Willson v. Appalachian Oak Flooring & Hardware Co.

• Decision Date: 04 February 1965
• Docket Number: No. 22761,22761
• Citation: 140 S.E.2d 830,220 Ga. 599
• Court: Georgia Supreme Court
• Parties: Woodrow WILLSON v. APPALACHIAN OAK FLOORING & HARDWARE COMPANY et al.

Page 830

140 S.E.2d 830

220 Ga. 599

Woodrow WILLSON v. APPALACHIAN OAK FLOORING & HARDWARE COMPANY et al.

No. 22761.

Supreme Court of Georgia.

Feb. 4, 1965.

Syllabus by the Court

1. The petition sets forth a cause of action against the defendant as a member of a conspiracy to defraud the plaintiffs as creditors of the corporation.

2. The petition was not subject to the special demurrers on the grounds of misjoinder of parties plaintiff or defendant, nor on the ground that the petition stated separate and distinct causes of action.

Congdon & Holley, W. Barry Williams, Augusta, for plaintiff in error.

Fulcher, Fulcher, Hagler & Harper, Boller & Yow, Hull, Willingham, Towill & Norman, Harris, Chance, McCracken & Harrison, Charles G. Houston, Jr., Thurmond, Hester, Jolles & McElmurray, William C. Calhoun, Nicholson & Fleming, Augusta, for defendant in error.

ALMAND, Justice.

To a petition seeking legal and equitable relief by several creditors of Old South Manufacturing Co., Inc., against seven individuals and one corporation, the overruling of the general and special demurrers of one defendant, Woodrow Willson, is the subject matter of review in the bill of exceptions of Willson.

The sole question is: was the petition as amended subject to the demurrers of the defendant Willson?

Appalachian Oak Flooring & Hardware Co. and six other corporations and A. W. Cordes, trading as Georgia-Carolina Manufacturing Co., and William T. Lamb et al., trading as Lamb Brothers Lumber Co., in behalf of themselves and all creditors of Old South Manufacturing Co., Inc., who might intervene, brought this action and named as defendants Woodrow Willson, six other individuals, and the American Shell Homes, Inc. It was alleged that: 'Old South Manufacturing Company, Inc. was organized and operated for the purpose of permitting American Shell Homes, Inc. to acquire a manufacturing plant and inventory to construct shell homes, and so as to merge it with American Shell Homes, Inc. in order to form a series of interlocking companies to manufacture, sell, and finance shell homes; that all the acts and omissions herein described were in furtherance of this plan and were done to accomplish this result without any risk or liability upon the individuals or American Shell Homes, Inc. in the event of adverse financial developments. That each of the defendants conspired with the others or acted upon orders of their superiors who conspired with the others to accomplish the result described above; there was general concert of action among the defendants to deceive the plaintiffs and obtain credit from them, and each and every act herein alleged of each and every defendant was performed and committed in pursuance of said conspiracy to deceive and defraud the petitioners and the other creditors for whose benefit this action is instituted. That all of the defendants are jointly and severally liable to each of the plaintiffs for fraud and deceit practiced upon the plaintiffs for the deliberate purpose of inducing each of the plaintiffs and all other similarly situated to extend cerdit to Old South Manufacturing Company, Inc. to the injury, damage and loss as hereinafter set forth.'

