Smith-Howard Gin Co. v. Ogletree

• Decision Date: 07 October 1948
• Docket Number: 7 Div. 951.
• Citation: 37 So.2d 507,251 Ala. 366
• Parties: SMITH-HOWARD GIN CO. et al. v. OGLETREE.
• Court: Alabama Supreme Court

37 So.2d 507

251 Ala. 366

SMITH-HOWARD GIN CO. et al. v. OGLETREE.

7 Div. 951.

Supreme Court of Alabama

October 7, 1948

Rehearing Denied Nov. 18, 1948.

C W. Stringer, of Talladega, and Borden Burr, Samuel H. Burr and Benners, Burr, Stokely & McKamy, all of Birmingham for appellants.

Harvey Deramus, of Birmingham, and Brewer Dixon, of Talladega, for appellee.

BROWN Justice.

This is an appeal from an interlocutory decree sustaining in part and overruling in part the separate demurrers filed by the respondent to the bill and refiled to the bill as amended with cross-assignment on the record by the appellee, the complainant. The appellant makes 116 assignments of error on the record. The appellee makes three cross-assignments. In speaking of the bill hereinafter, we refer to the bill as last amended to which the demurrers were directed and refiled.

The demurrers of each of the respondents are addressed 'to the original bill of complaint in the above entitled cause and to each paragraph thereof separately and severally, and to each aspect of the bill of complaint separately and severally, upon the following separate and several grounds.' This form was used in refiling the demurrers to the bill as amended. Under repeated rulings of this court the demurrers are addressed to the bill as a whole. Oden v King et al., 216 Ala. 504, 113 So. 609, 54 A.L.R. 1413; Kelly v. Carmichael, 217 Ala. 534, 117 So. 67; Badham et al. v. Johnston et al., 239 Ala. 48, 50, 193 So. 420; Hall v. Hall, 241 Ala. 397, 406, 2 So.2d 908; Barnes v. Powell, 241 Ala. 409, 410, 3 So.2d 80; Dean v. Lusk, 241 Ala. 519, 525, 3 So.2d 310; First Nat. Bank of Birmingham v. Bonner, 243 Ala. 597, 599, 11 So.2d 348; Baker v. Farish, Supt. of Banks, 244 Ala. 178, 179, 180, 12 So.2d 547; Wells v. Wells, 249 Ala. 649, 651, 32 So.2d 697. In the further progress of this opinion we will so treat them.

The bill by appellee Ogletree, alleges that he owns 20 shares of the capital stock constituting 40% of the capital stock of the respondent Smith-Howard Gin Co., Inc., a corporation organized and existing under the laws of the State of Alabama, incorporated Sept. 9, 1930, in Talladega County. The object of the corporation, as alleged, was to construct and operate cotton gins; buy, sell or lease real estate; buy cotton, cotton seed, cotton seed meal and hulls and any other farm product incident to its business. Copies of the charter and certificate of incorporation are attached to and made exhibit A to the bill.

The bill is filed against the corporation, L. L. Smith and R. R. Gross. It is alleged that the complainant purchased his stock from Smith, paid cash therefor and received appropriate certificates of stock during the year 1935; that he was thereafter made president of the corporation, actively operated its business without compensation other than dividends received on his stock for a period of seven or eight years, devoting his entire time and attention thereto; that there are only three stockholders:--complainant who owned 40% of the stock; Smith who owned 60% and one or more shares being registered in the name of respondent Gross 'solely for the purpose of complying with the laws of the State of Alabama.'

That after complainant had successfully managed and operated the business of the corporation with the aid of Smith, who received and deposited in a bank of which he was the president the earnings and receipts of said corporation. That at the time complainant was made president of and put in charge of the corporation, the corporation was greatly in debt and during the several years he managed and operated said business all of said debts were paid and said corporation put in good financial condition and had on deposit a considerable sum of money--$20,000--in its surplus account. That in the fail of 1943, after the sale of the gins owned by the corporation and after the corporation had ceased to operate gins--the major business for which it was incorporated--the respondent Smith stated to complainant that new officers would have to be elected and that the complainant, on account of his health, would no longer serve as president and that he, Smith, would be elected president and draw a salary of $1500.00 per year. Complainant did not consent to such arrangement. 'Complainant is informed and believes and upon such information and belief avers that since said date, respondent Smith has drawn or received a salary of $1500.00 per year from the corporation; and complainant avers that the payment of such salary to Smith, without an express contract therefor, is a misappropriation and misuse of the funds of the corporation.

