Tierney v. United Pocahontas Coal Co. S.

• Decision Date: 17 February 1920
• Citation: 85 W.Va. 545
• Court: West Virginia Supreme Court
• Parties: L. E. Tierney v. United Pocahontas Coal Company et als.

85 W.Va. 545

L. E. Tierney

v.United Pocahontas Coal Company et als.

Supreme Court of Appeals of West Virginia.

Submitted February 3, 1920.

Decided February 17, 1920.

1. Corporations Sale of all Assets Will be Set Aside at Suit by

Minority Stockholders Unless at Fair Price and Free from, Fraud.

The sale of all of the assets of a corporation, which is under the control and management of one individual, to another corporation, of which such individual is the sole owner, will be set aside at the suit of a minority stockholder of such selling corporation, unless it appears that the same was made for a fair and adequate price, and was free from fraud or unfair dealing. (p. 558).

2. Equity Convenience as Test of Multifariousness.

There is no certain rule for determining when a bill is multifarious. If it appears that the matters in controversy between the parties can be more conveniently litigated in one suit, and that such procedure will not involve an undue burden or expense upon the defendants, a bill will not be held multifarious, even though it may unite more than one cause of action against the common defendants. (p. 560).

3. Corporations When Suit by Minority Stockholder to Vacate

Sale of Assets as Fraudulent Will be Barred by Laches.

The defense of laches will not bar a suit by a minority stockholder to set aside a sale made of the assets of a corporation upon the ground that the same is fraudulent and unfair, unless it appears that such stockholder has delayed an unreasonable time in bringing his action after he was in full knowledge and possession of all the essential facts necessary for him to determine whether or not he will accept the provisions of the sale, or repudiate the same. (p. 561).

4. Same Property Acquired by Officer and Director is Not

Ordinarily Acquired in Behalf of Corporation.

Ordinarily property acquired by an officer and director of a corporation will not be taken as an acquisition on behalf of such corporation, unless it already has an existing interest therein, or an expectancy growing out of an existing right, or such acquired property is necessary and proper for the accomplishment of the purpose of the organization of such corporation, and the acquisition thereof by such officer would interfere with the carrying out of such corporate uurpose. (p. 563).

5. Depositions Depositions in Equity May Be taken by Plain-

tiff After Cause Has Matured and in Advance of Answer.

In an equity suit the plaintiff may properly take depositions to support the allegations of his bill, after the same has been filed and the cause matured, in advance of the filing of an answer by the defendant. (p. 565).

6. Banks and Banking Defendants in Suit by National Bank to

Enforce Rights as Equitable Oivner of Interest in Corporation Cannot Question Bank's Right to Hold Such Interest. The defendants in a suit brought by a national bank to enforce its rights as the equitable owner of an interest in a corporation, because of the improper conversion of the assets of such corporation, will not be permitted to question the right of such bank to hold such stock. (p. 565).

Appeal from Circuit Court, McDowell County.

Suit by L. E. Tierney against the United Pocahontas Coal Company, the Flat Top National Bank, and others, in which defendant bank joined plaintiff in his contentions. ' Cause referred to a commissioner, and from a decree of the court for plaintiff and for defendant Flat Top National Bank, the other defendants appealed.

Modified and Affirmed.

Brown, Jackson & Knight, and Anderson, Strother, Hughes & Curd, for appellants.

A. G. Fox, Russell S. Ritz, and Sanders & Crockett, for appellee Tierney.

French & Easley, for appellee Flat Top Nat. Bank. Ritz, Judge:

Plaintiff, a minority stockholder in both the Indian Ridge Coal & Coke Company and Zenith Coal & Coke Company, brought this suit for the purpose of setting aside an alleged sale of the properties of these companies to the defendant United Pocahontas.Coal Company, a corporation, upon the ground that said sale was in fraud of his rights, and deprived him of a substantial part of his interest in the two above-named companies. The bill prays that the sales be set aside, and the property of each of said companies restored to them if this could be done; if not, that the plaintiff be decreed to have an interest in the United Pocahontas Coal Company equivalent to the interest held by him in the dissolved corporations; and in the event neither of these remedies could be administered, that a decree be entered against the United Pocahontas Coal Company, the purchaser, and the individual defendants, directors of Zenith Coal & Coke Company and Indian Ridge Coal & Coke Company, for the actual value of his interest in these two companies at the time of the sale. The court below, upon the hearing, found that the sales made of the property and assets of Zenith and Indian Ridge Coal & Coke Companies to the United Pocahontas Coal Company were unfair and in fraud of the rights of the plaintiff, but found that because of the changed conditions in the properties since the sale it was impracticable if not impossible to set the sales aside and restore the properties to the former stockholders; that it is likewise impracticable to ascertain what interest would have to be given to the plaintiff in the United Pocahontas Company in order to represent the interests held by him in the Indian Ridge and Zenith Companies, and decided that the relief to be granted would be a decree against the United Pocahontas Company and the individual defendants, directors of the Zenith and Indian Ridge Companies, for the actual value

of the plaintiff's interest in those companies at the time of the sales of their assets to the United Pocahontas Company, but found that he was not sufficiently advised as to the exact value of plaintiff's stock at the time of the sales to the United Pocahontas Company to enter a decree that would do justice between the parties, and for the purpose of informing himself as to this matter referred the cause to a commissioner to report upon certain specific inquiries. The defendant, Flat Top National Bank was also the owner of stock in the Indian Ridge Coal & Coke Company, and it joined the plaintiff in his contention that the sale of this company's property was not in good faith, and was violative of the rights of the minority stockholders. From the decree holding the sales to be in violation of the rights of the plaintiff and the defendant Flat Top National Bank, this appeal is prosecuted by the defendants United Pocahontas Coal Company and the individuals composing the board of directors of the Indian Ridge Coal & Coke Company and Zenith Coal & Coke Company, who made the sale and transfer of the assets of these companies to the United Pocahontas Company.

In order to an understanding of the controversy involved in this litigation it will be necessary to state briefly the facts antecedent to the transaction under review. The Indian Ridge Coal & Coke Company was organized in the year 1893 for the purpose of mining the coal from a tract of land situate on North Fork in McDowell County. The Company did not own the land, but leased it from the trustees of the Flat Top Coal Land Association, agreeing to pay a royalty of ten cents for each ton of coal mined, with certain provisions as to a minimum royalty and as to the conduct of its mining operation. The moving spirit in the organization of this company was the defendant Worth Kilpatrick, and he has been its guiding influence and mainstay during the entire period of its operation. Fifty thousand dollars of stock was sold at par, and with this money the company's operations were commenced. Subsequently a stock dividend of fifty per cent, was declared, and there was issued to the then stockholders of the company twenty-five thousand dollars of additional stock, making an outstanding capital of seventy-five thousand dollars. This was the condition in the year 1901 when the plaintiff purchased fifteen shares of this stock for the sum of $2250.00. There was some difficulty about having the stock transferred to him which is emphasized in the evidence, but which we consider of little if any importance in the determination of the matters involved. One C. Botsford was also a stockholder in this company from the beginning. Ten shares of his stock he had deposited as collateral to secure a debt to the Flat Top National Bank, and upon his failure to pay this debt the stock was sold, and the bank was under the necessity of purchasing the same at the sale, and in this way it became one of the stockholders of the company. All of the stock except this twenty-five shares held by the plaintiff and the Flat Top National Bank was held by the defendant Worth Kilpatrick and those acting with him at the time of the alleged sale of the company's assets to the defendant United Pocahontas Coal Company.

The defendant Zenith Coal & Coke Company was organized in the year 1903 by one W. II. Coffman. Its operations were conducted on two tracts of land about equal in area and containing in the aggregate about one thousand acres of coal, one leased from Burkes Garden Coal & Coke Company, and the other held under a lease from Pocahontas Coal & Coke Company. The capital stock of this company issued and outstanding was the sum of $456,000.00, divided into 4, 560 shares. It does not very satisfactorily appear what amount of actual money was used in the development of this operation. It does appear that of the capital stock four hundred thousand dollars was issued to W. IT. Coffman, in consideration of the transfer by him to the company of the two leases above referred to, and presumably the remaining fifty-six thousand dollars of stock was sold for the purpose of realizing funds for the development of the mine. Prior to the time that the Indian Ridge Coal & Coke Company became a stockholder in the Zenith Coal & Coke Company W. H. Coffman was practically the sole owner...