*1
Raymond
al.,
P.
v.
et
Corporation,
Bellaire
Securities
al.
et
Opinion February Filed 1936. On Rehearing 1936. June *2 Fisher, William Appellants; Justus Chancellor and Beggs Beggs, Appellees'. & its' Corporation brought Securities Brown, J. Bellaire bill of complaint against ,Brown P. William Raymond H. Illinois; Bond, Frank S. a resident residents Erie, Pa.; Improvement Co., corpora- a Florida tion; G. Askew, W. B. M. Walton County, Johnson Florida, Co., and West Florida Naval a Florida Stores corporation, praying which it holds *3 on a certain land, described Bayview tract known as the tract, Florida, located in Walton foreclosed. County, be
The pertinent in allegations of the bill are substance that Raymond P. 1, Brown and William H. Brown on July 1925, being indebted to Charles E. in the Cessna sum $63,000.00, executed and delivered to him their seven prom- issory amount, notes aggregating this and to secure pay- notes, ment of said Raymond wife, Jones, P. joined his' 1, 1925, did on July execute and deliver E. to Charles Cessna tract,” a on the mortgage “Bayview containing 8,736.5 acres, less, more or lying Walton County; that the mortgagors covenanted that upon failure to interest, either principal the whole debt should mortgage become due and immediately payable, should in- debt costs, fees; clude all expenses and attorney’s subsequent that execution and of said delivery mortgage, Raymond P. Brown conveyed “Bayview tract” Im- to the Co., provement latter executed and delivered a second on said mortgage Brown, land to Raymond P. exe- cuted a third to Frank mortgage S. Bond and executed to turpentine land, G. W. lease on said which was Johnson Askew, G. W. and B. M. trading Freeport Johnson Co., Naval mortgaged Stores to West Florida Naval Stores Co.; William H. Brown that claims' some interest in the claims were all of these and is made that
mortgage party; Cessna; ma- to the E. that prior inferior to that of Charles notes, assigned E. Cessna of the Charles turity thereby indebtedness secured $63,000.00 and the holder thereof since May, who has been the complainant, 1926; H. Brown and Bayview P. W. Raymond due payments defaulted in the Improvement principal Co. 1926, 1928, and years 10th 1927 and on November of the interest, all thereby causing also defaulted immediately payable; to become due amounts in- principal, with complainant there is due 6% 1925, 10, fees. November solicitors’ terest from 10% Bond, Frank A taken S. pro against decree confesso Naval West Florida B. M. Askew and Johnson, G. W. Co., com- or answer the bill of appear who failed to Stores plaint. their William Brown P. Brown and H. filed
Raymond they, several and cross bill in which after answer joint bill, except all those contained admitting allegations- 8, 7 and denied that paragraphs in- P. Brown Raymond Co. to Bayview Improvement *4 to the from P. subject mortgage Raymond ferior and to E. strict proof Brown to Charles Cessna and demanded bill, thereof; alleged July, and that answering the “Bayview P. to s'ell tract” Raymond Brown contracted $265,335.00, part A. and as of the agree- to Root Jesse ment, $63,- himself obligated P. Brown to a Raymond place which agreed 000.00 thereon Root to and mortgage assumed that pursuant agreement, to that pay; mortgage, upon, which now to be foreclosed was sought executed wife, Pearletta, P. Brown and Raymond W. H. Cessna; upon E. that Brown to Charles information and 14, 1925, Root, September belief, A. on without the Jesse Brown, Adair, knowledge D. assigned contract to- Z. 17, 1926, and on November Z. Frank Bond D. Adair and S. Co.; assigned said contract to that Improvement A. Root represented Raymond he P. Brown that Jesse had business men of S. namely financial Frank ability, Bond, Adair, Bowen, Howe, Z. D. M. Burton A. Neely J. Studebaker, others, Frank G. associated with Jones him, who he would take over if would dis- property $26,535.50 thereof, count from the purchase price which to, agreed and further that would representing land, a organize title to-take to the but that men would with which supply out carry contract; and relying upon- representations, said after re- A. ceiving Root his associates the initial Jesse $50,000.00, payment upwards of conveyed the property Co., to the Bayview Improvement and the latter executed Raymond and delivered P. Brown mortgage thereon $112,000.00, which was for four security promissory amount; notes' that that aggregating upon being advised 10, 1926, E. Cessna on Charles that May the interest pay- $63,000.00 ment on had not mortgage paid, Ray- been mond P. Brown forwarded a check for to Charles default; E. prevent Cessna that on information and be- lief, 11, 1926, May Bowen, on A. Neely Root and Jesse their associates induced E. Charles Cessna to assign said in blank mortgage notes and them and forward with draft Co., Central Union Trust to the done and the draft that E. paid; Charles Cessna believing been sold had forwarded the check in him; of interest to P. Raymond Brown being informed some of his Root associates had taken over the notes and that they hadn’t decided them, what to do being unable to have the check *5 returned, stopped; on it had payment interest payment P. Raymond represented Bowen Neely thereafter that Florida, land values that slump Brown because up and bought to sell land unable they if themselves, that and proposed protect mortgage collection, for neither his press mortgage would not Brown and the Florida upon that information belief they; would $1,894.73 in the check for Co. Mortgage presented Farm American National Bank to the of interest payment refused; Pensacola, that thereon was upon but payment Co., Bayview Improvement at information and belief the it and Brown a mort- gave took title to land time $112,000.00, sham, without for capital thereon gage transactions, being such incorpo- and substance warrant capital; and and that for without only rated by Brown was made Root and asso- payment cash ciates, are using Bayview Improvement and Co. the land due Brown and balance thereon defraud out into hands mortgage, by delivering as' evidenced Corporation Bellaire the first mortgage Securities indebtedness fore- representing causing
S3 associates; between P. Brown and Root and his Raymond that the asso- interests Root complainant and given ciates' said mortgage subject mortgage to- P. Raymond Improvement Brown Co. Bayview relief, P. to fore- Raymond of cross seeks by way land, close his lien ask- superior against Root, ing process be A. against Neely issued Jesse Bowen, Howe, Burton Studebaker, A. M. Frank G.- J. Jones, Co., Z. Adair D. and the Florida Farm Mortgage who had not made in the any up case to that appearance time.
The answer and cross bill amended by substituting Curtis, the name Eugene executor, for that of Nina K. deceased; Jones, and by Frank substituting the estate of S. for the Bond name of Frank S. Bond. Decree pro Root, taken A. against confesso Jesse J. Frank G. Jones,
M. Studebaker and for failure to appear or answer bill of complaint. Corporation
Bellaire Securities answered the answer defendants, and cross bill substance of the allegations being complainant and answerer was a bona pur- fide chaser before and holder maturity first mortgage and notes; that complainant the officers of are now K. E. Fen- derson, President, Helen Vice-President, C. Perry, V. C. Barrett, Treasurer; Secretary and at the time of the purchase of the Howe, was Burton A. Pres- Howe, ident, Vice-President, Elizabeth C. William A. Strauss, Jr., Secretary-Treasurer, and E. C. Hanley, As- Secretary-Treasurer, sistant other than these no one Howe, A. except Burton who all of the owns stock in com- been interested‘in plainant, complainant; has that neither Root, Bond, A. Frank Bowen, S. Z. D. Adair, Jesse Studebaker, Jones, G. M. Frank Florida Farm Mort- J. person, other nor Co., Co. Improvement gage *7 stated, interested has ever been as hereinbefore except notes; complainant that mortgage complainant, the 4-13 of paragraphs of the allegations denies' specifically bill; be- information and that upon the answer and cross the as organized, Co. was Improvement lief Bayview the tract”; that knew, “Bayview the purchase Browns well of first mortgage a assumption plus the cash payment constitut- mortgages, second and third a giving the sale of common was' raised price, ing purchase $98,000.00, being purchasers approximately stock for Snow, Howe, George Warren H. Burton A. Frank G. Jones, Eiffert, C. Davidson, George I. C. Bradbury Earl C. W. with Thomson, or connected them associated being none McGill; Bond, complainant pur- Root, Duncombe or that Howe A. owned some because mortgage chased said Burton Co., latter Improvement but the Bayview the stock of transaction; that since the pur- with connection had no Brown owes complainant defendant mortgage, of Said chase Cessna; E. that information and upon Charles instead E. real estate Charles agents Browns were belief property, of the that instead Cessna, owner original Cessna, as for contracted agent they land selling $125,000.00 him for approximately it from Root for the with A. sale of the thereafter contracted Jes'se $265,000.00; purchased property, that they property $63,000.00, re- thereon for a mortgage Cessna giving $90,000.00 in cash and a approximately sec- ceived therefor $112,000.00; prior to the time ond closed, they and his associates was had an Root trade with Bowen, land dispose through of the opportunity Root being assignable, so that the contract as agent, simultaneously, closed Browns ac- all the trades cepting expressly obligations of the Bayview Improve- Co., ment purchaser that the property; trade was closed by Improvement Co. assuming the first $63,000.00 mortgage of given by Brown to E. Charles Cessna, $112,000.00 giving second the Browns giving third mortgage to Root and associates; that in addition the Bayview Improvement Co. paid Root and his $98,000.00 cash, associates approximately the latter paying the $88,000.00, Browns approximately out of which Cessna; paid part Browns of what owed that each of the distinct, trades was' separate and and the Browns them; knew and accepted expressly con- trary statements found in the answer and cross bill are *8 untrue; that upon belief, information and Root was acting as the of agent Brown persuade Bond and his associates to buy the land.
