Waldrop v. Martin

• Decision Date: 13 April 1939
• Docket Number: 8 Div. 913.
• Citation: 188 So. 59,237 Ala. 556
• Parties: WALDROP ET AL. v. MARTIN ET AL.
• Court: Alabama Supreme Court

188 So. 59

237 Ala. 556

WALDROP ET AL. v. MARTIN ET AL.

8 Div. 913.

Supreme Court of Alabama

April 13, 1939

Appeal from Circuit Court, Marshall County; A. E. Hawkins, Judge.

Bill by Ralph W. Martin and others against J. V. Waldrop and others to enjoin defendants in respect of liquidating the First National Bank of Albertville and for appointment of a receiver. From a decree overruling a demurrer to the bill and denying a motion to dissolve temporary injunction respondents appeal.

Reversed rendered, and remanded.

John W. Brown, of Albertville and D. Isbell, of Guntersville, for appellants.

Scruggs & Creel, of Guntersville, for appellees.

GARDNER Justice.

Complainants are minority stockholders in The First National Bank of Albertville, which, by resolution of the stockholders in November 1937, went into voluntary liquidation under the provisions of sections 5220 and 5221 of the United States Revised Statutes, 12 U.S.C.A. §§ 181, 182, with the election of J. W. Bishop, J. V. Waldrop and E. D. Vinyard as a liquidating committee of said bank. The board of directors is composed of J. V. Waldrop, J. W. Bishop, Ralph Smith, W. Smith, E. D. Vinyard, W. L. Howard and J. C. Guest.

The bill seeks injunctive relief against the members of the liquidating committee as well as the board of directors and the bank itself, and the appointment of a receiver to wind up the affairs of the institution. The bill avers the insolvency of the corporation, and seeks to restrain the "corporation, its officers and agents, and all others persons from exercising any of the privileges or franchises pertinent to said corporation; and from collecting and receiving any debts, or paying out, assigning or transferring any of the moneys, lands, tenements or effects," and injunction is specifically prayed to issue restraining the "corporation, its liquidating committee and Ralph Smith, and all other persons connected therewith" from exercising any of the privileges above enumerated.

An exception is made as to the Federal Deposit Insurance Corporation, from which a large sum was borrowed, and to which collaterals were pledged and in process of collection by said federal corporation.

The bank, its directors, members of the liquidating committee and remaining stockholders are parties defendant to the bill. Preliminary injunction was issued as prayed. Defendants interposed demurrer to the bill, and motion to dissolve the temporary injunction, the latter being heard upon proof by way of affidavit. From the decree rendered overruling the demurrer and denying the motion to dissolve the injunction, defendants have prosecuted this appeal.

It appears from the bill that in August 1937, upon an examination of the bank's affairs, it was ascertained that Ralph Smith, who was cashier of the bank, had embezzled approximately ninety-five thousand dollars of the funds of the bank, whereupon the directors sold to another bank for a large sum much of the holdings of the bank, which sale was subsequently ratified by the stockholders.

At the same time, in order to pay depositors and creditors in full, the board negotiated a loan with the Federal Deposit Insurance Corporation to an amount of approximately one hundred and forty-one thousand dollars, pledging the bank's remaining assets as security for the note executed therefor. Out of the securities thus pledged, the Federal corporation has collected a sufficient sum to reduce the indebtedness on the loan to approximately sixty-five thousand dollars.

The bill further avers a liability on the cashier's bonds of not less than fifty thousand dollars, and that the bond company has offered a compromise of its liability upon payment of twenty-five thousand dollars, less a premium on one of the bonds. So far as the bill discloses no action has been taken by the liquidating committee or the board of directors as to any such offer, nor is it averred that it will be accepted. But the bill does allege that the board of directors have agreed with the liquidating committee that the committee's bond will be approved with personal surety, rather than with the surety company, and that the liquidating committee have agreed with Ralph Smith that they would appoint him as their agent, and have so appointed him with authority to act for them, with the understanding that said Smith will "settle in some manner the liability" of the surety on his bond, and then pledge the remaining assets of the bank, and procure from said pledged assets and from the bond money enough to pay off the federal corporation, and thus place the whole of the assets in Ralph Smith's hands, and jeopardize the remainder of the assets and cause irreparable loss to the stockholders.

On information and belief it is averred that the election of Ralph Smith as agent for the committee was due to the fact that he and his relatives hold controlling stock of the bank and can vote whom they desire as officers, and thus enable said Smith to handle the affairs of the bank and at the same time try and induce the authorities of the federal government not to prosecute and send him to the penitentiary for embezzlement until after he has fully wound up the affairs of the bank. It is averred that Waldrop of the liquidating committee is a father-in-law of Ralph Smith, and that Bishop and Vinyard, though not stated to be in any manner related, yet are alleged to "appear to be under the control and domination of said Ralph Smith."

In the transactions involved thus far no charge of fraud or even mismanagement is made against either the directors or the liquidating committee of the bank. The sale to another bank involved more than half a million dollars and a large loan was obtained from the federal corporation. Presumably each of these transactions is free from adverse criticism and to the best interest of all. Neither the solvency nor the integrity of any members of the board of directors or the liquidating committee is here challenged, with the exception of Ralph Smith, former cashier, charged with embezzlement. And reduced to the last analysis, the alleged fraud upon which complainants rest their case is the alleged intention of the liquidating committee, who are presumably solvent and under proper bond, to allow Ralph Smith to assist in closing the bank's affairs and in handling its assets.

We may note here the affidavit of the members of the liquidating committee offered on the hearing of the motion to dissolve the temporary writ of injunction makes positive denial of any intention to allow Ralph Smith to wind up the bank's affairs or have anything to do with winding up the business of the bank, except in a clerical way or by way of giving data and information to those who are engaged in closing the bank's affairs, but that said Smith will not in any event handle any funds collected for the bank.

Considering first, however, the demurrer to the bill, we are persuaded the ruling thereon was erroneous. Under the provisions of 12 U.S.C.A. § 91, no injunction is to be issued by any state court against a national bank before final judgment in any suit. Pacific National Bank v. Mixter, 124 U.S. 721, 8 S.Ct. 718, 31 L.Ed. 567; Van Reed v. People's National Bank, 198 U.S. 554, 25 S.Ct. 775, 49 L.Ed. 1161, 3 Ann.Cas. 1154. The demurrer takes the point the bill seeks an injunction against the bank in violation of the federal statute. Complainants' only reply is that the bill seeks only injunctive relief against the directors and not the bank. But we cannot so interpret the language of the bill and its prayer.

We have hereinabove quoted a portion of the prayer of the bill, "that this court issue or direct the issuance of an injunction to restrain the corporation, its officers and agents," which is later repeated in substantially the same language. True, no injunction in fact was so issued, and the writ was confined to the officers and liquidating committee. But we are here dealing with the demurrer to the bill, and we see no escape from the conclusion that the assignment of demurrer was well taken.

But the matter of vital concern relates to the matter of substance in the bill. And in considering this feature of the bill a few general observations as to the controlling legal principles are in order. Complainants are minority stockholders, and it is to...