Florence Gas, Electric Light & Power Co. v. Hanby

13 So. 343, 101 Ala. 15

• Court: Supreme Court of Alabama
• Decided: November 15, 1893
• Status: Published

Opinion

McCLELLAN, J.

The appellee, Planby, as receiver &c., is the complainant .in the present bill, to which the appellant, the Florence Gas, Electric Light & Power Co., is respondent. The corporation of which complainant is now receiver entered into a contract on July 6, 1889, with the respondent corporation to construct and erect complete for the latter an electric light plant at Florence, and equip the same with specified machinery, appliances, &cl, for lighting the town of Florence with electricity. The contract contains a stipulation for the erection of the plant “as soon as possible." The construction company also undertook in said contract to pay an outstanding indebtedness of the Florence company to the Westinghouse Electric Company, amounting to $2,200, which was secured by a mortgage on an existing plant of the former, “thereby lifting” said mortgage, which existing plant, it is fairly inferable, was to be incorporated with and made use of in the construction of the new plant; and also to pay the current indebtedness of said company, amounting to $2,000. For all this the construction company was to receive twenty-six thousand dollars ($26,000) , payable at certain specified rates of discount on face value in bonds of the Florence company, which were to be “secured by a mortgage or deed of trust on the entire plant and lot [on which a ‘power house’ was to be erected] of sufficent face value to net the above amount ($26,000), said plant and lot to be free of all incumbrances.” It was, further stipulated that the bonds should not” be issued to the construction company in excess of the work done or machinery furnished by it, the implication being that partial issues and deliveries of bonds were to be made during the progress of construction. The contract contains also the following provision : “Said bonds to be delivered to us to be used by us as collateral security for six months, unless sooner sold ; but either you [the Florence company] or ourselves shall have the privilege of selling said bonds at par. If said bonds shall not be sold before the expiration of six months, then we shall have the option of extending tlie time for the sale of said bonds until they can be sold, or of taking them in payment of the debt of $26,000. If taken in payment of the debt, you are to issue to us enough bonds bearing 7 per cent interest to net us at 90 cents on the dollar $26,000, or you will furnish us enough bonds bearing 6 per cent interest to net us $26,-000 at 85 cents on the dollar.” It thus appears that, contrary to the first provision of the contract in this connection noted above, the contract did not contemplate absolutely that bonds should be taken in payment of the $26,000, but that in the first instance the construction company should take the bonds as collateral with power to sell and apply the proceeds to the debt within six months, and that after the lapse of that time the construction company was to have the option either to extend the time of sale indefinitely — until the bonds could be sold — or to take them in payment of the debt. The bill avers that on August 5, 1890, a majority of the stockholders of said Southern District Telegraph & Electric Company, representing more than three-fourths of the capital stock thereof, filed a bill in the chancery court for a dissolution of said corporation according to law, and the present complainant, upon special grounds set out and shown in said bill, was appointed upon the filing thereof receiver of all the corporate property and assets of said company, and empowered and authorized to collect by suit or otherwise all the debts due to said company, and to complete all the outstanding contracts which said company had made for the erection of plants, &c.; and that on the 20th January, 1891, upon a decree rendered in the cause dissolving said corporation, the complainant’s receivership and his powers thereunder were continued, and he was further appointed receiver upon the dissolution of said corporation as provided by law, with .all the powers and authority given him as such receiver by law.

The averments of the bill as to what has been done and offered to be done by the construction corporation and the complainant as receiver thereof in performance and discharge of the contract with the Florence company, and as to the latter’s attitude in respect of the matter of performance, are contained in the third paragraph thereof, which is as follows : “That said Southern District Telegraph & Electric Co., immediately undertook and proceeded to perform said work and erect said plant, that it had substantially completed said work and erected said plant, when the same was turned over to and accepted by respondents, who are now operating the same in lighting the city of Florence. That after substantially completing the work, as aforesaid, owing to the stringency of the money market and its inability to collect its debts, said Southern District Telegraph & Electric Company went into the hands of a receiver. That your orator, the said receiver, at once notified said Florence Gas, Electric Light & Power Company that he would go on, as he was authorized and empowered by the chancery court, and complete said contract. That your orator sent necessary workmen to Florence to complete all of said work, and had material shipped there to complete the same, but defendant refused to allow said work to be proceeded with, claiming that they had a right to rescind said contract.” The bill further avers the filing of verified statements of the claim and debt of the construction company against the Florence company for work and labor done and materials furnished by the former under the contract in the office of the judge of probate of Lauderdale county, with a view to fastening mechanic’s and material-man’s lien on certain described property of the latter company and upon the improvements thereon, &c. Copies of these statements are exhibited to the bill, and assignments of demurrer, numbered 16 and 17, which went to their sufficiency under the statute, were sustained. No appeal is taken by complainant, and this ruling of the chancellor is not presented for review, nor does this record present any question as to whether the statements can be amended in the particular of their adjudged insufficiency, and we are neither called upon nor authorized to decide whether they are so amendable or not.