Burton A. adopted Howe as his own the answer of Bellaire Corporation Securities to the answer and bill cross of defendants. Co.,
The Florida Farm in Mortgage addition to alleging in answer many its facts' were in alleged that the answer of Bellaire Securities Corporation, also alleged that was a corporation, Fisher, created William A. by counsel for com- plainant, and whose stockholders composed are of solely members of his own that family; its bank account is used on of purpose occasions funds keeping clients William funds; A. Fisher separate personal his own that the interest was found among the mortgage check him sent to foreclose and papers he deposited it in ac- this count in American National Bank of Pensacola. Bowen Z. D.
Neely Adair answered the answer bill, denying cross truth of all matters fact found in bill; 4-13 paragraphs of the answer and cross and alleging in Pensacola in dealers real estate that the were answerers dealers 1925; real estate the Browns prior that belonging certain lands' supposed charge to be in Cessna, property, said purchased E. thereafter Charles it, the with connected became and before these answerers Root, A. therefor to a contract of sale Browns made Jesse Dun Bond, A. himself, Frank S. Frank represented who McGill; information and that upon Edward E. combe and Root’s belief, getting Browns' Root agent was ’ interested; entered negotiations that Root associates land; that Bowen Neely sell them the answerers to1 these names, information upon certain whose parties, interested answer, who belief, complainant’s mentioned are if title thereto purchase would said property Stated organize Bowen would and if approved made; thereafter could be purchase through express Co. was for the Improvement organized Bayview land, and in funds put title to said taking purpose common stock by by said purchase make $98,- therefor who paid approximately persons various 000.00; closed at the were all Same time trades Fisher, knew, Root as the Browns of William offices them paid using and his associates portion greater Co.-to Improvement to. Cessna, *9 such of the he needed to
Brown using H. Brown represented at which time William hims'elf transaction, Brown in title to the closing P. Raymond latter; that- knew in the William H. Brown being land respective circumstances of the transactions and all of the Bayview parties, Improvement the relations of the Co. land; to make organized solely Brown transfer of title acquiesced H. William Co., Improvement P. Brown" Bayview the col Raymond associates, lection Root and his money through $63,000.00 assumption Co.,
Improvement of a second giving Browns, to the of their representing portion profits, and the of a third Root giving mortgage h> associates. 5, 1930, Browns,
On solicitors, July through their aр- plied bill, for leave amend their answer and cross application complainant objections. filed ordered, 1930, 8, The court on action on said July application for leave amend would be deferred until the cause was presented on final hearing.
Testimony the cause was Ex- Special taken before ; aminer and by depositions of several who parties could not appear before the Examiner. Special taken,
After the depositions testimony the court then granted defendants leave to amend their answer and cross bill.
The defendants Brown their joint amended and several answer cross bill by making Bellaire Securities Corpo- ration, Co., Bayview Improvement Bond, Frank S. Jesse Root, McGill, Bowen, A. E. E. Duncombe, F. A. Howe, Burton A. the Administrator ad litem of the estate of Frank G. appointed, when Nina K. Jones, Warren Jones Snow, Davison, Eifert, H. W. Earl George C. I. C. Brad- Thomson, bury, George Adair, C. Z. D. Florida Farm Mort- Co., H. B. Davis’on gage and Atlantic Corporation Securities thereto; parties by striking therefrom paragraphs 4-11 therefor and substituting the following allegations, the sub- stance of which are: that P. July, Raymond Brown contracted to sell A. Root the “Bayview tract” Jesse $265,335.00, which contract provided that Brown might a first give mortgage on land which Root should assume *10 exe- was part price, mortgage and such purchase of in writ- $63,000.00; assigned
cuted Root that thereafter was Adair, it assignment to D. in which ing contract Z. of provisions and all agreed material conditions that part were made a and Root agreement between Brown Bowen, belief, thereof; Neely that information and upon Howe Burton A. authorization Frank G. and by Jones D. with Z. associates, agreement and entered into an their of the assignment Adair said and purchase for the land contracts, Adair Root-Adair paid and Brown-Root and $10,000.00 account, and furnished on by Jones associates; Bayview Improve- their and caused Howe and ment be take title to incorporated expressly Co. to $15,000.00, incorporated with each property, being E. Bowen, Z. D. incorporators, Neely Adair and J. stock; Adair, shares of that owning D. land Bowen Z. Adair the fur- perfected by paying $121,000.00 ther Howe and sum of furnished by Jones associates, an their of the con- taking assignment two Brown writing, tracts in P. deed- by Raymond wife Co., ing Bayview Improvement the latter property $63,000.00 from mortgage Brown to’ Cessna assuming part as' Brown purchase price, executing $112,000.00 second for the balance due him mortgage for $120,- third to Frank S. executing Bond for 718.00; therewith, simultaneously Bay- stock of Howe, Improvement forwarded to view Co. was Burton A. himself, it for Frank who holds estate of G. Jones associates; 10, 1926, May Bowen, about their Howe, procured and instruction an upon authority as- signment E. Charles' Howe; Cessna, the sum furnished being and that upon Howe, the stockholders of Bayview invitation of Improve- *11 Co., ment participated or their associates relatives or close in the purchase pro- in the same relative mortgage stock; portion as their the name of ownership of that the. in assignee of the was left assignment blank, but, Howe, was, to the instruction of according just before institution of foreclosure filled in proceedings, the name of “Bellaire Corрoration,” assignee, Securities as Howe; all of the stock latter owned Burton being A. that Bellaire Securities Corporation did not con- pay any sideration the assignment of said mortgage, but the money was advanced the stockholders of Im- Bayview provement Co. or their close associates or relatives' therein; same proportion in which owned stock that they 10, 1926, on or about May in- Browns forwarded the terest on the payment Cessna, Charles E. Bowen; inwho turn forwarded it to Neely unable being to learn from check, Bowen who had possession pay- of the ment thereon was' ordered stopped; that the Florida Farm Co., Howe, Mortgage as agent associates, and their Jones in February, presented the check to the bank for pay- ment, refused; but thereon was since receiving land, the deed Bayview Improvement Co. has en- in no gaged business and has acquired no and no property whatever; funds though agreement to assume the mortgage for to Cessna was made in name Co., of Bayview Improvement yet fact obligation of Howe and was that and their associates, which Jones they obligated to as part purchase price; but are a scheme engaged using are Bellaire Corporation Securities and the Improvement Co. as a cloak for said foreclosing mortgage for the purpose avoiding payment thereof.
A decree pro against entered A. Root confesso Jesse testament the last will Eugene Curtis executor of answer the K. or to appear Nina for failure to Jones
amended answer and сross bill. Administrator D. as' ad appointed
The W. Howe court *12 Bond; Frank litem Frank S. of the estates of G. and Jones and as to M. Stude- dismissed the answer and bill cross J. baker prejudice. without the Frank G.
