Browning v. Kelly

SHARPE, J. — The character and purposes of the bill of complaint are shoAvn in the report of the case heard upon a former appeal from a decree on demurrers to the bill. See Kelly v. Brotoning, 113 Ala. 420. On that appeal it was held in effect that the bill was well filed to establish in favor of complainants an equitable interest in the railroad property, A\diich was the subject of their contract made with the defendants on May 11th, 1888. The decision Avas apparently upon the consideration that one effect of the agreement, Avas to place the original defendants Kelly and Byrne in the position of agents or representatives of the original complainants in carrying out the contemplated reorganization of the railroad corporation and that Kelly could not rightfully take advantage of the powers derived from that agency, to further his individual acquisition of the entire property, to the extinguishment of the interest represented by the com-, plainants’ stock and bonds. The equity of the bill as then recognized by this court is thus stated in the opinion: “We are satisfied that if the averments of the bill be sustained by the evidence, that complainants have an equitable interest in the property purchased by Kelly, and that Avithout regard to the bona fides of his intention in procuring the issue of receiver’s certificates or the decree of foreclosure of sale or the purchase of the property. If these steps Avere taken by him and property purchased in good faith to carry out the agreement, and he refuses uoav to perform it, in a court of equity he holds the property in trust for the complainants to the — 650 — extent of their proportionate interest. If these proceedings were taken apparently in good faith with- the secret purpose on his part to defraud complainants, it will avail him nothing. Having succeeded in purchasing the railroad and taking the title to himself under his agreement with complainants, acting in the capacity of agent or trustee and by the use of their property, he is in equity.a trustee.” It was further held in effect that under the facts alleged it would be assumed that the railroad had been improved and its value enhanced by Kelly’s money furnished to the receiver of the road upon his first lien certificates to the issuance of which complainants had consented, and that because in such increased value complainants had been benefited' in proportion to their interest in the property they were equitably bound to reimburse Kelly in the same proportion, as a condition to the relief indicated. In the opinion some stress was'laid upon the fact appearing in the bill, that complainants had consented to the proceedings in the federal court under which the receiver’s certificates were issued and made a first lien on the property, and the discharge of this lien by Kelly’s purchase of the. certificates was also mentioned as a benefit accruing to complainants from the use of Kelly’s money. We adhere to the former opinion upon the case as then presented and have now to consider what different aspect if any it assumed on final-hearing. After the remandent of the cause the complainants by an amendment to .the bill set up in effect that Avhen the issuance of' the certificates Avas being moved for in the federal court, their consent to the measure Avas given upon the oral promise or agreement of Kelly and Byrne “that they would indemnify and save harmless the said Edward F. Browning, John Hull Browning and Amos G. West, against any prior lien of any receiver’s certificates to be issued and that they would at their OAvn expense cause said certificates to be paid off and retired Avithout cost to said Edward P. Browning, John Hull Browning and Amos G. West, so that the bonds Avhich they were by said contract entitled to receive, should be a first lien upon the said railroad and property covered by said contract,” — 651 — To prove tlie neAV agreement so alleged there was offered in behalf of complainants the. depositions of EdAvard P. and John Hull BroAvning and of the defendant John Byrne, besides that of William C. BroAvning who Avas not a party to either the contract or the suit. Kelly having died since the suit begun, and his estate being interested in the result* the chancellor rejected that part of the depositions of the first named three Avitnesses Avliich told of transactions Avith and statements made by Kelly respecting the neAV agreement; holding that under section 2765 of the Code of 1886 (present Code section 1794) each of them A\ras incompetent by reason of interest to testify of such matters. That the disqualification exists as to Edward P. and John H. BroAvning Avho are complainants in that suit is not seriously questioned. The bill prays relief not only against Kelly’s estate, but against Byrne as a co-contractor with Kelly. In one aspect it seeks to hold Byrne accountable jointly with the estate for the value of complainants’ stocks find bonds as Avell as to fasten a trust on the property. It also claims of him as Avell as of Kelly’s representatives, contribution to counsel fees alleged to liaAre been expended under the contract. To' subject the property bought by Kelly to the joint liability thus sought to be enforced, would be to shift a burden from Byrne individually, and his interest would seem to lie directly in the accomplishment of such a result. Under decisions of this court involving similar questions Byrne Avas an interested witness — Sublett v. Hodges, 88 Ala. 491; Lewis v. Post, 1 Ala. 65; Dickson v. Collins, 17 Ala. 635; Barney v. Earle, 20 Ala. 405; Keel v. Larkin, 72 Ala. 493. In the respect noticed, Byrne’s interest Avas opposed to that of Kelly’s estate, and such opposite interest disqualified him to testify as to statements by- and transactions with Kelly without a Avaiver of the incompetency by representatives of the estate. That his position on the record, and his interest in some respects was opposed also to the complainants, did not enable them to avoid, the incompetency as to the estate by Avaiving — 652 — it as to themselves. — Sublett v. Hodges, supra; Dolan v. Dolan, 89 Ala. 256. Thus the alleged parol agreement so far as it is attributed to Kelly, rests alone on the testimony of William O. Browning. The first deposition of this