Bush v. Jefferson Standard Life Ins. Co.

A case is moot, and a writ of error from a dismissal of the action on general demurrer must be dismissed, where the only relief prayed is a temporary restraining order and injunction against a sale under a security deed, or relief merely incidental thereto, and no attack is made on the validity of the instrument or sale; and where for the first time it is made to appear in this court, without dispute, that the sale occurred after dissolution of a temporary restraining order, although before the dismissal on the general demurrer, and where the record does not show that the judge before his decision was apprised as to the sale, and there is no exception on that ground. The dismissal of the writ of error in this case shall operate without prejudice to any rights of the plaintiffs in error.

No. 14006. MARCH 11, 1942. William E. Bush and William E. Bush Company, as owners of common stock and income bonds in Bon Air Augusta Company, which owned the Bon Air Hotel properties in Augusta, brought their petition in two counts against Jefferson Standard Life Insurance Company. The first count alleged, that the defendant, as grantee in a security deed from Bon Air Augusta Company, was advertising the property for public sale on the first Tuesday in July, 1941, under a power in the instrument; that the properties were worth much more than the debt to the defendant; that there was a reasonable certainty of the Government's establishment of an army camp near Augusta, and the hotel could be operated by receivers to the advantage of the plaintiffs and other minority stockholders, because the camp would cause a shortage of dwelling facilities and increase the hotel business; that if the sale were thus postponed, no harm could come to the defendant, and it could agree on the appointment of receivers "without jeopardizing its interest or security;" that the individual plaintiff at a meeting of stockholders of the debtor corporation had made efforts for negotiations with the defendant creditor, to save the interests of the minority stockholders, but these had failed; and that it was apparent from the creditor's actions that it intended to proceed with the foreclosure, in order to receive all the profits from operating the hotel after establishment of the camp. The first count did not attack the validity of the security deed or of the proposed sale, or deny that the debt was in default.

The second count complained that at the previous foreclosure sale by the defendant under a security deed from the predecessor corporation of the present owner, by virtue of which sale the present status of the properties arose, the defendant sold the personalty in bulk with the real estate, whereas there was no legal authority thus to sell and convey the personalty, and it is impossible to tell what the real estate brought. However, the validity of any of the instruments executed after the sale is not attacked; and the complaint is merely that "petitioners can not safely bid on said property [at the present foreclosure], protect his interest, until the validity of said first foreclosure is legally determined."

Both counts prayed for a temporary restraining order and injunction against the sale, and for general relief. The first count prayed that after a restraining order should be granted, it be continued at an interlocutory hearing, where upon good cause shown receivers be appointed to report on the feasibility of operating the hotel at a profit, and, upon their favorable report, that the injunction against the sale be made permanent, the receivers continue operations as long as profitable, and after payment of "all of the indebtedness, or as much thereof as possible," the physical properties be returned to the stockholders and bondholders of Bon Air Augusta Company.

By amendment to the first count, proceedings at a meeting of stockholders of the debtor corporation just before the foreclosure are alleged in detail; and complaint is made as to certain named persons being officers and directors in both the debtor and the creditor corporation, and as to the failure of such persons and a committee of the debtor corporation to take sufficient active steps with the creditor to obtain a postponement of the foreclosure, since if "any communication was . . had, it was telephonic communication." There is no prayer in the amendment other than for its allowance. There is no party defendant other than the creditor corporation.

The judge, after granting a temporary restraining order on June 30, 1941, entered an order vacating and dissolving it on July 1, 1941.

On October 10, 1941, the judge entered an order dismissing the petition and amendment upon general demurrer, on the grounds that no cause of action was stated for equitable or legal relief; and that neither the plaintiffs nor the debtor corporation "had offered to do equity by offering to pay the secured indebtedness admitted to be due."