The Administrator ad litem of estates of Frank amended answer and S. Bond answered the Jones bill advised stating cross that he not as any was thereof. allegations proof and prayed strict answered, Bayview Improvement every The Co. denying bill; allegation of the answer and cross and al- amended it leging organized incorporated that was at the expense Bowen, Adair, D. E. of Z. Adair and Neely who have J. been its officers and its it organization; directors since that transacted in regularly has all business connection necessary thereon; with its property, kept paid has the that taxes $63,000.00 valid, still a lien subsisting Co., against Improvement property Bayview no of which for part paid of, has been or for account funds of this cross defendant. answer, Farm The Florida Co. as Mortgage adopted its the answer filed to the previously it had answer and cross bill the defendants before amendment.' answered, Bowen Z. D. Adair
Neely denying all of fact 4-10 alleged paragraphs truth of matters bill, and cross' and after amended answer realleging transactions, in the alleged that steps various substance Bowen now owns and owned has since Neely Bayview was Improvement organized, Co. shares the capital thereof, Browns, and that he did mislead stock but particular that latter acquiesced every the trans- action, that condition their upon agreeing such procure that Bowen able to Neely transaction; close the thаt Bowen President officers, Z. D. Adair and Adair E. as the other two have J. been directors of Improvement Co. since organ- its ization; Improvement that the Bayview Co. has done busi- ness by its land having turpentined, an oil by giving lease therefrom; thereon and by selling timber that said corpora- $15,000.00 tion was incorporated for in order only to save fees; $98,000.00' charter Z. D. Adair paid in the equity land provided a sound for the basis incor- poration $98,000.00 of said corporation $15,- instead of 000.00, the ultimate purchasers' paying for 13/15 therein; of the stock that the Bayview Improvement Co. was not a sham and was organized for the express purpose *13 of taking title the land thereon, and of giving mortgages to which assented; the Browns that the first mortgage was not paid, but was purchased in a legitimate way with intent; bona that none of the individuals' ad- fide vancing for the was liable thereon; purchase of the first mortgage was the purpose of evading foreclosure at the time and aswas much for the benefit of the second mortgagee as of mortgage, the Browns acquiesced therein.
Bellaire Corporation Securities answered the amended bill, answer and denying cross of allegations paragraph 4-10 thereof and issue on taking paragraphs 1-3 of the bill; original answer and cross and after setting out the steps various detail, the transactions in alleged in sub- stance that well knew and Browns consented to every taken in step connection with land; sale of the that the beneficial ownership said stock was after
62 closed,
various transactions’ and has been since and is now as follows: Bowen, of the total or 20 shares 2/15
F. G. 130 shares Jones____________25% Burton A. 130 shares Howe--------25% George W. shares Davison------25% Atlantic Securities Corporation (and Warren H. 130 shares Snow)--------------12)4% Eiffert_______4
Earl C. of 130 shares 1/6% I. C. of 130 shares Bradbury------4 1/6% — B. Thomson George of 130 shares 1/6% That the following persons purchased an interest from Burton A. Howe:
Frank G. ________________$15,925.00 Jones 15,925.00 H. —--------------- B. Davison 7,962.50 W. PI. ------------------ __________________ Snow E. 2,657.68 C. Eiffert I. Bradbury_________________ 2,657.68 C. 2,657.68 G. B. Thompson--------------- Bowen, That Neely Corporation Atlantic Securities Davison, W. George owners of stock in Bayview Improve- ment purchased Co. never interest in the mortgage; and complainant denies that any stockholder of Bayview Improvement Co. ever became obligated *14 the mortgages given by assumed said corpo- ration.
Thereafter court the allowed further time the taking of additional to sustain or defeat testimony the issues as made by amended answer and bill cross and the several answers thereto. counsel, final
After the entered court arguments were equities decree which it found that the the cause Brown; with P. H. Raymond Brown and William Brown, against P. William H. Brown and Raymond Raymond P. Brown and executed mortgage by wife, E. in- Pearletta to Charles Cessna and the debtedness been thereby secured have and the mort- paid, record; if gage ordered cancelled of that within five days, one of the P. defendants not pay Raymond cross does Brown $112,000.00, the sum of the land be sold to pay same, and the of all therein be fore- rights cross defendants closed. decree,
From this final complainant cross de- fendants' took appeal. this
Briefly stated, the vital are contentions of the appellants that under the facts this case court was in lower error in that the holding stockholders of the Im- Bayview provement Company responsible on thе personally which, by Brown Cessna given upon conveyance of the property Improvement Company, was assumed by corporation; that the organ- ization corporation personal to avoid but liability, not personal to evade any theretofore or thereafter liability incurred, was a valid and legitimate use of the incorporation State, laws justify would not disregard when, later, corporate entity; unable the interest on the first and it be- mortgage, default, came fraudulent for some three- stockholders, fourths of the purpose for the of forestalling, being, the time foreclosure of the first held Cessna, their buy, funds, individual a three- in the (the interest first mortgage fourth’s other one-fourth Davison, interest same being purchased at time Mrs. *15 that such pur- stockholders), the wife of one of the of the mort- tanto pro operate chase did not as part the on responsibility personal there no gage, being that the obligation; the stockholders on the first stockholders, herself who the wife of one of act of in purchasing in corporate obligor, stock owned no in funds a separate with her individual and faith own good not, would mortgage, one-fourth interest mort- event, share her from her preclude enforcing her husband was a stockholder. lien because gage merely here, where, by appellants It further contended is the purpose corporation regularly organized of the part pro- on avoiding any personal obligation stockholders, persons taking obligations and the posed such purpose prior are advised of corporation of the into money put when the cash obligations; and taking such the corporate stock the transaction it, corporate obliga- and the put not have been into would made, consent except upon been tions would have re- accept solely corporate corporate obligee of such obligee, profited who has corporate largely sponsibility, transaction, into the cannot put so from the cash through corporate look right claim the thereafter claim the personal responsi- entity the stockholders. bility of contend that the court below erred also
Appellants appellees’ answer and the amendment permitting that the original set ground up claim on as a counter facts and raised on which issues purported for relief basis tried, and the cause and which the taken the evidence ¡the untrue, to be showed definitely evidence claim up counter set other and incon- answer amended facts, the issues. changed sistent *16 court that the hand, contend appellees On the the other the affirmed; that, in the evidence under below should be through in case, looking error chancellor committed no the entities, holding and corporate the fiction the of legal Improvement Company View of the Bay the stockholders mort- of the liable for the payment were personally the mem- Cessna, were they because from Brown to gage co-adventurers, which, purchased the as' bers of syndicate and land, the syndicate, to Cessna by the and the payment relatives, for the of the amount their and close associates the Bellaire the name of the in purchase alleged was, the syndicate’s reason of Securities Corporation in law and in fact payment, for its personal liability husband Mrs. That as Davison’s mortgage. of the payment the mortgage and syndicate, as was a member of members, of its for the benefit purchased by syndicate relatives,” her alleged associates and their “close to the subject and was with notice of one-fourth interest of the husband for payment of her liability personal op- purchase by syndicate the alleged so that mortgage, alleged her one-fourth tanto of pro erated as mortgage. interest in the have contentions, questions, various subsidiary and
These counsel thoroughness by argued ability with been of authorities copious citations parties, respective the rather voluminous evi- the pages references to it, dence; law of case is clear but as seewe case are few in the questions' simple controlling of fact. number, and, questions in the main are has rather record in this bulky A the evidence reading case, others which as in many this impression left boom, none Court, an aftermath reached this have in- of were guilty to these transactions parties tentional fraud or wrongdoing while negotiations on, if going had remained the same and conditions. land were, values had held up to what or were believed been, have fall are, the chances none the parties would have suffered and this any loss contro- would versy never arisen. have Strange fantastic as now, seem may this land was cоnsidered to be worth November, 1925, or more in suf- *17 ficient to afford all adequate three of the mort- security which gages placed were if thereon values had kept toup their then high levels. But collapse the 1925 of real boom, estate and the terrific which shrinkage ac- values companied and followed has naturally caused much i\ litigation, and the raising many questions which gave the buyers and sellers of real in those halcyon little days estate or no concern time. In at the the clear light cold of “the after,” importance morning questions of the pri- liens, orities of and other and of personal respon- sibilities, were accentuated.
