126 Ala. 449 | Ala. | 1899
We shall first dispose of the questions raised by the assignments of error on the cross-appeal.
When this case was here on former appeal (114 Ala. 601) the equities of the bill were fully discussed and settled. In the opinion delivered, the averments of the bill are set out im extenso and the two theories under which relief is sought are pointed out and shown not to be inconsistent or repugnant, the one with the other. The purpose of the bill under the second or alternative • aspect presented in it, is to seek satisfaction of the complainants’ demand out of the debtor’s property, which is alleged in effect to have been fraudulently conveyed or attempted to be placed beyond the reach of execution. Or to state the proposition in another form, it is to subject to the satisfaction of complainants’ debt equitable assets in the hands of Henderson which have been converted by him. For if it he true as averred that Woolfolk and Saportas as officer's of the corporation, the A. T. & I. Co., purchased the stock of nender
We are aware that the courts of this country are di Added upon the question as to the poAver of corpora-' tions to acquire and hold its own stock. But in no jurisdiction is the poAver of a corporation to purchase its oavu shares sustained, if the purchase is made AAdth the intent to injAire its creditors or to defeat them in the collection of their claims or if it has such effect. 7 Am. & Eng. Ency. LaAV, pp. 818, 819, 820, and notes.
We have made no mention of the first theory presented by the bill based upon the averment that Henderson has not paid his subscription note executed by him to the A. T. & I. Company for stock. This is unsupported by the testimony in the case and is not insisted upon as a ground for relief.
After the cause was reversed on the former appeal, the bill was amended by incorporating into it the averment that the complainants became the owners of the debt held by the Farley National Bank against the A. T. & I. Company with the right to collect the same for the benefit of the stockholders of said bank and also", by making H. M. Hall a party complainant in whose name the indebtedness of the bank against the A. T. & I. Co. was reduced to judgment. After these amendments were made, a number of grounds of demurrer was assigned to the 'bill as amended. It is argued in. support of the 6th and 7th grounds that the judgment in favor of Hall as receiver is a nullity because theaverments of the bill show his discharge as receiver before the rendition of the judgment and the assets of the bank returned to it and transferred to the other complainants, Hall and Farley as trustees. The argument is that the suit in which the judgment was recovered abated, by reason of Hall’s discharge as receiver, and therefore the judgment was void. The insistence is that section 26 of the Code requires all suits to be prosecuted in the name of the parties really interested. But the exception made by the statute is that in actions upon bills of exchange and promissory notes payable at a bank, or banking house or at a designated place and other commercial instruments, the suit must be instituted in the name of the person having the legal title. We will presume in support of the judgment that such was the character of the instrument' sued upon and evinced the debt for which the judgment was ren
The case of Rice v. Rice, 106 Ala. 636, ansAvers the contention made in ’support of the 8th, 9th, and 10th grounds of the demurrer,, that the cestui que trust of Hall and Farley as trustees should be parties to this cause.
The making of H. M. Hall a party complainant, relieved the necessity of any averment of a formal transfer or assignment of the judgment or proof of such assignment or transfer. Nor did it bring the case Avithin the application of the general doctrine that all complainants must recoArer or none can. These principles are settled in the folloAAdng cases: Gunter v. Williams, 40 Ala. 572; Blevins v. Buck, 26 Ala. 292; Plowman v. Riddle, 14 Ala. 169; McLane v. McLane, 19 Ala. 180, and it will serve no purpose to discuss them at length. This disposes of the 11th and 12th and 1st grounds of demurrer to the bill as amended by making Hall a qmrty.
It is stated, in brief, in support of the first, second, third and fourth grounds of demurrer to the alternatire phase of the bill, that they, should be sustained because the averments of the bill are too indefinite and uncertain, in that it fails to show when the assets Avere received by Henderson, Avhat the assets consisted in, hoAv they Avere received, Avhether as director and treasurer of the company in his official capacity, or whether in his individual capacity and whether all were received at one time or at different times. These are matters peculiarly within the knowledge of the A. T. & I. Co. and Henderson, the respondents to the bill. We do not understand it to be a rule of pleading that the eAddential facts upon Avliich the pleader relies shall be set forth in his pleading. The charge is, that Henderson, subsequent to January 5, 1891, being a director and treasurer of the company, received assets of said company amounting to $30,000 or other large sum,
The fact of the insolvency of the Alabama Terminal & Improvement Co. is sufficiently proven by the evidence. But this fact is immaterial under the view we take of this case.. For if it be true that Henderson received the assets of the corporation knowingly or under such circumstances as to put him upon inquiry that the money paid to him for his stock was the money of the corporation in consideration of a sale by him of the stock to the corporation direct, or through Woolfolk and Saportas to the corporation, or if the consideration enuring to the corporation was his stock, then it is in effect a gift by the corporation to him of its assets, which is fraudulent as to creditors whether the corporation was actually insolvent at'the time the bargain for the sale of the stock was made or not. There can be little doubt, if that were important, that it was on the road to financial disaster when the alleged sale was-made and was hopelessly insolvent long before Henderson received many of the payments made to him. Morawetz on Corporations, § § 793, 794. Nor do we understand the fact to be controverted that all the money Henderson received on account of his alleged sale of the stock was paid out of the assets of the corporation. There is no room under the evidence for such a disputation, for it points with unerring certainty to this conclusion.
