Arnold v. West Lumber Company , 198 Ga. 207 ( 1944 )

It is not the right of a stranger to a pending cause to intervene therein, unless it is necessary to his protection that he be allowed to become a party to the litigation and thus afforded an opportunity to resist the rendition of a judgment which would operate to his prejudice.

No. 14932. SEPTEMBER 6, 1944. West Lumber Company filed a suit in Fulton superior court against Briarwood Inc., and alleged: that the defendant was indebted to the petitioner in a named amount for building materials furnished to the defendant and used in improving described real estate; that within ninety days a claim of lien was duly filed; that the defendant had executed loan deeds against the property, constituting prior liens on the premises; that a large number of other materialmen had furnished materials used in improving the real estate, and their claims are unpaid; that these liens are all of equal rank; that the defendant is insolvent, with a large number of unpaid judgments against it, duly recorded; that loan deeds are in default and are about to be foreclosed; that the petitioners and other creditors similarly situated will suffer irreparable loss on account of the insolvency of the defendant; that a considerable amount of the defendant's property has been permitted to be sold at foreclosure sales; that the suit was brought for the benefit of West Lumber Company and other creditors similarly situated; that owing to the large number of creditors, a multiplicity of suits will result unless a court of equity assumes jurisdiction and requires all parties to intervene; that the defendant had already conveyed large portions of its properties, while insolvent, for the purpose of delaying and defrauding creditors; and that certain creditors were being preferred. The prayers were for a judgment foreclosing its lien; that other creditors be allowed, permitted, and required to intervene and have their respective claims reduced to judgment, and in this proceeding have the respective rank, dignity, and priorities fixed; that the defendant's assets be marshalled and administered for the benefit of the petitioner and others similarly situated; that a receiver be appointed; and for general relief. Upon this petition, Edgar Craighead and F. W. Kerr were appointed receivers.

Thereafter Paul T. Arnold filed his intervention, seeking to become a party, and praying that Guy W. Rutland Sr. and Rutland Contracting Company be made parties. After giving a history of the pending case, Arnold alleged that Guy W. Rutland Sr., a resident of DeKalb County, Georgia, was president or owner of all of the stock of Rutland Contracting Company; that Fred W. Kerr, one of the receivers, was an employee of Guy W. Rutland Sr., and an officer in the Rutland Contracting Company; that Briarwood Inc. was indebted to Guy W. Rutland Sr. in the sum of approximately $8000, this indebtedness being unsecured; that in November, 1939, Guy W. Rutland Sr. demanded and received a loan deed conveying certain property to him as security for his indebtedness and future advances; that prior to taking the loan deed the indebtedness had been reduced to judgment, and that, notwithstanding the loan deed, Guy W. Rutland Sr. and Rutland Contracting Company were using the judgment as a means of preferring themselves over other creditors; that Briarwood Inc. was indebted, other than the Rutland indebtedness, in the sum of $10,740.97; that at the time the materials were furnished, the intervenor was president of Briarwood Inc. and prevailed upon the materialmen not to record their liens, so that he could sell the houses, and when the houses were sold they would be paid out of the proceeds of such sale; that Guy W. Rutland Sr. told the intervenor that he was going to foreclose his loan deed unless the intervenor would transfer to him all of the capital stock of Briarwood Inc., but that if the stock was transferred to him, he would sell the houses and lots when profitable, apply the proceeds to the payment of the materials and labor, and the balance to the indebtedness of Rutland Contracting Company and Guy W. Rutland Sr., and should there be any excess, he would divide it between Guy W. Rutland Sr. and the intervenor, and thereupon the stock was transferred to Guy W. Rutland Sr.; that a stockholders' meeting was called, and Guy W. Rutland Jr. was elected president and Fred W. Kerr secretary and treasurer; that a list of the accounts payable and a statement of how they were to be paid from the proceeds of the sale of the houses and lots were furnished to Guy W. Rutland Sr. and Fred W. Kerr, upon their request, by the intervenor, who again assured materialmen it would not be necessary to record their liens; that, when the first two houses were sold, the agreement was complied with and the materialmen were paid in accordance with the agreement; but that thereafter Guy W. Rutland Sr. and Fred W. Kerr refused to pay the materialmen except where liens had actually been filed and recorded, and Guy W. Rutland Sr. and Rutland Contracting Company refused to permit payment of materialmen, even though the sums for their payment were set aside and held in escrow for this purpose; that the receivership is being used to transfer to Rutland Contracting Company large sums, which should be applied to the payment of materialmen's claims, all in violation of the agreement made between Paul T. Arnold and Guy W. Rutland Sr.; that Haley-Stewart Electrical Company and H. W. Trout Lumber Company have sued the intervenor personally in the courts of DeKalb County, when the items sued on are owed by the corporation Briarwood Inc., and that because Guy W. Rutland Sr. refused to live up to his agreement, the intervenor is having to defend these suits; that Fred W. Kerr is not an impartial receiver; that the receivership is general, but the receivers are not taking possession of all the assets of Briarwood Inc.; that Guy W. Rutland Sr., Rutland Contracting Company, and Fred W. Kerr should be made parties defendant in the case, an accounting had, and all the assets of Briarwood Inc. used to pay the outstanding bills in accordance with the agreement between Paul T. Arnold and Guy W. Rutland Sr.; and that the suits against Paul T. Arnold as an individual should be restrained, and those parties be required to set up their claims in this proceeding.