In his and valuable very interesting treatise on Dis- “The Fiction,” regard Corporate several times cited by ap- Prof. Wormser pellees, (pp. says: 10-11) “A Federal court said, has recently in language peculiarly apt, ‘Every question of' law arises situation, out aof fact and if there be no state of facts there can be no question of' law.’ The has a creed. lawyer The judges are the trans- mitters and interpreters the creed. The manner in which accomplish this is they through decision of cases. One may begin the study legal problems with a search for a view. general point of One ends always the consid- eration of If cases. one once facts, understands the law flows almost from inevitably their mere statement. To state most legal problems fully fairly is to answer in ascer- them advance. There is far more difficulty Therefore, I law. than in taining facts applying I shall have ask with me discuss cases you bear while as well as principlеs.” truth of case is illustrative of the this statement.
This attempt part Without conscious on attributing any their of the witnesses their to suit testimony to twist interests, it must be considered that testifying to the tak- prior about transactions several occurring years ing of accounts for some of testimony, probably there; Court, and this vagueness discrepancies here and court, trial has more in its difficulty and no doubt the had efforts to some of get important at real facts on experienced than it at the points getting applicable has law of the case.
If the contested rested the written questions solely upon documents which this land from Cessna to Brown passed Brown to a result Bayview Corporation, as Root, Adair, as- sale Brown to who by Root signed subject to the Bayview Company *18 Cessna, as- which the mortgage Bayview Company to and then executed the second sumed and to agreed pay, $112,590.00, to Brown for and the third mortgage mortgage $120,718.00; the assignment Bond for subsequent to the to Bellaire the Corporation; Securities Cessna But this is not half case would be easy. decision this evidence, more than small fraction of the nor story, in consider view the questions has been to necessary it raised.
There no need to consider the question of disregarding Bellaire corporate entity Securities Corporation. holds the title to Admittedly, it the mortgage to be sought for the use and benefit of those persons foreclosed fur- who nished all but one of whom buy mortgage, were members of the and stock- syndicate Jones-Howe in the holders But Bayview corporation. there is a serious whether, evidence, quеstion here under the the corporate entity should be company disregarded, its stockholders participated who purchase, held have been bound personally said first at Cessna; then, the time bought if be- they they bound, came personally SO' whether Brown waived such personal liability accepted corporate instead. liability
The first to be question considered is whether or not Howe, als., Jones, became, et reason of the Adair con- Root, tract with personally for the obligated the purchase price of the lands in If question. did liable, continued, so become and such personally liability the law is well organization settled of a corporation for the purpose of an evading existing personal on liability the part of those who became will its stockholders be allowed to achieve that for in purpose, such case the courts' will veil “pierce corporate fiction” and hold corporation stockholders of the their personal liability, corporation even though regularly organized in ac- cordance with the statutes. Not that the law it rep- deems rehensible form a corporation order limit one’s risk stock, to the amount of investment so far as future concerned; liabilities of the are le- this is and an occurrence. gitimate every day Wormser, Prof. Thus in the book referred to (p. 18), says: correct,
“Such a decision is entirely because, if the cor- has been poration validly organized in its inception, the use *19 prevent the incurring of personal ob- in the future ligations is entirely proper and legitimate.
69 The our policy of laws with incorporation sanctions today the consequent immunity from individual It liability. fol7 lows that no fraud committed in incorporating is precise purpose personal avoiding respon- escaping Indeed, sibility. is why people incorpo- most exactly rate, know, and those or at dealing corporations least know, are presumed to the law in this regard.” 84, again, And on page says: the same author rule, “What if general can The any, be laid down? near- est approximation to generalization present state of the authorities would warrant this: is When con- ception corporate is entity defraud credi- employed tors, to evade existing obligation, an to circumvent a stat- ute, to achieve perpetuate or or monopoly, protect knavery crime, will courts draw web of aside the will entity, regard corporate live, an company association .as shareholders, men up-and-doing, and women will do justice between real This persons. is true in particularly many courts of but finds equity, illustrations courts well, law for it must be thought “Our Lady the Common Law” not sufficiently powerful explode or scholastic where sophistry theory used as a cloak for- / wrongdoing.” 59-61; 27;
See also 14 C. 7 R. C. L. cited; and cases J. Co. Biscayne also & Realty Ins. v. Ostend Co., Realty 148 1; 560, 109 Ave. Fla. Third So. Co. v. 46, 111 Keely, Fla. 30; & Grocery So. Winn Lovett v.Co. Saffoul Bros. Co., 833, 681; 121 Fla. Produce So. v. Mayer Eastwood- Co., 122 Fla. 164 So. & 684. Smith now to the Returning question of whether incurred personal had stockholders liability first mortgage by of the Cessna means of the Root-Adair contract, be well to review might led briefly what up *20 contract, contract both
this in its nature a of was purchase assignment. 50,000 E. acres
Dr. Charles owned approximately Cessna Florida, Counties, De- of on land in and Walton Bay H. 18, 1922, Brown and with William contracted cember. firm, P. Sons, Raymond estate of which a real Chicago member, right a said firm exclusive give Brown was of, for the issue contracts sale years ten to sell and to the lands covered contract. or to of purchase, 8,840 acres, front- The Tract” of “Bayview approximately Walton included County, ing Bay on Choctawhatchee 31, 1925, this tract pur- March On agreement. acre, Brown for a total per P. Raymond chased by $9.50 a $84,000.00, gave some later Cessna and he months about $63,000.00, thereon, 1, 1925, for July first dated having Cessna deeded purchase price, part him. property 1925, 17, Root, A. real estate
On operator July Jesse Erie, Pa., for a of Frank S. acting syndicate composed McGill, Erie, Pa., Bond, F. and E. E. all of A. Duncombe Raymond P. Brown writing contracted $265,335.00. Tract for While contract this Root, assume purchaser, would provided agree purchase price, be part pay, as Cessna, land Brown on said execution of given 1, 1925, dated had $63,000.00 mortgage, July evidently time, as the completed at that acknowledgments not been wife thereto were taken until and his November Brown 2, 1925. 1925, A. Root executed a written September
On Jesse contract, seal, Adair, Z. under to sell said lands to D. Florida, $398,002.50. Springs, of DeFuniak This con- acknowledged receipt tract *21 provided and for the of seller to the upon of -the conveyance the to and giv- the property buyer, ing of a second the to the seller for the mortgage by buyer purchase remainder of the It that price. is also provided all terms, of the provisions conditions and of the contract Root, between Raymond except P. Brown and A. as Jesse to the provision land, to be the price paid to “be and as the same are and of hereby adopted incorporated part as sold, this agreement.” contract This also assigned Adair, heirs, representatives transferred legal assigns, Ray- all under contract rights seller’s said the wife, mond P. Brown and all in- right, of the title and terest of seller to the in and land described in and cov- ered contract. said by
It provided was also that the trade between Brown and Root, them, as outlined in the contract between of copy a attached, which was and the trade between Adair Root and should be closed and that simultaneously conveyances should made, be direct land, the present owner of the Adair, order to avoid a having conveyance first made Root, seller, Adair, from him buyer. contemplated The contract also that in fixing the-amount Root, of second be mortgage to Adair given there first be deducted the total cash payments, including seller, binder made to the and the payment, buyer mortgage, first evidently amount to the referring Cessna, mortgage Brown to given by so that the cash pay- ments, the first and the second would mortgage cover price and settle the to the purchase property think, therefore, contract, seller. We that the effect of the whole, Adair interpreted assumed and fairly mort- purchase agreed pay, part price, as. Cessna, $63,000.00, although Brown to gаge given by completed by been had not the execution of contract at time this acknowledgment delivery entered into. Bowen, broker, influenced a real estate Chicago,
Adair to make this and furnished Adair with $10,000.00, which the at the time latter to Root paid into. considered foregoing contract was entered Adair that he Bowen were a mat- but as buying property, fact, syndicate ter of Bowen was composed acting Howe, Frank G. Burton Davison and Jones, George A. W. Eifert, Snow, Warren H. New City, York Earl C. *22 George Bradbury, C. Thomson and I. of Grand Rapids, C. Bowen, Tenn., Memphis, Mich. a former resident of had Frank likewise in that known G. when he resided Jones Bay- Bowen interested in city. purchase Jones 1925, September on the he view Tract and morning distance told by long telephone in touch with got Jones it was author- thought “good buy,” him he 'and that Jones $10,000.00 pur- a binder of put up ized Bowen to for land and him the which Bowen money chase wired check, which he personal means' his handed paid by It Root. Root appears and Adair handed to that Adair Bond, over Frank S. headed who then turned Root acting which had been for. No written syndicate by Frank G. any executed Nor was contract was Jones. from him Bowen or to Adair telegram produced letter or had, however, stated, evidence. He above in or offered telephone message distance New by long Jones Pensacola, York Bowen in authorized Bowen to sent the tract and purchase he and Adair used order to this contract with Root. get Neither Root Bond knew who Bowen represented. nor
Bowen testified that Adair called him at on the San Carlos Hotel in 1st, Pensacola about him September and asked land; find buyers for this that he had some correspondence with Mr. about the the con- but not about property, Jones tract; that a couple of were also be- telegrams exchanged them, tween but his to purchase was authority given by telephone above referred to. Adair message did not know his associates and had no dealings Jones but Bowen in anyone matter, connection with the testified that he and Bowen were planning to incorporate land, then sell buy it for a That Bowen profit. and himself an employed attorney incorporate, and then sold the stock to land. had con- That no tract to sell the land at the time they bought it from Root. But Bowen’s makes it testimony plain that he acting Frank G. Jones, and second deposition he stated that the positively contract of taken Adair from Root taken Adair on behalf of himself and F. G. Whether Bowen knew then had asso- Jones. Jones appear; ciates does not nor does appear that the clearly Syndicate, so-called whose names are above given, Jones had been formed at time actually authorized Jones Bowen to buy property.