What we have quoted from the bill is all shown by it as to the performance of the contract on the part or in behalf of the construction company, or as to the time within which what was done at all by said company, in work and labor or in supplying materials, &c., was performed. It does not appear from the bill whether the debts which the Florence company owed at the time of contract made, and which thereby the construction company undertook to pay, namely, $2,200 to the Westinghouse Co., and $2,000 to other creditors, have been paid or not by the construction company, or otherwise.

The leading prayer of the bill is for the enforcement of the debt claimed to be due the construction company, about $24,000, as a mechanic’s and material-man’s lien against the Florence company and on certain property of that company. There is also an alternative prayer for specific performance of the contract through a decree compelling the defendant corporation to issue to complainant as receiver &c., the bonds stipulated for in the contract. All demurrers to the bill, except the two referred to above, were overruled, and from the decree in that behalf this appeal is prosecuted by the respondent company.

1. We may as well say here as elsewhere that there is no merit in the contention that the bill was rendered multifarious by the addition of the prayer for alternative relief. The averments of the bill are not duplex. All of them would have been proper, in respect, at least, to the rule against multifariousness, had there been only one, and either one, of the special prayers we have stated; and multifariousness can not be predicated solely upon the variant prayers with which a bill may conclude.— Lyons v. McCurdy, 90 Ala. 497, 8 So. Rep. 52.

2. The dissolution of the Southern District Telegraph & Electric corporation and the final appointment of complainant as receiver thereof must be referred to sections 1683 etseq. of the Code. The section named provides for the filing in the chancery court of a petition by a majority of the stockholders, owning three-fourths of the stock, setting forth the names and residences of all the stockholders, &c., as nearly as practicable all the property of the corporation, and that it is the wish of the petitioners to dissolve the corporation. If no other relief than dissolution is sought, and only this statutory petition is filed, the court is without jurisdiction to grant, by interlocutory or final decree or order, any relief beyond or other than that prescribed by the statute ; that is, it could only decree dissolution, and upon the passing of that decree appoint a receiver under and with the powers prescribed in section 1686 of the Code. But it may be that there is necessity for other relief than this ; it may be that pending the proceeding for dissolution it is necessary, on account of the misfeasance or malfeasance of the directors and officers of the corporation, for the power of the the court to be exercised to the preservation of corporate property and rights by such interlocutory orders or process as will meet the necessity and conserve the end in view. In such case, should the stockholders be forced to file a bill for the temporary relief to which they are entitled, and at the same time institute in the same court a separate proceeding for the final relief of dissolution to which the interlocutory relief is merely an incident? We think not. To the contrary, we can conceive of no reason why the statutory petition may not be incorporated with a bill alleging the facts authorizing dissolution and the facts which show a necessity for the intervention of the court pending the proceeding for dissolution, to the end that the property of the corporation may be saved pendente lite for administration by the receiver to be appointed on final decree'under the statute. Good pleading indeed — the rule against multiplicity of suits — would seem to absolutely require that these purposes, the dissolution of the corporation and appointment of a receiver under the statute, and the preservation of the property ad interim for its final disposition by the receiver, should be sought and accomplished in one and the same bill. The present bill contains averments which show that the bill filed by the stockholders was of this character ; that bill, it is alleged, contained averments of special grounds for the appointment of a receiver of the corporation pending the proceeding under the same bill for a dissolution thereof. Upon such a bill the chancery court had jurisdiction, aside from statutory provisions, of the matter of appointing a receiver pending final action on the prayer for dissolution and consequent appointment of a receiver under the statute. — Meyer, Trustee &c. v. Johnston & Stewart, Trustees, 53 Ala. 237. And if the appointment was merely irregular and erroneous — it could not have been void in this state of case — its validity can not de questioned by the present respondent in this purely collateral proceeding. — Comer v. Bray, 83 Ala. 217, 3 So. Rep. 554. The assignment of demurrer which sought to impeach the original appointment of complainant to be receiver of the Southern District Telegraph & Electric Company were properly overruled. As to the entire regularity of the second appointment — that made upon final decree of dissolution — the averments of the present bill leave room for doubt.