The chancellor rendered a decree against Henderson for $8,719.01 and interest, and refused to charge him with the other money, assets of the corporation, received by him. In dealing with Henderson’s liability, he
The remaining contention made by Henderson, the ■cross-appellant, is predicted upon an estoppel which is ■alleged in his ansHver and which lie insists is supported by the proof in the cause. We quote from his counsel’s brief as showing what defense is alleged in the answer: ■“The answer in this case, filed May 15th, 1897, and refiled with the amendment April 16, 1898, in the sixth paragraph on page 6, sets up as a defense that Hender
If Ave treat the insistence as laid in argument, that the proofs sustains the averments of the ansAver, the Avhole matter might be disposed of by pointing out the fact that the eA’idence shows that this stock stands in tire name of one John W. Hess, and has never, as a matter of fact, been transferred to these complainants. True the assignment to Hall and' Farley as trustees shows 400 shares of stock is embraced in it. But the record sIioays that the corporation had purchased quite a large amount of its stock from other stockholders. Whether this 400 shares mentioned in the assignment is the stock bought of Henderson or the other Troy stockholders, does not clearly appear from the evidence. But aside from this, in the transaction between Henderson and Woolfolk, AA’hich is sIioavu to have taken place about March 13, 1891, by \Arhich this stock'Avas surrendered by Henderson to Woolfolk, Henderson got, in lieu of it bonds as collateral security. The bank is not shown to have been a party to the negotiations between them AA'hicli resulted in this exchange of securities, or to have had anything Avliatever to do with it, except to become the transferee solely for the purpose of becoming a conduit by Avhich the Chatham National Bank of New York city might become, its owner as the property of Woolfolk. This purpose is clearly disclosed in Woolfolk’s letter to Henderson. But conceding that the Chatham National Bank desired, and held this stock as collateral security for an indebtedness due it by the Farley Bank, AAre can perceiA'e no injury'to Henderson on that account. He receiA'ed a quid pro quo from Woolfolk for the stock he surrendered. If he after-
It is further argued in support of the proposition that the averments of the answer are proven by these facts, viz., that on March 28, 1891, Henderson sent to the Farley Bank a note of Woolfolk to him in the sum of 13,333.33 for collection, and on May 1 a similar note for $4,000 for the same purpose, which were paid by checks drawn by Woolfolk on that bank, signed by him as “President.” The evidence discloses that the consideration of these iiotes which were ostensibly given, along with others, by Woolfolk and Saportas, was for the purchase of Henderson’s stock in the corporation. However, there was nothing on their face indicating this. It is true the bank undertook their collection and that on presentation of them by it to Woolfolk, he gave checks on it signed by him “President,” which were paid by the bank, and the amounts remitted to Henderson. Confessedly all this does not, in the remotest degree, tend to prove that the stock was transferred to the bank, or that the bank transferred the stock to the complainants, as averred in the answer.
But it is said that the bank, by honoring these checks out of the deposits of the A. T. & I. Co. in payment of notes which showed on their face that they were the individual indebtedness of Woolfolk and Saportas, committed a wrong upon Henderson. This wrong consisted in not informing Henderson that Woolfolk was paying his debt to him out of the funds of the corporation and not his own. How did the bank know that Woolfolk was misappropriating trust funds? If it can be charged with such knowledge, it must be made to rest upon the fact that the checks were signed “Wool-folk, President,”—a strange and anomalous position for Henderson to assume. He had, prior to this time,
Nor are the complainants’ rights under the aspect of the bill under consideration, dependent upon the-right of the corporation to assert its title to this money.. The transaction, as we have shown, was fraudulent as-against these complainants. Being fraudulent, their-rights to subject their debtor’s property fraudulently conveyed is in nowise dependent upon the right of their debtor to recover the money of Henderson.