Frank G. died before issue, this cause was but at Jones *23 from the Bowen of and testimony Adair and the other sur- transaction, parties to the viving it appears that ver- Jones' authorized Bowen bally purchase to the Bayview tract and sent him make money to the initial or binder payment, and that Bowen utilized Adair a figurehead as accomplish to the Bowen, a So purpose. telephone message from Jones York, in New became the authorized verbally agent of Jones Adair, and who had no purchase, dealings with or Jones of his and purchased associates who in his own name at signed and who contract request, Bowen’s was really believed, Bowen, evidently he or as the as acting agent Bowen, testi- just which of himself and for the benefit clear. does make mony not the evidence as inferred from It also be may fairly whole, composed for a acting syndicate was that Jones to, though hereinabove referred himself and others syndicate .the nor just does not how when appear formed. support tends to testimony that some of the is true
It attempting were Adair themselves Bowen and theory con- the Root-Adair means of purchase the property by the intention of (and money) tract use of Jones’ persuaded Bowen had (whom already reselling Jones profit at a to Bowen binder) as buy put up and $25,000.00, recognized profit and and that this Adair later, settlement, two months in the final some paid and made with reference trades which had been when all the Adair as- and at which time completed this property Bayview Improvement the Root-Bowen contract to signed But, whole, his we think that on Company. Jones real what- potential purchasers, were the associates least, also, Bowen, Adair got at out probably ever more in the nature commissions final settlement was than profits. Bowen, who was authorized verbally
If Neely Jones just on what terms (though property to buy himself bought property signed had shown) Root, then it may be that purchase written contract adventurers, referred to joint Jones Jones legally would have been obligated York New syndicate, the contract includ- money, carry out to Cessna. ing frauds (See statute of Comp. of our language The
75 Gen. Laws) is that “No action shall be brought whereby * * * * * * charge person upon contract for the sale any any * * * lands, or that is upon agreement not be per- formed within the the space making of one year thereof, or agreement promise upon unless which such action shall be or note or brought, some memorandum thereof, shall inbe be writing signed party to by therewith, charged some other him thereunto person'by statute, authorized.” To with the lawfully comply written memorandum sale must land designate lands, Conrad, disclose terms of sale (Swisher v. 644, 76 Fla. 80 564) So. the other contracting party, he can so that be identified parol proof (Knowles without Albert, 2nd, 163, v. 9 Fed. 165); but it be executed may an whose agent is created authority Smith by parol. See Shackleford, 731, v. Fla. 110 So. cited. cases But to hold that an authorized agent by parol so to execute a written contract for the sale or of land for his can principal such delegate authority to (at another least without the principal’s express to that authority effect) far would be too and would going tend to defeat the pur- statute. See in this pose connection 27 C. 295- J. 297, 2 685-686. C. J. Under the law applicable agency general, the un- appointment of a sub-agent may authorized be ratified by principal, but mere fact that the principal later learned such employment sub-agent and acqui- ratification, not еsced is if there therein nothing to show he understood that sub-agent was employed as as the agent, agent agent. primary C. J. 687-688. rule, common strict law
According order to bind seal, a contract under principal by as' this was, one *25 76 and it must the principal,
instrument must to bind profess If contract. deed or be executed in his name and as his agent it the instrument be executed as purports to seal, is binding it not signature and under his individual the other even principal though party on the undisclosed that the actually principal to the instrument knows rule 676. And the for him. C. is agent contracting J. of an cannot be agent the authority is a familiar one that made own declarations proof his merely by established the principal. in absence of party, to a third that on this the record point Our conclusion is does or Jones, Adair to bind Frank G. show that had authority associates, Nor does land contract. his on this Bowen had appear authority even clearly it incur, Jones, obligations all the which were em- on behalf follows, course, contract. braced in the Root-Adair It were legally obligated neither nor associates Jones the execution of the Root-Adair contract to means of by land, for the or to assume and the Cessna pay take or pay mortgage. appellees
But further contended that this lack of by it al., Jones, bind et at the time supplied was authority later accepted fact that and his associates cured Jones all the knowledge, with full fruits of the Adair and enjoyed, contract, all the acts which and thus ratified had done been Bowen, including making Adair and the Root- contract, and became therеby personally obligated Adair mortgage. the Cessna first of the Root-Adair the execution on After contract Sep- 14, 1925, there of some delay two months tember being prepared the abstracts were and the title while to the investigated and being tract some view kinks Bay thereafter the several out. contracts Shortly straightened all involving land were office of William this closed Fisher, Pensacola, 17th, 1925, who Esq., on November parties. had title for investigated the the interested *26 About 17th, week or Neely a ten before November days Bowen had conversation Frank in Memphis, with G. Jones idea, probably of genesis incorporation shows and also tends to that Bowen negative theory was a joint adventurer with It indicates also that Bowen Jones. did that not consider time was at that bound Jones contract conversation, the land. In that Bowen continued, “if told that the Florida boom it was a good Jones but if the buy, boom was land collapsing, the worth was not that buying,” and “would be better off forfeit the Jones binder up,” of already put opinion as in Bowen’s land than per “the was not more worth acre under $5.00 conditions.” ordinary said he that the thought But Jones least, activity would continue for more at years two and told Bowen “go ahead and close the deal.” This we think amounted to a ratification of Adair’s in mak- agency contract, ing the when in connection considered with what happened,, for the natural subsequently presumption is Bowen told all about the Adair contract. then Jones Jones instructed Bowen to return to Florida organize cor- poration title the property. to take
This was corporation done. The promptly was organized 12, 1925, on November incorporated, at expense Adair, the Bay Improvement Bowen and View Company, $15,000.00 capital stock, Bowen, with Z. Adair D. brother, Adair, and his E. being incorporators J. each of the stock. taking fifty shares for Nothing was paid time, which, the stock at the with the together capi- small $15,000.00, talization appellees argue their support charge corporation that the a mere sham. The claim the transactions stock
appellants paid that the later, which took a few when place days trades land, closed, corporation got of which the by means make cash necessary payments. formed in accordance with corporation was legally That The be- Florida mot denied. court law is to, corporate asked on other disregard entity low was grounds. that several before the days closing
Bowen testified Brown, he conversation Mr. Wm. H. the deal had a repre- P. and who Raymond partner father told him that his son the windup meeting, sented with a charter he from Tallahassee had-just returned Mr. de- Brown Improvement Company; View Bay *27 taking a corporation a little to the fact that murred title, con- him that the whereupon pointed Bowen out to D. or his assignee, tract called for deed direct Z. Adair Brown carried the transaction through and subsequently respon- title without further took whereby sibility. 12, 1925, Frank G. wired the Amer-
On November Jones ican National Bank of Pensacola follows: ti-ie “Have Wired Central Union Trust Com- Just pany of New York as Follows Please Place to Credit of American National Bank Pensacola Florida One Twenty Thousand Hundred Hundred Five Dollars on to Be Paid on Instructions Out Bowen Eighty Eight Delivery Deed for to That Bank Bay Forty Land Four and Fraction Acres View Tract Improvement Company Together Bay Deed to View Company Properly of Said Endorsed Witi-i All Stock Be You Deed to Be Sent Record Stock Sent With Be Returned You After Re- Instructions cording.”