There were appropriate prayers that all of these persons be made parties; that all of the assets of Briarwood Inc. be brought into the receivership and administered for the benefit of creditors, and when the materialmen have been paid, the balance be applied to the indebtedness of Rutland Contracting Company; that an accounting be had between Paul T. Arnold and Guy W. Rutland Sr.; and that Paul T. Arnold have judgment against Guy W. Rutland Sr. for such sums as Rutland had received in violation of the contract set out between him and the intervenor.

A rule nisi was issued on the petition for intervention, and general demurrers were filed by all the defendants except H. W. Trout Lumber Company, which was not served. When the general demurrers came on for hearing, the court rendered the following judgment: "The intervention of Paul T. Arnold which was filed February 9, 1944, seeking to make parties and other relief, coming on to be considered, and motions to dismiss the same having been filed by Guy W. Rutland Sr., Fred W. Kerr, and Guy W. Rutland Jr., as representatives of Rutland Contracting Company, and general demurrers to said intervention having been filed by Fred Kerr, Guy W. Rutland Sr., and Guy W. Rutland Jr., as representatives of Rutland Contracting Company, and also by Guy W. Rutland Sr. individually, and a general demurrer also having been filed by Haley-Stewart Electrical Company Inc., said motions to dismiss and general demurrers, and each and all of them, challenging the right of said Paul T. Arnold to seek the relief set out in such intervention: it appearing to the court that no facts are alleged by said Paul T. Arnold which would authorize the allowance of said intervention, the same is disallowed." The exception is to this judgment. The foregoing statement of facts will disclose that the proceeding filed by West Lumber Company against Briarwood Inc. was simply one for the enforcement of its claim of indebtedness, for the appointment of a receiver to protect and preserve the assets of the defendant, and for a determination of the amount and respective priorities of the claims of creditors of Briarwood Inc. The proposed intervention of Paul T. Arnold simply shows that he was a former stockholder in and president of Briarwood Inc.; that when he transferred his stock to Guy W. Rutland Sr., a contract was made with Rutland, and Rutland has breached the terms of this contract; and that certain creditors of Briarwood Inc. have filed suits against Arnold in his individual capacity on accounts that are the obligations of Briarwood Inc. Arnold claims no interest in Briarwood Inc. or West Lumber Company, and seeks no judgment against either the plaintiff or the defendant, but insists that the creditors of Briarwood Inc. should be enjoined in this proceeding from prosecuting suits against him; and that, in this proceeding, he should have an accounting with and judgment against Guy W. Rutland Sr. The question is, can Paul T. Arnold, for these purposes, intervene in the proceeding by West Lumber Company against Briarwood Inc.?

It is insisted that the Code, § 37-1007, gives to him this right. This section reads as follows: "Where there is one common right to be established by or against several, and one is asserting the right against many, or many against one, equity will determine the whole matter in one action." We fail to see how this section can have any application to the state of facts now under consideration. The intervenor in the instant case has no common right with West Lumber Company, Briarwood Inc., or the creditors of Briarwood Inc. He simply seeks to have certain creditors of Briarwood Inc. enjoined from prosecuting suits against him, and a judgment against Guy W. Rutland Sr. for a claim against Rutland for breach of contract. True it is that the alleged breach of contract as to Rutland grew out of a transfer of stock of Briarwood Inc. by the intervenor to Rutland. This, however, is an independent and personal matter between the intervenor and Rutland, and can in no sense establish a common right as between or against the plaintiff, the defendant, or the creditors involved in the proceeding by West Lumber Company, against Briarwood Inc.

It is further insisted that the case of Davis v. Warde,155 Ga. 748 (118 S.E. 378), is authority for this proposed intervention. The ruling in that case was that the intervenors had a common interest in the subject-matter of the litigation and could intervene, because they were taxpayers of the municipality. This holding has no application to the instant case. "It is not the right of a stranger to a pending cause to intervene therein, unless it is necessary to his protection that he be allowed to become a party to the litigation and thus afforded an opportunity to resist the rendition of a judgment which would operate to his prejudice."Clarke v. Wheatley, 113 Ga. 1074 (39 S.E. 437); Clarke v. Harrison, 182 Ga. 56 (3) (184 S.E. 620).

The intervenor in the instant case is a stranger thereto, and no judgment could be there rendered which could in any way prejudice his right to defend the suits brought against him by creditors of Briarwood Inc., or his right to proceed against Guy W. Rutland Sr. for breach of contract. "A person is not entitled to intervene where he has a remedy by an independent bill against both plaintiff and defendant and the petition to be made a party involves no principle to be settled in the case." 21 C. J. 344, § 343. In Davis v. Warde, supra, where the intervention was allowed because the intervenors were taxpayers of the municipality, it is stated that, "The general rule is that a stranger to a pending cause of action can not intervene therein, unless it is necessary for his protection that he be allowed to become a party defendant to the litigation, and thus afford him an opportunity to resist the rendition of a judgment which would operate to his prejudice." We conclude that the court committed no error in refusing to allow the plaintiff in error to intervene.

Judgment affirmed. All the Justices concur.