Upon what principle an estoppel could be said to rest as to the money of the corporation received by Henderson, other than the two sums collected for him by the bank, so as to preclude the rights of these complainants, even if it be conceded that the bank owed Henderson the duty to notify him that Woolfolk liad offered to pay these notes by checks'drawn on the deposits with it belonging to the corporation, we are unable to see. Certainly not upon the doctrine of' ratification. The bank
It follows from what we have said that Henderson takes nothing by his appeal.
Of the $29,102.57 of the A. T. & I. Co.’s money received by Henderson in payment for his stock, the learned judge in the court below only charged him, as we have said, with $8,719.61, and refused to charge him with the following items: $2,500 paid February 24, 1891; $7,530 paid on the same day; $3,342.96 paid March '23; $4,010 paid May 1; and $3,000 paid June 6, aggregating the sum of $20,382.96. From a reading of his
The entries upon the cash book disclose “Bills payable January 5th, 1891 : 3 notes account of A. 0. Saportas and J. W. Woolfolk for the A. T. & I. Co. for $10,000, each due as follows:
One note 30 clays after date................$10,000
One note 45 days after date................ 10,000
One note 60 days after date................ 10,000
$30,000
On credit side of cash book:
Investment account—
Bought of Fox Henderson 3,000 shares capital stock of A. T. & I. Co. :
In suspense..............................i,.$30,000
Justice Brewer, now of the Supreme Court of the United States, Avliile a member of the Supreme Court of Kansas, in the case of National Bank v. Drake, 29 Kan. 326, said: “The directory, as has been said, is the visible representatiAre of the bank. Persons dealing AA'ith it meet only this visible representative, and have a right to presume that it knows all of the affairs of the bank, all that the bank as a principal ought to knoAV of its condition and business. On the other hand, the stockholders and depositors—the persons avLo are pecuniarily interested in the safe management and prosperity of the bank—look to the directors as the chosen
The case of United Society v. Underwood, 9 Bush, 609, was several actions of trover brought to recover of directors of an insolvent bank by those who had placed certain bonds in the custody of the bank, on naked bailment, as a special deposit. The declarations charged that the bonds so deposited had been converted to the use and emolument of the bank; that they had been abstracted from the. package of special deposit by officers of the bank, and sold, and the proceeds used in the business of the bank; that, the defendants, being directors, had notice of the fact of such conversion, or could by the most ordinary diligence, have had notice, as well from the ledgers, books and accounts of the bank as from its correspondence, etc. To the declarations a demurrer was sustained by the lower court. The Supreme Court, reversing the rulings of the lower court, said: “Bank directors are not mere agents, like cashiers, tellers, and clerks. They are trustees for the stockholders; and as to their dealing with the bank, they not only act for it and in its name, but, in a qualified sense, are the bank itself. It is "the duty of the board to exercise a general supervision over the affairs of the bank, and to direct and control the action of its subordinate officers in all important transactions. The community have the right to assume that the directory does its duty, and to hold them personally liable for neglecting it. Their contract is not alone with the bank. They invite the public to deal with the corporation, and when any one accepts their invitation lift has the right to expect reasonable diligence and good faith at their hands; and if they fail in either they violate a duty they owe not only to the stockholders, but to the creditors and patrons of the corporation.—Hodges v. New England Screw Co., 1 R. I. 312. * * * It is
These principles are also declared in Martin v. Webb, 110 U. S. 7; Merchants’ Bank of Lincoln v. Rudulf, 5 Neb. 527; Bank of Wulfekuhleh, 19 Kan. 527; Arlington v. Peirce, 122 Mass. 270; Bank v. Dandridge, 12 Wheat. 64.
The competency of the entries in the books as evidence against a director is recognized, though the presumption raised is not held' to be conclusive or indis-
Under the facts of this case, it is unnecessary to go ¡to the length of holding the presumption raised against Henderson, conclusive. According to these entries, the force of a disputable presumption of the truth of the facts stated in them, when taken, and weighed in connection with the facts we have pointed out above, as shown outside of the book entries, our conclusion is, that Henderson’s statement, and that of Woolfolk’s, that the stock was sold to Wool folk and Suportas, and not to the corporation, is insufficient to overcome their probative effect. The sale being to the corporation, it follows as a matter of course, that Henderson knew that he was being paid by it, his vendee.
A decree will be here entered affirming the decree upon the appeal prosecuted by Henderson, and reversing the decree upon the appeal of Hall and Farley. A decree will also be here rendered in favor of Hall and Farley as trustees for all the money paid to I-Ienderson on account of this sale.