'On or about January 1, 1947, the Respondent Smith, informed the Complainant, for the first time, that he was not a stockholder of Smith Howard Gin Company, Inc., a corporation, and that the Four Thousand Dollars ($4,000.00) paid for the stock by the Complainant in 1935, was merely a loan of the money by the Complainant to said Respondent, and that he, the Respondent Smith, was then ready, willing, and able to repay said loan. Said statement was made by the Respondent Smith, after the Complainant had actively conducted the business affairs of the Respondent Corporation for a period of to-wit: eight (8) years, and as a result of the Complainant's management and supervision, all of the debts of said Company had been fully paid and its assets greatly increased, and said corporation was reasonably worth to-wit: $80,000.00. In other words, the Respondent Smith, did not so inform the Complainant that he was not such stockholder until the Respondent Corporation and the Respondent Smith, as one of its principal stockholders, had received the benefit of eight (8) years of hard and laborious service of the Complainant.

'The Respondent Smith, on to-wit: January 1, 1947, and since said date, has in his possession all of the books, records and accounts of the Respondent Corporation, and although the Complainant on to-wit: January 13, 1947, made a written demand upon the Respondent Smith, to be allowed the right and privilege to inspect the books, records, and accounts of the Respondent Corporation, such permission was refused, and at said time the Respondent Smith, informed the Complainant, or his duly authorized agent or attorney, that the Complainant was not a stockholder, director, or officer of the Respondent Corporation and had no interest therein. On to-wit: January 1, 1947, and since said date, the Complainant has owned forty (40) shares [percent] of the capital stock of said Corporation and has, at all times, owned and had in his possession the Certificates evidencing said shares, which said Certificates do not show or reflect any lien, right, title, or encumbrance thereon, in favor of the Respondent Smith. (Brackets supplied.)

'Complainant has made no demands upon the Respondent Gross, as he is powerless to do any act; and although the Complainant is rightfully entitled to inspect the books, records and accounts of said corporation, the Respondent Smith, has wrongfully refused to allow him this right.

'The Complainant is informed and believes, and upon such information and belief, avers that although the Respondent Corporation owns unencumbered assets of a large value, and has an appreciable amount of cash on hand, nevertheless, the Respondent Smith, has stated that the Corporation is to mortgage or encumber some of its real estate, and is to acquire other real estate and make large expenditures by the erection of buildings and for other purposes. Complainant avers that this will be done, unless enjoined or restrained by this Honorable Court. Such expenditures for the purchase of real property and for the erection or construction of commercial buildings in Sylacauga by the Respondent Corporation, is ultra vires and is for a purpose not authorized by the Articles of Incorporation of said Company.

'Since the complainant has no longer been directly connected with the business affairs of said Corporation, its affairs have been directly under the supervision, direction, management, and control of the Respondent Smith, and the Complainant has not been notified of any meetings of the stockholders or directors, nor has he been consulted in any way, relative to the management of the affairs of said Corporation; and the Respondent Smith, is solely managing the affairs of said Corporation in any way or manner he sees fit to do. * * *'

The complaint further avers that at the time the corporation ceased to operate cotton gins and made sale of its last gin the complainant's stock was reasonably worth $32,000.00, which fact was known to Smith; that Smith did not dispute the right of complainant as a stockholder until January 1, 1947, 'at which time he connived the scheme to claim that the $4,000 paid by the Complainant for said stock was merely a loan by Complainant to him and at such time offered to pay the Complainant $4,000.00 for the surrender of the said stock, which the Respondent Smith well knew to be worth to-wit: $32,000.00. All of the actions of the Respondent Smith in assuming the absolute control and domination of the affairs of the Respondent Corporation to the exclusion of the Complainant and in disregard of the Complainant's rights as a stockholder have been with the purpose and intention to compel the Complainant to accept $4,000.00 for his said stock and to defraud him of the true and rightful value thereof.'

'The Respondent Smith, on to-wit, January 1, 1947, stated to the Complainant or his agent, that he would not recognize the Complainant's rights as a stockholder; that he would not allow the Complainant to participate in the affairs of the corporation; that he was going to pay the Complainant $4,000.00, and not one cent more...