Tutwiler v. Tuscaloosa Coal, Iron & Land Co.

• Decision Date: 10 April 1890
• Citation: 89 Ala. 391,7 So. 398
• Parties: TUTWILER v. TUSCALOOSA COAL, IRON & LAND CO. ET AL.
• Court: Alabama Supreme Court

7 So. 398

89 Ala. 391

TUTWILER v. TUSCALOOSA COAL, IRON & LAND CO. ET AL.

Supreme Court of Alabama

April 10, 1890

Appeal from chancery court, Tuscaloosa county; THOMAS COBBS Chancellor.

P A. Tutwiler, for appellant.

Cochrane & Fitts, Hargrove & Van de Graff, and Wood & Wood, for appellee.

STONE C.J.

On January 15, 1887, the Tuscaloosa Coal, Iron & Land Company was incorporated in Tuscaloosa county under the general statute then in force, providing for the incorporation of business corporations. Code 1876, pt. 2, tit. 1, c. 1, art 1, commencing with section 1803; Sess. Acts 1882-83, p.5. On February 26, 1887, the act of the Alabama legislature was approved, "To confirm the incorporation and organization of the Tuscaloosa Coal, Iron & Land Company, and to define and declare the powers of said company." Sess. Acts, 482. This act defines the powers and declares the purposes of said corporation. P. A. Tutwiler, complainant in the chancery court and appellant here, became the original subscriber for 90 shares of the capital stock of said corporation, of the par value of $100 each; and during the month of March, 1887, pursuant to calls made, he paid 30 per cent of his subscription, amounting to $2,700. Calls were subsequently made for the entire stock subscription, but Tutwiller made no further payment. Being put in apparent default by demand made for payment, the stock subscribed for by Tutwiler, together with that of many others in like condition, was by the corporation advertised to be sold publicly, for cash, on March 13, 1889, the proceeds to be applied to the unpaid balance of said stock subscription. This advertisement and proposed sale were had and proposed to be had, under section 1674 of the Code of 1886. ^[1] The power of sale contained in that section is not found in the law as it existed before that Code went into operation, December 25, 1887. When Tutwiler subscribed, the mode of enforcing payment of delinquent stock subscriptions to corporations like the present one will be found in section 1816, Code 1876. The corporation was not proposing to sell under the older statute, but under the power conferred by the Code of 1886, § 1674, enacted after Tutwiler became a subscriber.

On March 13, 1889, the present bill was filed. It has two objects, and prays relief as to each. It first seeks to prevent a sale of the stock under section 1674 of the Code of 1886, under which it had been advertised to be sold. The position taken on which this relief is claimed is that the statute giving this remedy, having been enacted at a date subsequent to the contract by which complainant subscribed for his stock, cannot be construed as retroactive, and that hence no valid sale can be made under the corporation's advertisement. We are not considering the merit of this contention. If it have any merit, the grievance is personal, and individual to the stockholder thus circumstanced, and no stockholder has any interest in the matter of Tutwiler's stock. A bill claiming such relief is a bill against the corporation as the only necessary and proper party. The contention is between the stockholder and the corporation, and any relief obtained will necessarily be against the corporation.

The other feature of the bill relates to an alleged purchase by the corporation of a large body of land from Friedman, in which it is charged that Friedman, who was a stockholder and director of the company, defrauded the corporation. Primarily, relief of this kind must be sought by the corporation as complainant; for it only, in its corporate capacity, is the legal sufferer. For such an injury the stockholder, as such, has not, prima facie, any legal cause of action, because he has suffered no individual grievance. In one category a stockholder, or any number of stockholders, may become actors, and file a bill for relief in his or their own names, namely, when the governing body, being thereto requested, refuses to institute proceedings to redress an alleged wrong to the corporation. Manufacturing Co. v. Cox, 68 Ala. 71; Planters' Line v. Waganer, 71 Ala. 581; Nathan v. Tompkins, 82 Ala. 437, 2 South. Rep. 747; Moses v. Tompkins, 84 Ala. 613, 4 South. Rep. 763; Dodge v. Woolsey, 18 How. 331; Hawes v. Oakland, 104 U.S. 450; 1 Mor. Priv. Corp. § 277. In such case, although the suit is by stockholders, the relief is, to all intents, in favor of the corporation, and against some outside party. To a suit thus brought, for the wrongs complained of in this case, Friedman was a necessary party defendant, being the person against whom relief, if any, would be granted. The corporation, it is true, was a necessary party; and, refusing to appear as complainant, there was no recourse left but to make it a defendant. The several and variant reliefs prayed in the two features of the bill, if there be nothing in the question to be next considered, render the bill multifarious. 3 Brick. Dig. 388, §§ 338, 342, 343; Clay v. Gurley, 62 Ala. 14; Adams v. Jones, 68 Ala. 117; Seals v. Pheiffer, 77 Ala. 278.

It is contended for appellant that the first feature of his bill, that in which he seeks to prevent the sale of his stock under the advertisement, is but a steppingstone or condition precedent to his right to maintain the suit in its second feature; that only a stockholder can maintain such a bill, and, unless he first succeeds in preventing a sale of his stock, or in having the sale, if made, set aside, he will be left without a standing in court, and his bill must fail on that account. The principle invoked is sound, in a proper case. An equitable right, one which can be asserted in a court of equity, generally carries with it all the powers that are necessary to make it effective. Wedgworth v. Wedgworth, 84 Ala. 274, 4 South. Rep. 149. We will show further on that that principle cannot be made to benefit this case. The demurrer for multifariousness need not be further considered, as the ruling on it did no harm.

The bill makes W. C. Jemison, president of the corporation, a party defendant. It makes no charge of misconduct against him. At least, it makes no charge of bad faith, or of conduct ultra vires, or of anything else, with sufficient particularity to justify making him a party defendant; and it prays no relief against him. True, it is claimed here that he is made a party for purposes of discovery. That, if true, would be no sufficient ground for making him a party. Norwood v. Railroad Co., 72 Ala. 563. But the bill expressly dispenses with a sworn answer from him. It is of the essence of a bill for discovery that it require a sworn answer. A bill like the present one can in no sense be classed as a bill for discovery. Zelnicker v. Brigham, 74 Ala. 598; Watts v. Bank, 76 Ala. 474; 1 Pom. Eq. Jur. § 144. The demurrer by W. C. Jemison was rightly sustained.

We cannot agree with counsel for appellant as to the proper interpretation of section 1816 of the Code of 1876. That section first declared a lien upon the stock of the shareholder in a corporation such as this for all amounts which may be due upon the subscription for stock. If the statute had proceeded no further, the lien could have been enforced by bill in chancery as other liens are. Westmoreland v. Foster, 60 Ala. 448. But the statute proceeded further, and gave to the corporation the option of pursuing one of two courses. The one was, if there had been partial payment on the stock, to proceed, after giving certain notice pointed out by the statute, "to consolidate into as many par shares as the money paid by such defaulting subscriber will amount to, and issue to him a certificate therefor." The other optional course which the statute authorized was to "proceed to collect what may remain unpaid of the original subscription by suit." Electing to pursue the latter course, the corporation could have maintained an ordinary suit at law for the collection of the money, or it could have maintained a suit in chancery for the enforcement of the lien. Cook, Stocks, § 121. And this option or right of election was vested in the corporation and in its exercise the stockholder had no voice or right of control. We have,...