A. D. Smith & Sons, Inc. v. Securities Co. of America

MAYFIELD, J. The bill was filed for specific performance of a sale, or contract of sale, of all the capital stock of the appellant corporation to the appellee corporation, and for other relief, under general prayer for that purpose. [494] The entire capital stock of appellant corporation was owned by A. D. Smith, and his two sons, A. L. and M. D. Smith, who also constituted the officers and governing body of the corporation. The corporation was formed to conduct, and carried on, the business of insurance brokerage. The capital stock was divided into 220 shares of the par value of $100 each. On the 12th of April, 1912, the stockholders entered into a contract of sale of all the capital stock to appellee, another insurance corporation, for the consideration of $9,000 worth of stock in appellee corporation and $18,000 in cash or certificates of deposit in solvent banks. The bill alleged that the contract of sale was subsequently modified by mutual consent to the extent that $3,000 of the $18,C00 should be paid in cash, and the remainder thereof settled by the execution and delivery by the purchaser of its three notes for $5,000 each, due successively August 1, 1912, October 1; 1912, and December 1, 1912; that as so modified, the contract of sale was fully executed by appellee corporation, but that appellants, as stockholders, failed and refused to deliver the 220 shares of the capital stock so purchased, but held the same, together with all dividends earned and rights accruing to the rightful holders of such stock, alleged to aggregate many thousands of dollars. The bill also alleged that the appellants, as individuals, by virtue of the sale, became stockholders, officers, and agents of ap-pellee corporation, and so acted for a year or more, and as such officers published prospectuses and advertisements of appellee corporation, holding it out as owning the capital stock of appellant corporation, that appellee’s stock was sold on the faith of such advertisements, and that, after thus acting for more than a year, appellants now attempt to repudiate the sale and refuse to deliver the aforesaid 220 shares of appellant corporation stock to appellee corporation. In addition to specific performance, the bill sought an accounting to ascertain the dividends due on or to the capital stock since the date of the sale, together with other profits received by appellants, praying a decree for such amounts so ascertained. Demurrer being overruled to the bill, defendants answered, denying many of the material allegations of the bill, alleging failure to pay the notes, and even denying the agreement to receive the notes in lieu of the $18,000 first agreed to be paid. [495] A hearing was had on the bill, answer,- and much evidence offered by all parties, on which hearing the chancellor denied the relief as to specific performance; but ordered an accounting as prayed; and from this decree appellants prosecute this appeal. (1, 2) It is insisted that, as the relief by specific performance was denied, no relief as for an accounting could or should have been awarded. We cannot accede to this insistence.- A trust relation is shown to have subsided between the parties, and an accounting was therefore not only proper, but necessary, in order that justice and equity could be meted out to all the parties, and complete relief given. Equity having properly acquired jurisdiction, it would continue the exercise of. it in order to do complete and full equity among the parties. The facts, which are undisputed, showed a proper case for an accounting in- equity —which is all that has so far been done. Appellants had received $3,000 in cash, and 90 shares of stock in appellee corporation, together with the dividends on the stock sold to appellee; and there were shown to be other indebtednesses growing out of the sale or contract from appellants to appellee, and hence a fit case for accounting was shown. (3) Appellants have shown no ground for a rescission of the sale or the contract of sale. The mere failure to pay the notes for the deferred payments is no ground for rescission, in the absence of stipulations to that effect in the contract, or in the absence of provisions to the effect that the payment of the notes should be a condition precedent to a consummation of the sale. There were no such provisions in the contract of sale. The contract merely shows that the modified contract was as to the notes a sale on credit pro tanto; and in such cases the failure to pay the deferred payments, without more, is no ground for rescission, whatever other remedy the vendor may have. It is unnecessary to review the evidence in this case in detail; it has all been examined in detail, and closely analyzed, in the light of the aid of briefs of counsel on both sides, and we feel sure that the chancellor reached the correct conclusion. Certainly so far as the appellants have any cause of complaint. It could serve no good purpose to further discuss the case made by the record. No new or difficult questions of law are presented. The chancellor reached the correct conclusion in all his rulings, both on questions of law and on the facts. Let the decree appealed from be affirmed. Anderson, C. J., and Somerville and Thomas, JJ., concur.