3. The first appointment, that made “on special grounds” upon the filing of the bill for ad interim relief and dissolution, was referable to the general jurisdiction of courts of chancery to appoint receivers pendente lite; and in the exercise of this jurisdiction it was clearly within the competency of the court not only to empower the receiver to execute and perform existing contracts of the corporation, but even to enter into and carry out new contracts in behalf of the company. — Beach on Receivers, §284; 20 Am. & Eng. Encyc. of Law, p. 154.

4. A somewhat more difficult question arises as to the power of a receiver appointed under section 1686 of the Code — the power of this receiver under his final appointment on decree of dissolution — to carry out and perform existing contracts of the corporation. By that section the powers which may be invested in a receiver are to take possession and control of all the property and assets of the corporation, to collect by suit or otherwise all the debts due thereto, sell its property and make conveyances thereof, and to proceed without suit to sell any or all of the debts and assets of the corporation at public sale for cash, or on such terms as in his judgment the interest of the parties may require. These statutory provisions mark the limits of the court’s competency to confer powers on the receiver of a dissolved corporation. But these powers when conferred by the decree involve and carry with them such power as may be implied from the general object and spirit of the statute, or as are incidental to the authority expressly given. — Beach on Receivers, § 434; Runyon v. Ranh, 3 Green Chancery (N. J.) 480 ; Emblee v. Shideler, 36 Ind. 423. In the case at bar the receiver asserts the power and authority to perform and discharge the obligations resting on the corporation by the terms of a contract of force at the time its corporate entity was destroyed by the decree of dissolution. That power is not expressly given in the statute, nor is the court thereby expressly authorized to confer it on the receiver. Can it be implied from the general object and spirit of the statute, or as an incident to the powers which are expressly conferred or allowed to be conferred on the receiver? We need not respond to this inquiry in the precise form in which it is put. The facts of the present case do not require it. These are, as has been indicated, that the construction company had entered into a contract to erect a plant for the Florence company for $26,000, and had substantially, in the sense of nearly, completed the erection thereof when the dissolution was had, but no part of the agreed price therefor had been paid. Upon dissolution it was necessary to the collection of this claim against the Florence company that the contract to erect and construct the plant should be fully executed and the plant completed, or to show that an offer so to do had been made in good faith and declined. Very clearly in equity and good conscience, especially when reference is had to the fact that the Florence company had accepted the plant so far as erected and it was being made to subserve the purposes of its erection, here was a debt in some amount owing to the dissolved corporation. This debt the receiver was empowered to collect by suit or otherwise. The performance or. offer to perform in full the contract which had already been nearly completed was a condition precedent to a demand for the payment of this debt in full. Without it the debt could not be collected. Without it the receiver could not execute the power which the law and the decree expressly gave him, and discharge the duty resting on him. The performance of the unexecuted part of the contract, or a readiness and offer to perform, was clearly within the object and spirit of the statute and incidental to the power which is thereby expressly vested in the receiver. While not deciding that a receiver under this statute has authority to perform all existing contracts of the corporation, we hold that the complainant was empowered to complete the execution of the contract with the Florence company, such execution being necessary to the discharge of the duties and powers which were expressly imposed and conferred on him, and that his offer so to do and the declination thereof must be accorded the same effect in this case as had there been no dissolution and the offer had been made by the construction corporation itself. — Wait on Insolvent Corporations, § 214; Pond v. Cook,- 45 Conn. 130.

5. The stipulation in the contract for the completion of the work contracted for "as soon as possible” is to be construed to require the erection and construction of the plant complete within a reasonable time, or within such time as was reasonably necessary, under the circumstances, to do what the contract required to be done. — 1 Am. & Eng. Encyc. of Law, p. 777, nóte 1, and authorities there cited.

As we have seen, the bill avers that the construction company, immediately on the making of the contract, undertook and proceeded to perform the work and to erect the plant contracted for, that it had substantially completed said worlc and erected said plant, when the same was turned over to and accepted by the Florence company, and that said company at the time of filing the bill was operating the same in lighting the city of Florence, thus subserving the purposes of its erection. The bill further shows, however, that the plant was not entirely completed according to the specifications of the contract, but that complainant was ready and willing and had offered to complete it It can not be affirmed, on this state of averment, that the bill shows that there was any violation of the compact in respect of the time in which the work that was done was in fact performed ; and even if there had been unreasonable delay on the part of the construction company in that regard the fault was condoned, and any right the Florence companv might otherwise have had to rescind the contract was waived and lost by its acceptance of the work done, and of the plant in its then approximate completed condition, and devoting the same to the objects of its erection. This, we think, gave the construction company a claim for the value of work and labor done and materials supplied prior to and up to the time of the acceptance, and whatever damage the Florence company sustained from a.subsequent unreasonable delay on the part of the construction .company or this complainant to fully perform the then unexecuted parts of the constract is, at most, matter for recoupment. And this conclusion is aided, in this instance, by reference to that provision of the contract, which clearly contemplates that payments were to be made to the construction company from time to time as the work progressed.