The enumerated acts of the defendants were: (a) defendant Thomas and others applied to the Superior Court of Columbia County, Ga., to be incorporated under the name of 'Old South Manufacturing Co.' and the amount of the capital stock was shown to be not less than $100,000; that at the time the petition for a charter was presented neither Thomas or the other parties had obligated themselves by stock subscription to pay any part of said minimum capital stock; that on February 8, 1961 the incorporators of Old South assigned their rights to the issuance of stock to the defendants, Thomas, James D. Pratt, P. W. Pratt, Jr., and Charles H. Douglas, but these shares where never paid for and they 'began doing business under that name and style, all of them having full knowledge that no capital had been subscribed for by a valid subscription agreement under which any person was obligated to pay for stock in Old South Manufacturing Company, Inc.; and with full knowledge that the minimum capital of $100,000 had not been paid to the corporation' and 'That on February 8, 1961, the purported holders of the right to own stock, Charles H. Douglas, P. E. Thomas, James D. Pratt, and P. W. Pratt, Jr., elected themselves as Directors of Old South Manufacturing Company, Inc., and in their representative capacities as members of the Board of Directors of Old South Manufacturing Company, Inc., these defendants elected P. E. Thomas as President, Charles H. Douglas as Executive Vice President, James D. Pratt as Vice-President, and P. W. Pratt, Jr., as Secretary-Treasurer; and shortly thereafter, Robert R. Warr and Woodrow Willson were also elected directors; and all of said directors accepted their positions and undertook to handle the business of Old South Manufacturing Company, Inc. and continued to act as directors until August 15, 1961. That said board of directors did business under the name and style of Old South Manufacturing Company, Inc. with the full knowledge that the minimum capital required by the charter had not been paid and that there was no valid stock subscription agreement in existence'; that after February 8, 1961, but prior to June 14, 1961 'Robert R. Warr and Woodrow Wilson acquired the purported right to own capital stock in Old South Manufacturing Company, Inc. and had themselves elected directors of said company, and as such directors, they undertook with the other directors to do business under the name and style of Old South Manufacturing Company, Inc.; and that as a director of Old South Manufacturing Company, Inc., they knew there was no valid stock subscription agreement in existence under the terms of which anyone was obligated to pay for any particular number of shares of stock of Old South Manufacturing Company, Inc.; and they knew the minimum capital had not been paid in'; that on 'March 9, 1961, American Shell Homes, Inc., by and through its officer, Charles H. Douglas, who was acting within the scope of his employment by American Shell Homes, Inc. and as agent for such corporation, in order to benefit it and all the other defendants, released to Dunn and Bradstreet a financial statement and report, representing that Old South Manufacturing Company, Inc. was legally organized; that the capital stock of Old South Manufacturing Company, Inc. had been paid in to the extent of $99,730 and further representing that since the financial statement had been prepared, an additional 90,000 shares had been subscribed for and were expected to be issued. That said financial statement released to Dunn and Bradstreet also showed that Old South Manufacturing Company, Inc. owned fixtures and equipment having the value of $40,325 and that it had notes receivable in the amount of $71,900. That on March 9, 1961, the corporation did not own any fixtures or equipment and did not hold any valid notes totaling $71,900, nor has the corporation since said date acquired any fixtures and equipment or any notes receivable in said sum; the capital stock of the corporation had not been paid in to the extent of $99,730 and the additional 90,000 shares had not been subscribed for; the financial statement was false when it was issued, which falsity was known to Charles H. Douglas and through him was known to American Shell Homes, Inc. and was known by each of the other defendants herein named. That the release of information by Charles H. Douglas to a representative of Dunn and Bradstreet was with the full knowledge and expectation that the information would be transmitted and circulated in the financial world; that suppliers who were expected to sell materials to Old South Manufacturing Company, Inc. would receive the information released to Dunn and Bradstreet; and that because of the favorable information contained in the release, such suppliers would sell to Old South Manufacturing Company, Inc. on credit; that the plaintiffs acted upon this information; they sold merchandise to Old South Manufacturing Company, Inc. on credit in reliance upon said information so furnished, without knowledge of the falsity of this information and they suffered loss as a result thereof; and except for which false and fraudulent misrepresentations, these plaintiffs would not have extended credit; and they would not have suffered the loss herein described.' The specific acts as to the defendants Johnson and American Shell Homes, Inc. were: 'That during the months of March, April and May, 1961, the Directors of Old South Manufacturing Company, Inc. negotiated with the directors of American Shell Homes, Inc. to effect a merger of the two corporations, as a result of which the stockholders of Old South Manufacturing Company, Inc. would convey their stock to American Shell Homes, Inc., the details of which negotiations and agreements are well known to the defendants, but are unknown to the plaintiffs, who did not participate in, nor were they kept informed of said negotiations. On June 21, 1961, American Shell Homes, Inc., by and through its Secretary-Treasurer, Harold L. Johnson, who was acting within the scope of his employment as Secretary-Treasurer of American Shell Homes, Inc., mailed a written communication to all suppliers of Old South Manufacturing Company, Inc., notifying all suppliers, which included the plaintiffs in this suit, that Old South Manufacturing Company, Inc. had been acquired by American Shell Homes, Inc. as a wholly-owned subsidiary; and plaintiffs herein and other suppliers were informed by this communication that James D. Pratt, O. E. Wilson, Jr., or Harold L. Johnson were the only persons authorized to sign purchase orders in behalf of Old South Manufacturing Company; and plaintiffs herein and other suppliers were informed and advised that James D. Pratt would be in...