Steiner v. Parsons

• Decision Date: 27 July 1893
• Citation: 13 So. 771,103 Ala. 215
• Parties: STEINER ET AL. v. PARSONS.
• Court: Alabama Supreme Court

13 So. 771

103 Ala. 215

STEINER ET AL. v. PARSONS.

Supreme Court of Alabama

July 27, 1893

Appeal from city court of Birmingham; H. A. Sharpe, Judge.

Action by J. H. Parsons against B. Steiner and the Birmingham Powderly & Bessemer Street-Railroad Company, of which Steiner is president and complainant is a stockholder, to compel defendant Steiner to account for certain funds belonging to such corporation, alleged to have been appropriated by him to his own use. From an order overruling a demurrer to the complaint, defendants appeal. Reversed.

The bill was filed by the appellee, Parsons, against appellants B. Steiner and the Birmingham, Powderly & Bessemer Street-Railroad Company, the defendant corporation, in his own behalf, as a stockholder, and in behalf of any other stockholder or stockholders in said corporation who choose to join as parties and contribute to the expense of the litigation. It alleges that the defendant Steiner is a stockholder of the defendant the Birmingham, Powderly &amp Bessemer Street-Railroad Company, a corporation organized under the general incorporation laws of the state; that said Steiner is in possession of the office of president of said corporation, which office he unlawfully usurps; that there is pending in the circuit court of Jefferson county an action in the nature of a quo warranto to oust him from the office of director and president of said corporation; that I. R Hochstader, Joseph Beitman, and L. G. Pettijohn, who live in Birmingham, Ala., J. W. Brown and D. H. Gordon, who live in Baltimore, Md., and E. Lesser, whose residence is alleged to be unknown, constitute, with said Steiner, the board of directors of said corporation; that from the 8th day of April, 1889, to the 24th day of February, 1890, said Steiner was regularly and duly elected and qualified as director of said corporation, and was also its treasurer, and, as such was the custodian of the money and choses in action of the corporation during that period; that, while such treasurer said Steiner fraudulently appropriated to his individual use $600 of the money of said corporation, and covered and concealed said fraudulent disposition of the funds by a voucher which purported to be given for right of way for the railroad line, then being constructed, which voucher was false and fraudulent, and he now claims that said money was expended by him in procuring terminal facilities in the city of Birmingham for said railroad; that in the month of October, 1889, said Steiner was intrusted by said corporation with the sale of 125 $1,000 bonds of said corporation, secured by a deed of trust on all the property and franchises of the corporation, and said Steiner, as the trusted agent of said corporation, agreed to obtain for said bonds the highest price possible, and account for the entire proceeds of said bonds; that said Steiner sold said bonds in the city of Baltimore, Md., and obtained for them their full face value,-$1,000 for each bond,-amounting in the aggregate to $125,000, but he reported to said corporation that he had sold said bonds at and for the sum of $850 for each bond, amounting to $106,250, and accounted to said corporation for said last-named sum, and fraudulently appropriated to his own use the sum of $18,750; that complainant, although a director of said corporation at the time of the sale of said bonds, never knew until recently-until within a few weeks before the filing of this bill-that said Steiner had sold said bonds for $125,000, but believed he had sold them for $850 for each bond,-$106,250 for all of them; that in December, 1889, said Steiner claimed to be desirous of advancing the interest of the corporation, procured permission from the board of directors to purchase the necessary steel rails for the construction of the railroad line, and he procured about 700 tons rails for such purpose, and sold them to the corporation for $33 per ton, and they were actually worth only about $15 per ton, and said Steiner paid about that price for the same, and actually made a profit of about $10 per ton on said rails; that they were purchased from the Talladega & Coosa Valley Railroad Company, of which company said Steiner was at the time an officer; that in order to cover up and conceal the said profits on said rails, so that complainant could not know the fraudulent appropriation of them by him, said Steiner obtained bills in the name of the Talladega & Coosa Valley Railroad Company to be made out, falsely showing the price of said rails to be $33 per ton; that the allegations as to the purchase and sale of said rails to said corporation are made on the information and belief of complainant; that on the 2d of April, 1890, at a meeting of stockholders, at which a quorum was not present, and which it is charged was not a valid meeting, resolutions were adopted by the stockholders present, who did not represent a majority of the said stock of the corporation, authorizing the issue of bonds of the corporation to the Mercantile Trust & Deposit Company of Baltimore, Md., or bearer, for the payment of said amount of money; that said Steiner procured the delivery to himself of said bonds, and, with the aid of said Mercantile Trust & Deposit Company, sold them in the markets in the city of Baltimore, Md., and said Steiner has appropriated a large proportion of the proceeds of the sale of said bonds to his individual use and benefit, but how much complainant cannot say. It is further charged in section 8 of the bill, in reference to the issue of said series of $125,000 of first mortgage bonds, that, among other things provided for in the deed of trust which was executed to the Mercantile Trust & Deposit Company by said corporation to secure them, it was provided as follows: "And it is hereby understood and agreed that the proceeds of said bonds, as the same may be sold, shall be held by the party of the second part, to be paid out by the party of the second part for the purpose, first, of preparing and executing said bonds and this deed of trust, and paying all necessary expenses of constructing and equipping the railroad line of the party of the first part, including the purchase of engines, locomotives, rails, rolling stock, and all other materials for the construction and operation of said railroad line, and upon the draft of the president of the party of the first part, supported by certificates or sworn statements of the engineer in charge of construction of the road, that the work for which said bonds are to be issued has actually been done, or upon the draft of the president, accompanied by bills of lading for rail, motive power, or rolling stock, or other material especially for the use of said railroad;" and it is averred that said Mercantile Trust & Deposit Company, from time to time, paid out the proceeds of the bonds of said corporation on...