Hall v. Henderson , 114 Ala. 601 ( 1896 )

HARALSON, J. —

This bill was filed not to administer the assets of an insolvent corporation for the benefit of all its creditors, on the theory, no longer obtaining in this court, that the stock and other property of a corporation is deemed a trust fund for the payment of the debts of the corporation; but it is one by appellants, a single judgment creditor of the corporation, with a return of execution “no property found,” to reach equitable assets of the corporation in satisfaction of their judgment at law, and filed for such purpose on two theories, in reference to the same transaction.

First. The defendant, Henderson, as is shown, subscribed to the capital stock of the Alabama Terminal & Improvement Company, a corporation under the laws of this State, the sum of $30,-600, which by the terms of subscription, became due and payable. He was a director and the treasurer of said corporation, and co-operated with J. W. Woolfolk, who was president and general manager, and who, as such, had the entire control and management of the business of said corporation, as said Henderson well knew. A. C. Saportas was also a director, who, it is alleged, was entirely under the control and management of said Woolfolk, in reference to the management of the business of said Terminal Company. It is alleged, as presenting HendersonL claim, that hé asserts, that he has paid his said subscription of stock in full, and that afterwards,- he sold and transfei'red the same to said J. W. Woolfolk and A. C. Saportas, — to one or both of them, and that they or the one buying his stock, agreed to pay him $30,000 therefor.

The bill avers, touching this transaction, that if said sale and assignment were made to said Woolfolk and Saportas, as claimed by Henderson, it was merely colorable, and was in fact a sale of said stock to the said Terminal Company; that said Henderson was of ample ability to pay and satisfy his said debt and liability to said company, but was anxious and desirous to escape therefrom ; and that he knew that said Woolfolk was largely indebted to said company for his own subscription of stock and otherwise, and said company was also largely indebted, and hastening to insolvency. It is also averred, that said Henderson well knew that said Wool-folk was, at the time, carrying out a scheme for withdrawing a very large amount of the assets of said company from its treasury, by buying up at par, in the name of the company, large amounts of the stock of the subscribers to its capital stock, and paying for the same with the assets of the company without any authority whatever, — the persons thus favored by said Woolfolk being the brothers and relations, partners and neighbors of said Henderson; that said Woolfolk, as president and general manager, having incurred large debts for the company, and being unable to use to advantage the assets in his hands belonging to the company, owing to the financial depression in the country, proposed to a number of subscribers for stock of said' company residing at Troy, Alabama, among whom were the said Henderson and his brothers, relatives, partners and acquaintances, that they could get rid of their stock and avoid all liability therefor, and at the same time provide for his present need of money, by paying in cash their subscriptions for stock, and by his buying the stock thus paid for, in the name of and for the company, and paying for the same in assets of the company in his hands at a certain price, generally, in bonds of the Alabama Midland Railroad Company, belonging to the said Improvement Company, at 85 cents on the dollar; and this plan was carried out with a number of said subscribers, of all of which said Henderson was informed.

But, as to said Henderson and in his case, it is averred, that on account of his relation to said company, or for some other reason, for his supposed security it was arranged, that he should pay up his stock subscription of $80,000 in full, and that said Woolfolk and Saportas should buy' his stock and execute to him their three notes, each, for $10,000, payable, respectively, in 30, 45 and 60 days from daté, the said Henderson retaining the stock as collateral for securing their payment; and that these notes should be charged up to and paid by said company, as a purchase by it of said stock, and this plan was carried into effect between them ; that said notes, on the 5th of January, 1891, were entered on the'books of the company on bills payable account, as debtor, in the sum of $30,000, and a corresponding entry on the credit side of the cash book of said company, was made in these words: “Investment Acct. Dr. Bought of Fox Henderson 300 shares capital stock of A. T. & I. Co. In suspeuse. $30,000 that said notes were renewed from time to time, and continued on the books of the company as its obligations, and were paid in part, from time to time, out of the funds of said company, of all of which said Henderson had full knowledge ; that at the time of such payments, said Henderson had good reasons to know that said company was largely indebted, if not wholly insolvent, and that the use of said company’s money and assets in the payment and discharge of said notes, was a fraud upon complainants and the creditors of said company, and said Henderson received of the money and assets of said company, in the manner aforesaid, after the 5th day of January, 1891, — the date of the entry of said transaction on the books of the company, — the sum of, to-wit, $25,000.