witness was taken de bene esse in January, 1894, while Kely lived. Then, when asked whether he knew that the receiver’s certificates were issued with the consent of his brothers he testified, “I do by hearsay. I do not know anything else about it. I know nothing of the facts. Well I am supposed to know that receiver’s certificates were issued, although I don’t know the fact yet I suppose they were.” About three years later, he testified in effect that he was present when the consent to the issuance of the certificates was given and heard Kelly make the alleged promise. That persons of business experience assisted by counsel representing the adverse interests would in a transaction of such magnitude leave so important a promise to rest wholly in parol is in itself somewhat improbable. In view of the existing circumstances, the testimony of a single witness whose statements about the main fact in issue are in themselves inconsistent, is insufficient to establish the agreement alleged in the amended bill. If a partnership existed between Kelly and Byrne, it was special and limited to the undertaking defined by the contract of May 11th, 1888, and complainants had no reason to assume that it had broader scope. It cannot be gathered from that contract that Kelly and Byrne undertook to change the road from narrow to .broad gauge, or to equip or operate it, or to furnish money for those purposes. Subsequent agreements to such ends were beyond the scope of the original undertaking; and any such agreements made by Byrne alone-are not shown to have been binding on Kelly. Whether the' alleged oral agreement, if it had been proved as against Kelly, would have altered the required relief, need not be considered. The complainants urge that the final decree should have awarded them an unconditional interest in the property and franchises purchased by Kelly, in like proportion as that interest was to arise in the cotemplated — 653 — neAV organization under the contract of May 11, 1888; and they further insist that upon the same basis the decree should have directed a mutual accounting for coun-, sel fees expended, i If the relief to be afforded lay in the specific enforcement of the contract, such insistence AA'ould be recognized as having force. But the contract is incapable of enforcement. It created no express trust, and it created no absolute undertaking on the part of Kelly and Byrne to deliver securities to the Brownings and West in any amount. The promise was to so deliver Avlien the neAV organization was effected and its securities issued upon the defined basis — an event which has never occurred, and Avhich Kelly and Byrne did not agree to certainly obtain. The stipulation Avas that they Avould “endeavor” to obtain it. The enterprise Avas one which necessarily depended not only on the reorganization of the company, but also upon the policy Avhich it as a corporate body mght adopt; and its accomplishment could not have been foreseen Avith certainty. The contract Avill be construed with reference to the character of the thing to be done and the situation' of the parties; and so construing it, the Avord endeavor cannot be expunged or accorded other than its usual meaning. It appears from such construction that the undertaking on the part of Kelly and Byrne was not intended to be enforceable, but was tentative merely according to its import. The court dc.es not entertain jurisdiction to specifically enforce a contract AAdien it would be Avithout power to enforce its decree. 8 Pom. Eq. Jur. § 1405; Pom. on Con. § 303; Waterman on Spec. Perf. § 49; lb. § 390; Fry on Spec. Perf. § 970. The court cannot compel endeaAmr, nor can it compel the reorganization of the company or control its policy Avith respect to the amount of capital stock or the bonds which it should issue. \ The proposed division of the expense of counsel fees, Avas made incidental to, and dependent upon, the main scheme of reorganzation. It was to be had only upon the payment and delivery of the neAV securities, and in proportion to the holdings of the parties therein as they would have existed if the scheme had been carried — 654 — out. The same reasons which defeat performance of the contract in other respects defeat it in this part also. Besides the court wll not enforce one paid of a contract to the exclusion of others unless they are separate and independent stipulations. Waterman on Set-off, §389. The remedy which can be afforded is by the establishment of a constructive trust upon the princple first referred to. Such a trust is the invention of equity to the end of preventing- wrong-. It follows the property which has been wrongly dealt with into whatever form it may be traced, and is not defeated by a mere change in the character of the property. Pom. Eq. Jur. § 1058; Perry on Trusts, § 166. The trust being created in invitum, the relief is administered independent of contract and aims at restoration of the parties to the status quo they originally occupied. That end is approximately reached in the present case, by establishing in the railroad property, an interest proportionate to that which they transferred to Kelly and Bryne in the corporate ' property. But it would be plainly inequitable to award them such ownership in the property without requiring tliem to requite Kelly’s estate for'the money supplied by Kelly, and which the uncontradicted proof shows was expended judiciously if not necessarily, in the improvement and maintainence of the road, and in freeing it of incumbrances. Such is the relief foreshadowed by the former opinion, and such the decree appealed from has substantially provided . The decree however is indefinite as.to the time for computing interest in favor of Kelly’s estate upon the sums to which complainants are required to contribute. In that respect it. will be here amended so as to direct, that such interest shall stop at the date when Kelly purchased the road. After the purchase of the property its use stands in lieu of interest. The decree will be further amended so that the time allowed the complainants for electing- in the mode it prescribes whether to accept its terms, be extended to sixty days from the 23d day of December, 1899. As ,so amended the decree will be affirmed at appellants’ cost.