and signed by six incorporators on that day. It was acknowledged on the 22d of March, 1887, recorded March 24, 1887, filed for registration with the secretary of state March 28, 1887, and thereafter finally registered in the register's office of Hamilton county, where the corporation was to have its chief business office, on the 30th of March, 1887. Charles A. Lyerly, the owner of the option, assigned or transferred it to the Clifton Hill Land Company; and on the 14th day of April, 1887, the vendors, in pursuance of the terms of the option, executed a deed whereby they conveyed the land to the said company as his "indorsee" or "assignee." The notes were made to run from the 1st day of March, 1887, though dated April 14, 1887. Except as to date of maturity, the notes were the same. The one maturing first is in the following words: "Chattanooga, Tenn., April 14, 1887. On first March, 1888, next after dated, we promise to pay to Mrs. Annie N. Watkins and Miss Alice M. Watkins, or order, eighteen thousand dollars, value received, with interest at 6% per annum from March 1, 1887, payable semiannually. This note is given for part consideration for, and its payment is secured by a vendor's lien on, the following real estate, *** described in deed of this date. If necessary to resort to law to enforce the payment of this note or protect the security for its payment, we agree to pay all costs of necessary litigation, together with a reasonable attorney's fee. $18,000.00. [Signed] E. Watkins, Pres. Clifton Hill Land Company." Mr. E. Watkins, whose name appears upon the notes, was one of the incorporators, and it was understood between him and his associates that he should be the president of the company, though no organization was in fact effected, by the election of officers, until the 9th of June, 1887, at which time he was elected president. E. Scott was elected secretary and treasurer of the Clifton Hill Land Company at the same time; and thereafter, in September and November, he, as such officer, paid to the vendors $2,700, the first semiannual interest on said five purchase-money notes. These payments were made to J. A. Caldwell, and receipted for by him as agent and attorney. On April 9, 1889, the principal of two of the purchase-money notes being then due and unpaid, the vendors filed their bill against the Clifton Hill Land Company and E. Watkins to enforce their vendor's lien; E. Watkins being made a party, for the reason simply that his name appeared upon the notes. He demurred to the bill, because it contained no allegation whereon he could be charged with personal liability. His demurrer was sustained, and the bill was dismissed as to him. Thereafter, on the 19th of March, 1890, the vendors and W. S. Shields, who had intermarried with Miss Alice M. Watkins, filed a supplemental bill, whereby they sought to hold the incorporators of the Clifton Hill Land Company personally liable for the balance of purchase money that might remain unpaid after the exhaustion of the land, upon the alleged ground that the charter obtained by them was invalid, and that their attempted incorporation thereunder was, as a consequence, ineffectual. Pending these bills, the Clifton Hill Land Company filed a bill against the vendors and others, seeking to rescind the sale of the land to that company, on account of alleged fraud and deceit practiced in the sale of the land. This bill was answered, and all charges of fraud and deceit were denied. Of this last bill it need only be further said, at this place, that it was dismissed upon final hearing, and from the decree of dismissal there has been no appeal or writ of error.

In the progress of the litigation, the vendors voluntarily dismissed their supplemental bill, so far as it sought "any personal relief or recovery against the individual defendants, but no further or otherwise." And upon the hearing of the case, as it then stood, decree was rendered against the Clifton Hill Land Company for the balance of unpaid purchase money, attorney's fees, etc., and the master was directed to sell the land in satisfaction thereof, unless the amount due should be paid into court within a time named. The money was not paid, and the land was sold, and purchased by the original vendors, at the price of $47,000. The sale was confirmed, and title divested and vested. From these decrees the Clifton Hill Land Company appealed to this court. The case was considered, and the decree below affirmed, upon grounds appearing in the opinion of this court, reported in 91 Tenn. at pages 683-692, inclusive, 20 S.W. 246. On the 1st day of March, 1892, while the appeal in that cause was still pending, W. S. Shields and his wife, formerly Miss Alice M. Watkins, and her mother, Mrs. Watkins, commenced the present proceeding by what the pleader termed "an original bill in the nature of a supplemental bill," to establish personal liability upon E. Watkins and various other defendants, and to collect from them individually the balance alleged still to be due on the decree rendered against the Clifton Hill Land Company, under the vendors' bill. In an amended and supplemental bill filed by the same parties on the 3d of February, 1893, they alleged that the said balance, as ascertained by decree of this court in the other case, is $77,916.50, and that an execution has been issued for the same, and returned nulla bona. The grounds upon which individual liability claimed on the one hand, in these bills, and denied on the other hand, in the answers thereto, will properly appear hereafter. At this point it is sufficient to say that each and every defendant, except the Clifton Hill Land Company, strongly denied his liability upon any ground, and that the chancellor, with the pleadings, proof, and decrees in all the cases herein mentioned before him, deemed the defenses good, and therefore dismissed these bills. Complainants have appealed, and assigned errors.

The first assignment of error is as follows: "The court erred in refusing to hold the said individual defendants, who composed the syndicate or partnership, liable for the balance due complainants on the purchase price of said lands. The notes given therefor were those of the partnership, and not the notes of the corporation. They antedate the corporation." This assignment and the argument in support of it are based upon the contention that the incorporators of the Clifton Hill Land Company and their associates were, in the first instance, partners under that name, and that, as such, they purchased the land, and gave notes for the purchase money, before incorporation; and, in doing so, become individually liable for the purchase price. If this contention be true as to the facts of the case, it is also true as to the legal result, nothing else appearing. "It is well settled," says Judge Wright, "that where an association...