It is again averred, in this connection, that said Henderson never, in fact, paid up his said subscription in full; that the said Woolfolk, in making the settlement with Kim, allowed him credits for $15,000, or other large sum, to which he was not legally entitled, and that such amount, with interest, in addition to said sum received by him from the assets of said company, since the 5th January, 1891, is still due and unpaid upon said subscription to the capital stock of said company; so that, as complainants aver, the said Henderson has never, in fact, made any bona fide payment of his said subscription . to the capital stock of said company, but that he still owes the same.

The foregoing presents the case as made by the bill in its first aspect. If its averments are true, one of two things is certain, either that Henderson has made no valid payment at all on his stock, and still owes the same, or that, if he has made any payment, he still owes a large amount of money thereon ; and, in either event, by the alleged fraudulent devices resorted to by defendant, Woolfolk and Saportas, to cover up and shield the stock, the right of complainants at law to subject the property to their judgment is obstructed, entitling them, therefore, to the aid of.a court of equity to remove the' obstructions which prevent them from so doing, and to subject equitable assets to the payment of said judgment: Allen v. M. R. R. Co., 11 Ala. 447.

The act of February 18th, 1895, (Acts, 1894-95, p. 881), amending section 2972 of the Code, provides,- that “a judgment creditor of a corporation, having an execution returned no property found, may by garnishment subject the unpaid subscription of any stockholder in such-corporation, to the payment of his debts, without giving bond or security, and without regard to whether the corporation can maintain suit against such stockholder for-such unpaid subscription, or not; or, such creditor may proceed in equity against any one or more of such stockholders, and subject such unpaid subscription without joining the other subscribers, or stockholders, and without regard to whether the corporation has called for such unpaid subscriptions and could maintain suit therefor, or not.” The act, in terms, expressly authorizes a single judgment creditor to proceed in equity to-subject unpaid subscriptions to his debts. A decree in any case of the kind, therefore, would necessarily be a money decree for the amount of unpaid subscriptions, if the creditor’s debt is equal thereto, or for so much thereof, as would equal his debt. — Hatch v. Dana, 101 U. S. 205. It is clear, then, that should the court ascertain that Henderson has not paid up his subscription to the stock of the said company, as is averred in the bill, in its first aspect, it would, after ascertaining the amount due by him, whether in whole as subscribed or only as a balance due thereon, render a money decree against him within the limits of the complainants’ judgment, for the amount so ascertained to be owing by him. It would-look through the alleged fraudulent devices resorted to, to shield defendant from liability, and subject the unpaid stock as an equitable asset to the payment of the judgment, which an execution on the judgment cannot now reach. There is nothing in O’Bear Jewelry Co. v. Volfer & Co., 106 Ala. 205, opposed to what is here said.

Second. The second or alternative aspect in which the bill is filed, is presented in the following language, the pertinency of which is dependent in large measure, upon the preceding averments as above recited : "But if. orators are mistaken in the foregoing averment, as to the subscription of the capital stock of said company not having been paid, they aver that subsequent to the 5th of January, 1891, the said Fox Henderson being a director and treasurer of said company, received. assets of said company amounting to $30,000, or other large sum knowingly, and without proper or legal consideration to said company, which he is liable for, with interest.” This averment is stated following and in connection with the ones before referred to, to the effect, that said Henderson had received of the money and assets of said company large sums of money and other assets to which he was not entitled, the receipt of which was a fraud upon complainants and the creditors of the company. In this aspect, the object'and prayer of the bill is, that said Henderson may be decreed to pay such money and assets of said Improvement Company, which were improperly received and converted by him, and that complainants’ debt may be paid out of the same.