The reached Bank the Fed- through the Pensacola Atlanta, eral Bank Reserve which the instruc- repeated tions contained in telegram. above Jones’
theAt closing No- meeting Fisher’s office on Attorney 17, 1925, vember Z. D. Adair Frank executed S. Bond an assignment under seal to the View Bay Improvement Company of contract between Root and Adair Root, contract between Brown and assignment Raymond P. Brown requested and authorized to make a conveyance of the View Tract Bay Improve- View Bay Brown, Company. ment Mr. Wm. represented H. who son partner, P. Raymond matter, in the had with him a deed which had been executed P. Raymond and; wife, Brown blank, name of the left grantee during course the meeting the name of the Bay View Improvement was filled Company in as the grantee deed delivered. deed stated This that was given subject to the Cessna mortgage which “the grantee herein hereby assumes and agrees part as a the purchase price.” appeared
It Adair owed Root and Bond as total cash $98,769.50, the sum of and that Root and $87,795.00. Bond owed Brown The American National Bank $121,500.00, turned money, Bowen, over to who delivered all of the stock of View Bay Improvement *28 assigned blank, in Company, the bank. Bowen then used $121,500.00 this the pay balance of the cash payment on purchase price the of the land under the Root-Adair con- tract, which Bond, was to Frank paid S. for whom Root had acted. Bond then used this money Brown the cash to him under payment contract, the Brown-Root which $87,795.00 was as above stated. Brown paid Cessna the which first mortgage the amount of the
difference between of Cessna, $63,000.00, purchase price the he had and given $85,000.00 of purchase under about his contract The then passed. Cessna. mortgages The deeds a Brown second Improvement Company gave View Bay $112,590.00, subject that it was stated mortgage for the pay- given and was secure mortgage Cessna and the price, part purchase ment Bond, $120,718.00, third Frank gave also S. the Root-Adair contract. due on balance representing $121,500.00 placed Bowen testified that was Neely this American Bank as personal account with the National Bowen, Trustee, him and that was sent to Improvement the land and did into the Com- buy go not pany, but went to Wm. H. Frank S. Bond Adair; $98,000.00 Z. pay- D. that he disbursed the cash as ment that necessary for the property, out three four paid remainder was as commissions to ones; that principal different that Adair amount and got he, it, Bowen, $7,000.00 shares got twenty to> for the pur- stock. As land, paid chase of the he also testified he that amount that Improvement President of View Bay Company He that at the time there Company. for that also testified still the real estate market great activity section value where this tract was situated of the tract was $400,000.00. He in the regarded neighborhood as bеing H. a fact that Wm. was asked this question: “Is the value the property Brown expressed opinion mortgages protect included in the was sufficient to and the Brown second mortgage?” Cessna “Yes, answered, he And said.” Bond, at In S. who was present tire of Frank testimony *29 the “State whether meeting, question: he was asked this you Dr. in which remember conversation Cessna any Brown, his Wm. H. final stated closing, at the time of such willingness corporate Bay the accept responsibility View Improvement in lieu of personal all Company answered, individual “I re- he do And responsibility.” member such a conversation.” had, Fisher,
Mr. Wm. office was whose the settlement Cessna, testified that Dr. E. was made present, Charles who the Bay mention the conference that fact during View Improvement Company was notes, securing to Brown and mortgage he, Mr. if willing accept asked Brown View corporate obligation Improvement Com- Bay he pany, personal or whether wanted some responsibility answer, behind Mr. paper. Brown made definite no that made the statement if Mr. Brown wanted but Bowen any personal paper, connection with the responsibility Root, he have it from Bond and for the reason get would he, Brown, that were the with whom had persons else; contract; he had and that anyone that no contract closed, in which the trade could or would be way the only deeded to the View Bay would be for the be property were to people and for who Improvement Company, *30 basis, and on-that After the trade was closed paper. that the Amer- the the stock to the delivery obtained by that Bank, showing ican National with the deeds together to the acquired property. had title corporation the Frank represented that Mr. Fisher had G. It seems Jones the associates, examining Bond in and his and and Root instruments on several titles and drawing passing that all the transaction. contend Appellees involved in the dealt before the closing transactions to a few prior days and had to do nothing of the land purchase only land; in a letter to with a corporation taking title to 1925, the abstracts of September relating Brown title, prop- “The parties purchasing Mr. Fisher wrote: would like have ahead with their trade and are going erty clear possible as soon as the ob- up made arrangements that soon after the Root- appears etc.” It jections, also $10,000.00 in which executed Adair contract was Jones’s in Adair a cash by making binder was used an offer Root, that he had Bowen wired Jones Contract,” it. accept refused “for but Jones taken with the the foregoing, together We think that associates, record, while indicates whole that Jones execution, not, the time of its become legally at did they land, they Root-Adair contract to by bound execution Bowen’s sub-agent, ratified its subsequently were, the real Adair, equity, purchasers; eys deemed to be worth more but, property as the inasmuch they position where mortgages, proposed than the to take form a the deed to lawfully could for the balance due mortgages and execute the property personal without on price, responsibility the purchase on consented to this was interested provided their part, happened. what The evi- exactly And this parties. transaction, dence is' convincing parties all to the Cessna, Mr. including Dr. and certainly understood acquiesced this the cor- arrangement, accepted porate in lieu of individual liability liability, thereby precluded themselves from later claiming contrary. *31 It plain that was on this basis understand- perfectly Bowen, associates, ing that for and his acting paid Jones $121,500.00 over the which it possible made to for Brown Cessna, settle with with Root and Bond to settle corporation the settle with and pay to Adair the accumulated down the In commissions on line. these circumstances, think we it would be highly inequitable corporate hold that the should be entity disregarded, that, in spite of this waiver of personal responsibility, Jones and his associates should be held to have been personally fashion, obligated, after the transaction was concluded in this pay either Cessna or the other mort- mortgage, gages which were executed View by Bay Improvement $121,500.00 Company, together which and the $10,000.00 price made binder a total to the corpo- $450,000.00. ration of about
A
waive
party may
any right which
en
he is legally
titled,
contract,
statute,
whether secured by
conferred
or
by
by the
guaranteed
904,
27
Constitution.
R. C. L.
et
See
Prather,
591,
17;
Rader
100
seq.;
15,
v.
130
Fla.
So.
Nelson
v.