6. It is to be conceded, that the bill contains no averment that the debts due from the Florence company to third parties, which were to be paid by the construction company, had been paid, and no averment of an offer, or even a readiness or willingness, to pay the same. It may be be taken, therefore, as showing a violation of the contract in this respect by the construction company. What is the effect of this infraction upon the relief sought ? It is, in our opinion, fatal to the prayer for specific performance. The bonds which the contract stipulates for, and which the prayer for specific performance would involve the issuance of, were to be secured by a mortgage or deed of trust on the property of the Florence company, which property was to be free from all incumbrances. The debt due the Westinghouse company was secured by a mortgage on this property or a part of it. Until this debt was paid and this mortgage “thereby lifted”, the Florence company could not, even had it desired so to do, have issued the bonds stipulated for, because the property which was to be pledged to secure them was incumbered, and this incumbrance was the result of the fault and failure of the construcion company to pay off the Westinghouse mortgage as it had agreed to do. The prayer for specific performance, therefore, in effect invokes the jurisdiction of chancery to compel the defendant to do an act which the failure of the construction company to perform its contract has left impossible of performance. There can be no equity in such a demand.

7. This consideration, however, has no application in respect of tlp.e prayer of the bill looking to the enforcement of complainant’s claim for work done and materials furnished, &c., as a lien on the property of the defendant corporation. The part performance, averred in the bill, and defendant’s acceptance thereof suffice to entitle complainant to recover for the work and labor done and materials furnished, even if it be conceded that the contract was not originally severable, and that but for such acceptance complainant could have recovered nothing except upon full performance of the entire contract, or a part performance with a readiness and offer to perform in full, seasonably made and declined by the defendant. This upon the principle that, “if one party, without the fault of the other, fails to perform his side of the contract in such manner as to enable him to sue upon it, still if the other party has derived a benefit from the part performance, it would be unjust to allow him to retain that without paying anything. The law, therefore, generally implies a promise to pay what it is reasonably worth.” — 3 Amer. & Eng. Encyc. of Law, pp. 920-922 ; Hayward v. Leonard, 7 Pick. (Mass.) 181; Kirkland v. Oates, 25 Ala. 465 ; Merriweather v. Taylor, 15 Ala. 735; Bell v. Teague, 85 Ala. 211, 3 So. Rep. 861.

8. On this theory, that partial performance by the construction company and the acceptance of the plant so partially completed and the use thereof by the Florence company raises up an implied contract on the part of the latter to pay for the work clone and the materials furnished, the complainant is entitled to a money recovery, even if it be assumed that the original contract provided for payment in bonds only, against the defendant; and as an incident of the transaction, involving the facts alleged in the bill, an inchoate lien attached to such of defendant’s property as comes within statutory terms in favor of the complainant, which, if perfected as provided bylaw, may be enforced by bill in chancery. — Code, §' 3040.

9. If it were necessary to go into-the question at all on this appeal, we should be inclined to hold that the primary obligation of the defendant under the express contract was to pay the construction company $26,000 in money, that the bonds were in the first instance to be issued to the latter company only as collateral security for the payment of this money, or as a means of raising the money for application to the debt, that whether they should ever be taken in payment depended upon an election on the part of the construction company so to do, and that so far from such election having been made, the present bill and its leading purpose to enforce a money claim by subjecting property to its satisfaction may be considered an efficacious and binding election, conditioned only on complainant’s right to make it — aright which, as has been indicated, we should hold he had— on the part or in behalf of the construction company not to accept the bonds in payment at all.

10. The contract involved here was entered into, the work and materials for which a lien is sought to be enforced were done and supplied, the lion therefor attached and was perfected, if perfected at all, and the present bill to enforce the lien was filed prior to the act of February 12,1891, providing for mechanics’and material-men’s liens and repealing certain sections of the Code of 1886. Acts 1890-91, p. 578. The right now asserted is hot affected by that act. If it existed at all, it was then a vested right, which a repeal of the statute could not destroy or impair, and which it would not be held to impair, if that were within legislative competency, in the absence of an indication of a legislative purpose to give it retrospective operation ; and it is now to be worked out and effectuated under the laws of force when the suit was commenced.

11. It is tobe assumed, in the absence of any averment to the contrary, that the construction company ■was authorized by its charter to enter into and perform the contract involved in this case.

What we have said will suffice to indicate the grounds of our conclusion, that the decree overruling the several demurrers to the bill insisted on in argument is free from error.

Affirmed.