Harton v. Johnston

McCLELLAN, J. Hugh M. Hartón (appellant) filed this bill against R. D. Johnston, E. F. Enslen, [321] Lula B. Hartón, Ensley Bealty Company, Ensley Development Company, Jefferson County Savings Bank, and the Empire Bealty Company; the four last noted being corporations. Its theory and purpose is to assert, have declared and enforced, in behalf, alone, and for the sole benefit of Hugh M. Hartón, a resulting or constructive trust in one-half of the capital stock, incomes, and profits of the Empire Realty Company. From the whole bill it readily appears that complainant’s alleged basis for claim to the relief sought, as stated, rests alone upon his right to or ownership of •one-half of the capital stock of the Ensley Bealty Company. The bill expressly avers that the Ensley Bealty Company was organized and incorporated under the laws then (1901) in force, for that purpose, in this state.—Code 1896, § 1251 et seq. The various and orderly processes for incorporation are exhibited, in copy, with the bill. Furthermore, the bill avers that complainant was elected, by the stockholders of the .Ensley Bealty Company, president, and general manager thereof. The minutes of the stockholders’ meeting show the number of shares assigned to each subscriber. The proper authority issued the certificate of incorporation. Obviously, the Ensley Bealty Company became a corporation, and so, notwithstanding the omission to issue certificates of stock or to note the respective shares on books of account of the company. It is well settled that a stockholder of an existent corporation cannot enforce individual benefits that maj- or will, accrue to him-in virtue of his interest in the corporation. Primarily, the corporation itself must assert and vindicate its own rights. If, for any of the reasons the law recognizes, corporate interest is being sacrificed, either from failure to act or because of the •adverse attitude of the controlling body to the corpor [322] ate welfare, thereby entailing injury on the corporation, the stockholder may implead for the corporation, not in assertion of the ultimate individual right that the individual shareholder may have. For a wrong to the corporation, in respect to its rights or properties, the cause of action is that of the corporation, not that of the shareholder.—26 Am. & Eng. Ency. Law, pp. 970-973, and notes; Montgomery Traction Co. v. Harmon, 140 Ala. 505, 37 South. 371; Jefferson Co. Bank v. Francis, 115 Ala. 317, 325, 23 South. 48. Shareholders in an existent corporation are not tenants in common of the corporate property.—10 Cyc. p. 373, and notes. To avoid the effect of these familiar legal principies, it is insisted for the complainant that the Ensley Realty Company ceased to exist as a corporation, because it, in 1902, sold all of its property to the Ensley Development Company, that company assuming all the debts of the Ensley Realty Company, and because the Ensley Realty Company has not since engaged in the business for which it was incor£)orated. A full answer to this insistence might be found in the fact that the insistence is broader than the averments of the bill in that connection. However, we will assume, for purposes of the argument only, that averments justifying the insistence appear, in the bill. It is well to first note that many of the.authorities on which appellant would rest his contention in this regard had to deal with, either, a bill directly inviting judicial dissolution of a corporation, or forfeiture of its charter for cause, or with unequivocal corporate acts, through its stockholders or governing body, in expression of the purpose to surrender the exercise of corporate functions, and to cease its existence. Among these cases it will suffice to mention McDonnell v. Ala [323] bama Gold Life Insurance Co., 85 Ala. 401, 409, 5 South. 120, wherein it appeal's that a general assignment, for the benefit of creditors of the insolvent corporation, was made, and that the corporate assets were turned over to trustees for distribution among the creditors. Such decisions cannot be influential on this occasion. Nor do the facts, assumed, as stated in this bill, bring the asserted voluntary surrender of corporate existence within the rulings made, on that subject, .in the school of cases to which Central Land Co. v. Sullivan, 152 Ala. 360, 44 South. 644, belongs. Among, if not the chief, charter powers of the Ensley Realty Company, consonant with its name, was the right to deal in real estate. Hence no significance can be attached to the sale of all of the property (only land is averred in the bill to have been its property) of the Ensley Realty Company to the Ensley Development Company. The transaction was in pursuit of the purpose of incorporation of the Ensley Realty Company. The fact that no dividends were earned or declared otherwise by the' Ensley Realty Company manifestly indicated no intent to cease the exercise of corporate functions. The debt, assumed by the Ensley Development Company as a part consideration for the sale of the real estate, then held by the Ensley Realty Company, to the former company, was a debt created in the original purchase of the land then conveyed by the Enslejr Realty Company to the Ensley Development Company. By the very act consummating this transaction, the Ensley Realty Company became entitled to many thousands of dollars evidenced by the notes, payable to it, of the Ensley Development Company, the chief consideration for the conveyance mentioned. In the litigation instituted by Gordon to enforce the payment of a demand against, and secured by a first lien on the property of the Ensley Development Company, [324] the Ensley Realty Company’s third lien to assure the payment of the notes mentioned was a factor and was declared, by the decree in that cause, a then existing liability of the Ensley Development Company; and, in respect of the sale ordered by that decree, and later effected, it was directed that the Ensley Realty Company’s claim and lien should be receivable, upon conditions defined, in payment of the bid price at the sale. It appears from the exhibit to the bill that, among ■others concerned, the Ensley Realty Company, in 1906, so consented to the use of the sum of its established claim and lien in the purchase by R. D. Johnston of the property of the Ensley Development Company at the sale under the decree indicated. It is unnecessary to pursue the facts further. There has been, on the averments of this bill, no dissolution ■of the Ensley Realty Company, the corporation. Accordingly, the learned chancellor correctly ruled, sustaining the third ground of the demurrer, taking the point that the bill omits to show that property to which ■complainant had any legal or equitable title was appropriated or- used in the purchase of the property of the Ensley Development Company by R. D. Johnston, or the appropriation or use of any such property by the Empire Realty Company. On the theory to be read from the bill, the special demurrer of the Jefferson County Savings Bank was property sustained. That institution, it appears, was not concerned in the Empire Realty Company, nor does it appear to have shared in the incomes and profits of that corporation. The decree, for the reasons given, is affirmed. Affirmed, Dowdell, C. J., and Simpson and Mayfield, JJ., ■concur.