111 Fla.
After trades certificates en- of blank, in dorsed A. delivered Burton Howe New York, stock, who held 20 except shares given Neely commission, Bowen for in trust for the mem- several 84 each member proportion syndicate
bers Jones $121,500.00 the fund in cash to had contributed paid Bank to be National had American sent Jones' stock were out to the when deed Bank, plus up by put delivered to Jones $131,- a total September, making as a binder back syndicate. cash 500.00 contributed in the members ownership Improve- resulted in stock This Jones, Frank G. as follows: Company being ment 25% Howe, shares, shares; A. Burton of 1301 25%, 32% 32% shares; shares; IT. Davison, Warren W. George 25%,- 32% shares; Earl Eifert Snow, C. Bradbury, I. C. 12%%, 16% cent, shares, Thomson, 4 130 per C. and George 1/6 each; Bowen, him (given shares shares 5/12 total, 150 of these parties, shares. None commission); as' Bowen, director was ever an officer or except Neely corporation. *32 fell the semi-annual interest on the
_When due Cessna corporation was mortgage May, first in unable The money. it. had no means tur- pay By lease, Bowen, an oil pentine Neely leases and President manged had taxes. corporation, its boom The first was' in The default. Then Bur- mortgage was over. Howe, and, A. on his own acting responsibility ton he as testified, foreclosure and to maintain the prevent status concerned, all in hope the benefit quo for be able protect would later and its other ob- company the first purchased mortgage Cessna for ligations, $63,630.00. assigned The blank. name was The all Corporation Securities' the capital of Bellaire stock of Howe, later owned inserted assignee. as Howe, after other mortgage, invited the buying stock- trust, holders, whose stock he an in- held in the terest mortgage. He said he this'. obligated felt to do All the stockholders, who also former members syndicate, accepted and purchased interests in the Jones mortgage, the same proportion which held stock they in the Bayview Corporation, with exception of George Davison, wife, W. Davison, whose Mrs. H. B. purchased, with funds derived from sale of some of her own se- curities, the 25 interest in the mortgage which had been °f0 husband, offered her for it. Thus paying later, some three years when decided to it was foreclose H. mortgage, Warren Snow meanwhile having disposed of his stock in the to Atlantic Bayview Company Securities Corporation, the Bellaire Securities Corporation held the in trust beneficial owners who had participated in purchase, its together who owned a portion, major or about the stock in the Bayview 55%, Improvement Davison, Company. Mrs. who never owned stock, any of the who Bayview stockholder, was no longer held a 12interest in mortgage. Bowen, who stock, owned 20 shares not been having member of the was not syndicate, asked to and did Jones not in the participate mortgage purchase.
If them, these parties, who participated in the purchase of the first had mortgage, been at the time per- sonally liable its payment, then such purchase would tanto, operated, pro have as a payment of the first mortgage the second against mortgagee. It is neces- to cite in support authorities of that sary legal principle. But, seen, as we have were not bound to personally *33 said pay such mortgage, personal been liability having claim, waived. however, Appellees that such purchase nev- operates ertheless as a of the mortgage because of the of stockholding relationship the purchasing parties
86 land which held the title to the Bayview corporation, denied; is not
and whose duty to hold that inequitable under the it would be circumstances all, Company’s of or a controlling majority, itself accomplish corporation what stockholders could will the cor- do, pierce a court equity could not and that of liable, when, to do the stockholders and hold porate entity otherwise, agree result. We inequitable to an would lead law, are so sure about we not to this last but proposition stockholder, it that a true premise. factual Is its assumed individuals, them, acquire as cannot or acting a majority We acquire? could corporation which any rights cannot concede that. no a stock question about the
Ordinarily, right there director, fraud, holder, in the hold acquire, absence of notes, bonds, enforce, against corporation, See obligations, corporation. other mortgages, or 769; Smith, Chambers, 214 Munro Fed. v. Martin v. 280; 654; Briggs Stender Atl. (R. I) Fed. v. Gallogly 962; Products 272 Pac. (Wash.) Co. Harper Clay & Co. v. 774; 294 Pac. Corporation (Cal.) Herrill v. Normandie 75; E. v. 103 S. La Veine (N. C.) Robinson v. Caldwell 1186; 868; 187 W. 14 C. S. (Mo.) Co. Springs Tiffany J. Robinson, 134-136. In 14-A C. Caldwell v. supra, J. held that where of a directors paid debt of the corporation by secured on its prop erty, were subrogated to the creditor right Chambers, And in Martin security. v. opin supra, ion Call, which written District Judge sitting a member of the Circuit Court Appeals for the Fifth Circuit, it was held an officer of an in value, full solvent at of notes of сorporation, the company, upon property, a lien its the purpose of con- *34 it such serving pur- that but for property, appearing foreclosed, chase the lien a fraud would havei been is not lienors, upon other no junior creditors or raises en- equity in their favor which 'from prevents purchaser the lien. forcing appellees insist within opera-
But that this case falls tive effect in Home Fire Ins. of the laid down principle Barber, v.Co. 67 Neb. in which was writ- opinion Pound, ten Dean Roscoe then a Commissioner of Nebraska, that, it Supreme wherein Court of was said corporation “When the into equi- comes seeks equity relief, table we look at the substance of the ought pro- if the ceeding, judgment sought beneficiaries of the recover, we have no in not to be- standing equity ought come fiction of corporate befogged individuality, to reach an result.” inequitable apply principles equity Now the corporation that filed this suit—the Bellaire Corporation Securities foreclose this mortgage, —to for the those undoubtedly acting purchased benefit of who the mortgage, interest, who are the real in parties if have no standing equity to recover as against these appellees then the learned chancellor was correct in render- if, ing appealed decree from. But as we have above held, these mortgage purchasers were not liable personally this for the payment mortgage, mere fact that they were the holders of most of the stock in the View Im- Bay liable, provement Company, did not company under the above authorities render them liable individually at law in Therefore, for its either payment, equity. their operate did as a it, be said persons cannot whose behalf and for benefit Bellaire whose filed this to foreclose were without standing equity suit to recover. *35 Davison,, B. who was is this true as Mrs. H.
Especially not a stockholder. must be re-
For these reasons the decree from appealed proceedings versed and cause remanded appropriate with herein principles expressed. consistent Reversed and remanded. J.,
Whitfield, Davis, concur. J.,C. Terrell and J. Ellis, Buford, J., J., P. conclusion. concur in the Rehearing.
On of reversal opinion judgment Curiam. The Per rendered in the above entitled cause is adhered heretofore rehearing. to and confirmed on Ellis, Terrell, J.,C. Whitfield, Brown concur. Davis, J., J.
Buford, original case (receding opinion). J. —This consideration is before us for after reargument granted pur- opinion judgment suant to the filed herein on February 20, The 1936. question which now appears necessary determine whether or not is Bellaire us Securities Cor- named as the poration assignee a mortgage by executed Brown, al., P. et Raymond Charles F. Cessna on July 1, 1925, the sum under the facts and con- original opinion set forth in the filed ditions herein as above stated, foreclose such may mortgage against Raymond P. wife, his Pearletta Brown. Brown and The decree Circuit Court from which appeal this other things adjudicated: taken amongst “That, as the said P. against Brown Raymond and Wil- Brown, the on the premises liam H. hereinafter particularly described executed the 1925, first day of July, the said P. Brown and Raymond Pearletta wife, Cessna, E. 21, Charles recorded Mortgage Book pages of the public of said Walton records County, and the indebtedness secured have been thereby, paid, and the cancelled, said and the hereby Clerk of this Court is directed to hereby make entry upon the margin of the said record of said mortgage that the said mortgage has been cancelled this decree appropriate reference to decree and place this its date and of record.”
This adjudication was necessarily upon based the finding *36 that the paid to Cessna money Howe as set forth in the original opinion herein constituted payment of mort- the gage upon the Howe theory be- associates had come liable for the primarily payment of that obligation and the transaction did constitute a purchase and an assign- ment. In original the Mr. -opinion speak- Justice Court, for the ing said:
“There is no need to consider the question of disregarding the corporate of entity the Bellaire Securities Corporation. it Admittedly, holds the title to be sought foreclosed for the use and benefit of persons those who furnished the buy mortgage, all but one of whom were members syndicate and Jones-Howe stockholders in the Bayview Corporation. But there is a whether, serious question here under evidence, the cor- porate entity Bayview company should be disre- garded, its stockholders who in participated the pur- chase held have been bound personally said time Cessna; at the they bought it from then, bound, if became so they personally whether Brown waived personal liability accepted such the corporate liability instead.
