Vance v. McNabb Coal & Coke Co.

• Decision Date: 17 November 1892
• Citation: 20 S.W. 424,92 Tenn. 47
• Parties: Vance et al. v. McNabb Coal & Coke Co. et al.
• Court: Tennessee Supreme Court

20 S.W. 424

92 Tenn. 47

Vance et al. v. McNabb Coal & Coke Co. et al.

Supreme Court of Tennessee.

November 17, 1892

Appeal from chancery court, Hamilton county; P. B. Mayfield, Special Chancellor.

Bill by Vance & Kirby and others against the McNabb Coal & Coke Company and others to set aside an alleged fraudulent conveyance of the company's property, and wind up its affairs as an insolvent corporation. From the decree in favor of plaintiffs, plaintiffs and defendant the Consolidated Coal & Iron Company, appeal. Decree affirmed, and extended so as to grant further relief to plaintiffs.

Caldwell J.

This bill was filed by the creditors of the McNabb Coal & Coke Company to set aside an alleged fraudulent conveyance of its property, and wind up and settle its affairs as an insolvent corporation. The McNabb Coal & Coke Company was a foreign corporation, much indebted, owning large property, and doing business in Tennessee. For the purpose of acquiring title to that property, and probably at the instance of the officers of that company, another corporation, known as the Consolidated Coal & Iron Company, was chartered in this state on the 22d of February, 1887; and on the same day the McNabb Coal & Coke Company conveyed to the Consolidated Coal & Iron Company about 16,000 acres of its lands, they being the greater part and most valuable of its property, for the recited "consideration of one dollar, and other valuable considerations to be paid" by the vendee. The minutes of a certain meeting of the officers and shareholders of the selling company show those "other valuable considerations" to have been the promise of a large share of paid-up capital stock in the purchasing company; the exact contract being that the McNabb Coal & Coke Company should receive for those lands "the sum of $2,500,000 payable in stock of the Consolidated Coal & Iron Company fully paid up; $1,000,000 of said stock to be donated to the latter company, and to remain in its treasury, and be sold as the needs or demands of the company might require in the extension of its business and the acquisition of other lands $200,000 of said stock to be donated to said company, to be immediately sold for equipping said lands to do a coal business;" and, finally, that $300,000 of said stock be "carried into the treasury of" purchasing company "as security until the incumbrance" on said lands, amounting to about $150,000, shall be paid and canceled. Though formally executed, this deed was not registered at once, and the McNabb Coal & Coke Company seems to have remained in possession of the property a few months after its date. Thereafter the McNabb Coal & Coke Company made an option contract with J. D. MacNeale and E. R. Donohue, whereby it agreed to sell them the same 16,000 acres of land, as well as the balance of its property, real and personal, and also $115,000 of its bonds, then ready to be issued and put on the market; and for all these they were to pay the McNabb Coal & Coke Company $60,000 in money and a certain amount of stock in a new corporation, to which it was intended all of said realty and personalty should be transferred; and they were also to pay into the treasury of such new corporation $20,000 in cash, and settle a mortgage for $35,000 on one of the tracts of land. It was further stipulated in that contract that MacNeale and Donohue should give as a bonus to the purchaser of the $115,000 of bonds such an amount of the stock of the prospective corporation as they saw fit, not to exceed $230,000. Under that option they sold the $115,000 of bonds to C. W. Short, he agreeing to pay the above-named sums of $60,000, $20,000, and $35,000, as they had agreed to do. And on the contract with Short, which was approved by the company, it was agreed that the "new corporation" contemplated should issue $1,000,000 of paid-up capital stock,-$200,000 to Short as bonus, $200,000 to MacNeale, $200,000 to Donohue, and $400,000 to the McNabb Coal & Coke Company as part of the purchase price. This agreement was reduced to writing, and signed on the 4th day of August, 1887. It was never fully carried out. The "new corporation" had in view was never organized, and no deed was ever made by the McNabb Coal & Coke Company under and in pursuance of the option contract.

About this time the Consolidated Coal & Iron Company appears on the scene again. Manifestly that corporation had been organized with a view of succeeding the McNabb Coal & Coke Company in its property and business, and upon the distinct agreement with certain gentlemen, who signed the charter, and were in the first board of directors, that they would resign from the directory whenever the real promoters of the enterprise should so desire. Accordingly those gentlemen did resign on August 4, 1887, the day the option agreement was finally closed, and in their stead, at the same meeting, were elected several other directors, among them J. D. MacNeale, E. R Donohue, W. B. Barnett, and G. N. Leighton; the first two being the same persons who had obtained the option contract from the McNabb Coal & Coke Company, and the latter two being president and general manager, respectively, of that corporation. F. J. Mitchell, who was secretary of both corporations, was present at that meeting, and recorded its action. On the 6th day of August, 1887, G. N. Leighton and another turned the whole of the property of the McNabb Coal & Coke Company over to the said MacNeale and Donohue for the Consolidated Coal & Iron Company, and six days later the deed that was executed on the 22d day of February, 1887, was filed for registration. On the 19th day of August, 1887, G. N. Leighton, for the McNabb Coal & Coke Company, submitted a proposition as follows: "The Consolidated Coal & Iron Company-Dear Sirs: Referring to a proposition made by the McNabb Coal & Coke Company through me, on February 22, 1887, and accepted by you, and subsequently carried out in part, I desire on behalf of the McNabb Coal & Coke Company to propose certain modifications. The deed for the two parts referred to in said proposition, to wit, the 11,500-acres tract *** and the 4,239-acres tract, *** has been delivered to you, and I propose that the interest of the McNabb Company in the 2,891 acres tract, known as the 'McNabb Tract,' and the interest of the McNabb Company in the Florence Coal, Coke & Iron Company, shall be transferred to you. In payment therefor and for the two tracts as above, all the stock of the Consolidated Coal & Iron Company shall be issued to me, being $2,500,000 of said stock, of which $1,500,000 shall be by me carried back into the treasury of the Consolidated Coal & Iron Company, $200,000 shall be by me assigned and transferred to C. W. Short, $200,000 to J. D. MacNeale, and $200,000 to E. R. Donohue; $400,000 of said stock shall remain in the treasury of the company for the benefit of the parties interested in the McNabb Company, in accordance with the terms agreed upon by the said McNabb Company and the terms of a contract entered into between the McNabb Company, J. D. MacNeale, and E. R. Donohue, to be issued in the future in accordance with instructions to be received from the McNabb Company. Said stock shall be paid stock, and the transfer of the McNabb tract shall include all improvements, steamboats, barges, stock of goods, and property of all sorts belonging to the McNabb Company in the states of Tennessee and Alabama." At a meeting of the directors of the Consolidated Coal & Iron Company on the 5th day of September, 1887, "on motion of C. W. Short, seconded by ...