The demurrer to the bill, in the ground mainly relied on is, that it is filed in the alternative, or in a double aspect, presenting inconsistent and repugnant claims for relief; the relief that could be granted in one aspect being materially variant from the relief that could be granted in the other. The court overruled this ground of demurrer. We have deemed it important, however, to fully consider it, for the purpose of another trial, and to settle the main contention on demurrer.

The rule on that subject, as settled in this court, is, that a bill in equity maybe framed in a double aspect, embracing alternate averments for relief, provided each aspect entitles the complainant to substantially the same relief, and the same defenses are applicable to each. If the causes of action presented are so distinct as to require inconsistent and repugnant reliefs, and different defenses, the bill is demurrable on the grounds of multifariousness. — Adams v. Sayre, 70 Ala. 318; Bolman v. Lohman, 74 Ala. 510; Globe I. R. &c. Co. v. Thacker, 87 Ala. 464.

When the purpose of a bill is single in seeking satisfaction of the complainant’s demand out of the debtor’s property, which is alleged to have been fraudulently conveyed, or attempted-to be placed beyond the reach of execution, it is not multifarious, as we have held, although it is exhibited .against several fraudulent grantors. Where fraud permeates the whole transaction, it imparts to the suit a singleness of object and purpose.— Handley v. Heflin, 84 Ala. 604; Hinds v. Hinds, 80 Ala. 227. In Allen v. M. R. R. Co., 11 Ala. 437, referred to above, judgment creditors of the railroad company were suing to obtain payment of their judgments by proceedings- against the stockholders, for their unpaid shares of stock, and against its vendee for the proceeds of the property alleged to have been fraudulently conveyed to him, and -the bill was held not to be subject to the objection of-multifariousness. The court-said : “The object of the bill is to reach the equitable as.sets of the corporation in satisfaction of the complainant’s judgment at law. These assets, it seems, are supposed to be of two sorts : 1.- Those arising from the right of the corporation to call in its unpaid stock; and, 2. Those which may be produced by setting aside the alleged illegal conveyance. Now, if this is true, the stockholders have no concern with the allegations which affect the -deed; but, supposing the unpaid subscriptions and the property conveyed to be assets of the company, the creditor has' the right to pursue them as such, and is entitled to the aid of a court of equity to remove the obstructions which prevent him from doing so. In Brinkerhoff v. Brown, 6 John Ch. 139, the object of the bill, as it is here, was to set aside conveyances as well as to compel payment from defaulting stockholders."

The case before us is stronger than the one just quoted from, for here the same person, Henderson, is the alleged defaulting stockholder, and the party to whom it is alleged the assets of the corporation have been fraudulently transferred, in order to defeat complainants’ judgment.

It will not be denied that a debtor cannot give away his property as against his creditors, and that one who acquires it from a donee, with notice, is in no better attitude, as to the creditor, than the donee. Woolfolk and Saportas had no right, as officers of the corporation, to appropriate its assets towards the payment of their own obligations, even if authorized by the company to do so, and if Henderson is the holder of money or property of the said company, which passed out of the company without consideration, as it is alleged, and he knew that fact, he holds in fraud of the company’s creditors, and in trust for them. — Wait on Fraud. Convey., §§ 383-385. To the extent of such a holding a decree would be rendered against him for the satisfaction of a judgment creditor of the company.

Each aspect of the case entitles the complainants to substantially the same relief, and the same defenses are applicable to each. There is no inconsistency or repugnancy of relief. The decree of the court is flexible and adjustable to reach the equities of the case. The fraud alleged in the transaction is the same in either alternative, entitling the complainants to the same character of relief in either case.

The court sustained the demurrer on the 1st, 11th, 12th, and 13th grounds, and overruled it as to the others. The bill was amended to meet the objection raised by the 1st ground. The 11th, 12th and 13th, raised the objection in different forms, but the same in substance, that the bill was not a general creditors’ bill, filed for the benefit of all the creditors of the corporation. In this there was error. We find no fault with the decree otherwise. It is reversed, and one will be here rendered overruling the demurrer. The defendant is allowed thirty days in which to answer.

Reversed, rendered, and remanded.

Brickell, C. J., not sitting.