“The first to be question cоnsidered whether is or not Howe, als., became, et Jones', reason of the Adair con- Root,
tract with for the personally obligated the purchase price of in If question. the lands did so liable, continues, become such personally liability well law is settled organization corporation that the for the an purpose existing personal on evading liability of those will part who became its stockholders' not be allowed to in such courts purpose, achieve that case the will fiction’ ‘pierce corporate the veil of the and hold the their corporation personal liability, stockholders of the even though corporation regularly organized accordance that the law statutes. Not deems form a order one’s reprehensible corporation to limit stock, risk investment in the so far to the amount of his concerned; are this liabilities of future occurrence.” is and an legitimate every day Then further in opinion, reviewing action the stockholders in Bayview Improvement Company, it said:
“We think that the taken foregoing, together with record, whole indicates that associates, and his while Jones not, they did at execution, the time of its become legally *37 bound the by Root-Adair land, contract to purchase the they ratified its subsequently execution by Bowen’s sub- Adair, were, agent, in the eyes the equity, pur- real chasers; but, inasmuch as the property was deemed to be more than the proposed worth mortgages, they were in a position where could form a lawfully corporation to take the deed to the property еxecute the mortgages for the balance due on the purchase price, without personal on their responsibility part, provided this was' consented to the interested by parties.”
The opinion then says, “and this what exactly hap- record, As we now see pened.” the that statement was not no time the agreed because at waive warranted Cessna men the original whom opinion of those personal liability the Root-Adair contract legally holds had become bound were, the equity, purchasers.” in the real “and eyes the to waive be- position liability Brown was not in on Cessna, we assume that Brown waived the though half of organized of the had liability corpo- individuals who ration to take title insofar as there property was any or, words', in other liability mortgage, second which was to be executed mortgage corpo- vendee vendor, ration who was the vendee of Cessna. is, And so it that the assuming adjudication of the Chan- cellor that moneys paid by Howe to Cessna constituted of the mortgage purchase, not a although was delivered by Cessna to Howe with a blank assignment which Howe afterwards filled in so make as to the assignment appear be to Bellaire Corpo- Securities ration, all capital stock of which was Howe, held by Howe evi- although raised the money dently to reimburse himself for he had paid what Cessna (because the record shows funds procured Howe from his associates who were Im- stockholders provement Company, and one other person who wife of a stockholder in that company) pro- after he had possession cured Cessna, cor- was a rect adjudication. further And assuming that the state- ment made our opinion above referred to—“There no need to consider the question disregarding corporate entity Bellaire Securities Corporation. Admittedly, it holds the title to the mortgage to be sought foreclosed for the use and persons benefit of those who furnished the all buy mortgage, but whom one of were mem- *38 in
bers of the and stockholders syndicate Jones-PIowe in that Bayview corporation,” and further statement think taken foregoing, as follows: “We that the opinion record, with the whole indicates and his together Jones associates', not, execution, while did at the time its they pur- become bound Root-Adair contract to by the legally land, chase by ratified execution they its subsequently were, Adair, Bowen’s in the sub-agent, eyes equity, real purchasers”' be correct. It must then neces- —to follow that Howe no title as sarily acquired assignee to the he, executed Brown and wife mortgage to Cessna and by title, no could having acquired not create title in by filling a blank so as to make assignment corporation of which he was sole owner appear be the of the assignee mortgage in he obligated law was and which pay, had been him. paid by
But organized Bayview whether who Im- gentlemen corporation, obli- provement Company, personally not, mortgage this first had gated to pay they personally on behalf of that corporation negotiated agreement part as a price whereby agreed the land involved assumed *39 did not any Bayview Imрrovement Company The record shows that for the land. price were made direct stockholders made such payments Bowen, who handled Brown. In Mr. Neely this regard, follows: the transaction testified as parties, for tract to Bayview “Is that Brown sold the fact 1925, $263,385.00 and that A. Root in July, Jesse Adair, 1925, sold September, Root property assignor Bayview Improvement Company, $395,000.00?
“A. The amount in the between called for contract paid Brown amount to be and Root was Ninety-five Adair Three Hundred and Thousand Dollars, that. approximately paid any ever Bayview Improvement Company
“Has of the involved person on account in this cause? It
“A. not. has minute, sure that is the you “Mr. Dever: Wait a are answer? right Yes, I of the am still President sir.
“The Witness: We never had a Improvement Company. penny since. H. ever from Cessna to Wm. you
“Did see letter 7th, to be dated purporting Brown and Sons May interest due with reference to an extension of the 10th, Dollar mortgage May on the Thousand Sixty-three so, 1926? If where the letter is? original do know you dated back at Brown’s Do know whether that letter was you was in after Wm. H. knew fact written Brown request, had sold the mortgage? Cessna letter, I I letter or a but copy “A. have seen the *40 know where don’t the letter now. I know nothing other what Dr. Cessna than told me it was. $100,000.00
“Is it not a fact that or more in cash was paid Bayview Improvement into for its stock? Company capital “A. was There deposited to my account the American National Bank with which to handle the Bay- deal, Improvement view made the Company initial payment involved. pay commissions This remained money Bowen, Trustee,’ in my pеrsonal ‘Neely account as disbursed, so approximately Ninety-eight Thousand dollars it paid as down payment for the being land which was deeded to the Bayview Improvement Company, and the re- mainder of it paid as' commissions three or four different I ones. do know whose was. not it money It was sent to me to buy property. It not this done as a corporate transaction. The money did into go Improvement but to Wm. H. Company, went Frank S. Bond and Z. D. Adair. what That is went with money and Adair was one who I got principal amount. got Seven Thou- sand of it.” Dollars
Now we find from record when the Brown to Cessna was' acquired by Howe paid he took an money and assignment instead of a receipt. In al., Osborne, 742, Summer v. et 101 Fla. 135 513, Sou. we said:
“If paid to owner of a first mortgage is ad- is, vanced one whose duty by contract otherwise, and cancel the first also a second mort- and relieve the gage, mortgaged premises' of the lien of the in the duty proper performance first mortgage, of which interest, an has mortgagee second payment thereof held, as the maker of the shall be first mortgage and second to be a release mortgagee, to the and not an assign-
95 an in form although purporting ment be an instrument assignment given is' to the one so advancing the money.” 644,
In Barber, Home Fire Insurance v. 67 Neb. Co. 1024, 758, N. W. 60 L. 108 Am. R. A. St. Rep. the rule applicable here was stated as follows: permit persons
“To to recover through the medium a court of to which they are not equity simply entitled because the nominal recovery is a distinct person through whom benefit, receive the whole actual and substantiаl would, and that nominal person cases, as rep- ordinary recover, beneficiaries resenting having right be entitled relief, is a It perversion equity. principles turns *41 meant to do justice be into rules to administered strictly without to the result. It regard is to the contrary very When the genius equity. corporation comes equity into relief, equitable and seeks we at ought look the substance and if proceeding judgment the beneficiaries of the recover, have no not sought standing we equity ought fiction to become befogged by corporate individuality, reach principles apply equity inequitable .an result.
“Hence, think the rule to we such apply to cases is this: law, Where a corporation at proceeding is where is a title to asserting property, or title to in- property is volved, the corporation regarded person as a separate stockholders, and distinct from or any its or all of them. But where it is proceeding to assert equity rights of an nature, or is relief equitable seeking upon prin- rules or ciples equity, will equity court that the forget real, stockholders are and substantial beneficiaries of a if recovery, the stockholders have no standing equity, and are not entitled to the equitably remedy sought be
96 in their behalf and their corporation
enforced recover.” permitted will not be advantage, Commonwealth, Tire 208 See & Lord v. Ayer also Co. 693; Arkansas, etc., Loan, 606, 271 S. W. v. Farmers Ky. etc., 954; 587, 22 Bank Pac. & Savings Colo. State Trust Co., N. v. Hermosa 30 M. Pac. Land and Cattle 469. I affirmed. appealed think decree from should be
So, al., et
E. L. Reese, Asher Levin. v.
Notes
notes mortgages take to take the mortgages Bay who were Improvement people View since Company, in no. event furnish or offer would furnishing Mr. Brown then made personal responsibility. That accept corporate statement he was' willing he Improvement View obligation Bay Company; ample protect value of land regarded being he would not re- second he was and that getting, in connection with the quire any personal responsibility
notes from Brown wife secured Cessna by effect, agreement acting such the name of they Bayview Improvement corporation, Company, agreed on his obligation Brown harmless to hold with Brown agreement entered.into that Having Cessna. conscience good in equity and Cessna could not to Cessna obligation paid have that contrive to thereafter so in them power to destroy a manner as to leave in such made and executed value of the second the entire Brown. their corporation record shows conclusively We must bear mind that