115 Ala. 317 | Ala. | 1896
The bill of complaint in this cause was filed on February 20th, 1890, and thereafter and before answer the defendant filed a motion to dismiss the bill for want of equity and a demurrer. The demurrer was overruled, but no action was taken on the motion to dismiss. Thereupon the defendant filed its answer, and after the taking of testimony the cause was submitted for decree on November 14th, 1895, and on the same day a decree was rendered declaring the complainants entitled to relief, and ordering a reference to the register. Upon the coining in of the register’s report, there being no exceptions thereto, the cause was submitted for final decree, and a decree was rendered granting the relief prayed for. Subsequently an application for a rehearing was granted, and thereafter the cause was again submitted for final decree, the submission including defendant’s motion to dismiss for want of equity and demurrer, and a final decree was rendered overruling the demurrer and granting relief, but the decree was silent as the motion to dismiss, and no action is shown to have been taken on it. Rule 76 of Chancery Practice provides that the defendant may, at any stage of the cause, move to dismiss the bill for want of equity, unless a similar motion has been previously made and determined, and that such motion may be made and heard in connection with the final hearing. The rendi
The averments are substantially as follows : “Some time ago” R. W. Francis was the owner of twenty shares of the capital stock of the Excelsior Foundry & Machine Co., “a corporation doing business at Avondale, in Jefferson county, Alabama,” the balance of the stock being held by other parties, one of whom was J. M. Carter; that said company had purchased a lot from the Avon-dale Land Co., the legal title to the same being retained in the vendor ; that said Carter “purchased, or by some means obtained the majority of the stock of said Excelsior F. & M. Co., the exact amount of his holdings is not known to complainants, but they were informed and believe that said Carter held all of the stock of said Excelsior F. & M. Co., except the twenty shares held by said Francis. The said Carter induced the directors of the said Excelsior F. & M. Co. to order said Avondale Land Co. to make a deed conveying said land to said Carter, as complainants are informed and believe, but the means by which said deed was obtained, or by whose direction it was made, are not known to complainants ;” that said Francis did not authorize the making of said deed, nor did he have notice of any stockholders’ or other meeting called for the purpose of authorizing the making of the same; that the Avondale Land Co. made and delivered to Carter a deed conveying to him said land, and neither of said complainants knew of the making of the same ; that after obtaining said deed, on July 15th, 1887, Carter executed and delivered to the defendant a mortgage, conveying to it said land and the improvements thereon to secure an indebtedness of $5,000 ; and that on August 3d, 1887, he conveyed said land Toy a deed of bargain and sale to the Ellen Ross Iron Works, a body corporate. On August 22d, 1888, the debt to defendant being due and unpaid, the mortgage was foreclosed and the defendant became the purchaser of the land at the sale at the price of $6,086.46, and took possession of the property; and that it claims that by said foreclosure the right of redemption of both Carter and the Ellen Ross Iron Works was lost, The bill then alleges -that when
The very meager statement of facts in the bill makes it difficult, to determine the theory upon which com
In order to sustain the equity of the bill,, thus considered, we would have to assume that, at the time of the filing of the bill, complainants were in fact stockholders in said corporation ; that Carter had made an unlawful use of his power as a majority stockholder and had wrongfully and fraudulently procured the making of said deed without any consideration moving to the corporation, and that said wrongful act had in fact diminished the assets of the corporation and resulted in consequent injury to the interests of the corporation and the complainants as stockholders thereof; that the defendant had taken its mortgage on said land with ' notice, actual or constructive, of the equity of the corporation and the fraudulent act of Carter ; and that the complainants had, prior to the filing of the bill, made an earnest but futile effort to induce the directors of said corporation to institute proceedings to obtain redress of the grievance complained of, or that a state of facts existed which would excuse such effort; since not one of these facts is stated in the bill. We can not, even for the purpose of determining a motion to dismiss for want of equity, assume the existence of these facts, 'so essential to the equity of a bill of this character, which seeks to have a subsequent purchaser of the property supposed to have been misap
A court of equity undoubtedly lias jurisdiction, in case of fraud, abuse of trust, or misappropriation of corporate funds or property, to grant relief and compel a restitution or accounting. But in order to invoke this jurisdiction the act complained of must have been fraudulent, illegal or ultra vires, and results in injury to the corporation and the interests of the stockholders. And since the wrong is committed primarily against the“corporation, when such relief is sought at the instance of a stockholder, it must clearly appear that, prior to the institution of the suit, he had made an earnest effort with the managing body of the corporation to induce remedial action on their part, and had failed therein, or that facts exist which would render such efforts futile and useless. When a stockholder makes the suit his own there is no equity in his bill in the absence of averments showing these facts. These principles have been so frequently considered and determined in this court that they require no further discussion here.—Tuscaloosa Mfg. Co. v. Cox, 68 Ala. 71; Merchants & Planters Line v. Waganer, 71 Ala. 581; Roman v. Woolfolk, 98 Ala. 237 ; Steiner v. Parsons 103 Ala. 220; Bridgeport Development Co. v. Tritsch, 110 Ala. 274; Decatur Mineral Land Co. v. Palm, 113 Ala. 531. For aught that appears in the bill to the contrary, the Excelsior Foundry & Machine Co. was in active existence at the time of the filing of the bill, having a board of directors and other officers, who would willingly have instituted proceedings to obtain redress for any wrong committed against the corporation. Carter may have paid a fair and adequate |>i'ice for the equity of-the corporation in the land conveyed to him, and the entire transaction may have been legal and attended with the utmost good faith, resulting in benefit rather than detriment to the corporation and its stockholders ; and the defendant may have been an innocent purchaser of the land by mortgage. Not one of these facts is controverted in the bill, either by direct averment or by inference from other facts averred. Considered, therefore, as a bill by a stockholder to annul the transaction or contract by which Carter acquired the equity of the corporation in the land and the subsequent legal title, and to declare the defendant a trustee of the
The conclusion we reach is, that the motion to dismiss the bill for' want of equity was well taken, and should have been sustained. This renders unnecessary a consideration of any other question the assignments of error involve.
The decree of the chancellor is reversed, and a decree will be here rendered dismissing the bill for want of equity.
Per, Curiam. — We have carefully examined the application for rehearing, and without entering anew into a discussion of the case, it is sufficient to say, that we feel constrained to adhere to the former opinion. But on consideration, we deem it better not to render a final decree dismissing the bill. In this respect the decree heretofore rendered will be modified, reversing the decree of the chancellor and remanding the cause, with instructions that the motion to dismiss be sustained, and allowing complainants, if they desire, to amend the bill within such time as the chancellor may prescribe.
Reversed and remanded.