Although the previous record made no reference to the sale having occurred, it appeared by brief in this court that after the dissolution of the temporary restraining order "the sale of the Bon Air Hotel properties took place on July 1, 1941, between the legal hours of sale." In response to a rule nisi as to why the case should not be dismissed as moot, it is undisputed that the sale thus occurred. In the response of plaintiffs they expressly recognize that this court "would not and should not pass upon the legality or propriety of the sale of the properties after injunctive relief had been denied." However, they contend that notwithstanding the limited specific prayers, they are entitled to a holding, under their general prayer, as to whether "such sale was thoroughly legal and such foreclosure thoroughly proper;" and therefore that this court should pass on the questions, raised by the petition and demurrer, as to the necessity of tendering "the secured debt as a condition precedent to seeking the restraining order," and as to the acts and the trust relationship between the officers of the debtor corporation and the stockholders, none of which officers nor the corporation are made parties. The plaintiffs further state, that "there is no moratory statute . . that the security deed's terms constitute its own statute;" that they are "not attempting to vitiate or destroy a vested contractual right . . in the contract or deed to foreclose upon default;" that they are not attempting to "prohibit the defendant from receiving payment of its loan, or of exercising its right to collect by foreclosure according to the terms of the deed;" but they "are asking that the exercise of this right in good conscience should bepostponed to determine if certain conditions" would warrant "a preservation of the property," making payments to creditors and stockholders, "as well as the payment of the debt in full, without sacrificing the properties and the equities of the stockholders." Exceptions to the dismissal on general demurrer of a petition by stockholders in a debtor corporation, to restrain and enjoin an advertised public sale by the creditor under a power in the security deed, must be dismissed as moot, where it now appears in this court without dispute that the sale it was sought to enjoin has occurred after the dissolution of a temporary restraining order without supersedeas, and where all the relief sought in the petition necessarily was merely incidental to a postponement of the sale, and where it is conceded that the security deed and the indebtedness claimed thereunder are valid, and there is no attack on the validity of the sale as it occurred, but the essential relief sought was merely a postponement of the sale to a more advantageous time for the benefit of the plaintiffs and other stockholders. Moody v.Ga. Ry. Power Co., 139 Ga. 102 (76 S.E. 857); Tabor v.Hipp, 136 Ga. 123, 124 (70 S.E. 886, Ann. Cas. 1912C, 246); Samuels v. Lanford, 149 Ga. 167 (99 S.E. 532). Since the case thus has become moot, we are compelled, following a long line of decisions by this court, to dismiss the writ of error, but do so without prejudice to any of the rights of the plaintiffs. Mathews v. Fort Valley Cotton Mills, 177 Ga. 340,344 (170 S.E. 256); Davis v. Jasper, 119 Ga. 57 (2), 59 (45 S.E. 724); Garlington v. Davison, 122 Ga. 677, 679 (50 S.E. 667); Bigham v. Yundt, 158 Ga. 600 (2) (123 S.E. 870). The explicit preservation of any rights that the plaintiffs might have under circumstances such as outlined, which has frequently been granted as in the cases just cited, is manifestly just and appropriate, inasmuch as the plaintiffs could not have excepted and obtained a supersedeas from the dissolution of the restraining order, so as to prevent the sale which rendered the case moot. Bragg v. Burke, 182 Ga. 592 (2) (186 S.E. 675);Hitchcock v. Hamilton, 184 Ga. 700 (192 S.E. 726); Jones v. Graham, 187 Ga. 622 (1 S.E.2d 635), and cit. Such preservation of any rights which the plaintiffs might have, and which otherwise might have become moot under the doctrine of res judicata (see Manry v. Stephens, 190 Ga. 305 (2), 306,9 S.E.2d 58), rests upon an even sounder basis than the right often given to a plaintiff in error to file his premature bill of exceptions as exceptions pendente lite.

Decisions cited by the plaintiffs hold nothing to the contrary. In Peoples Bank v. Fidelity Loan c. Co., 155 Ga. 619 (117 S.E. 747), the court refused to treat the case as moot, because "the petition prayed for equitable relief which, if granted in the suit, would avoid the sale," and the defendant had "proceeded to sell at its peril." In Henderson v. Willis,160 Ga. 638 (5), 646 (128 S.E. 807), the case was not treated as moot, because the petition, brought after the sale, attacked its validity for the reason that the advertisement had violated a previous injunctive order of the court, and chilled the bidding, and therefore did not constitute such legal notice as the law requires. A similar situation existed in Plainville Brick Co. v. Williams, 170 Ga. 75 (3) (152 S.E. 85). The instant case differs also from Reid v. McRae, 190 Ga. 323 (3), 332 (9 S.E.2d 176), where the judgment of the trial court granting an injunction was reversed, for the reason that at the trial it was made to appear that the acts sought to be enjoined had already occurred, and exception was taken to the action of the judge in granting an injunction against a past transaction. The decision in that case merely imposed upon the court below the same rule to which this court holds itself amenable, that is, neither court shall pass upon cases where the issues involved have become moot. In the instant case the record does not show that the judge was apprised, at the time the petition was dismissed on general demurrer, that the sale had occurred; nor is there any exception based thereon, but the undisputed facts with reference to the moot character of the case first appear in the briefs of counsel.

Writ of error dismissed. All the Justices concur.