Smith V. McWhorter

160 S.E. 250, 173 Ga. 255, 1931 Ga. LEXIS 306

• Court: Supreme Court of Georgia
• Decided: July 16, 1931
• Docket: No. 7957
• Status: Published

Opinions

Russell, C. J.

This was an equitable proceeding brought by Edwin A. McWhorter as trustee in bankruptcy of Eealty Savings & Trust Co., against Eealty Investment Co., W. H. Stillwell, and L. H. Smith', seeking to set aside a security deed executed to Smith by the Eealty Investment Co. through Stillwell, its president. Among the assets of the bankrupt company were 530 shares of stock of the Realty Investment Co., previously in the hands of a creditors’ committee, now in charge of the plaintiff as trustee in bankruptcy. It is charged that the security deed executed by Stillwell as president to Smith was made without any resolution of the board of directors or stockholders of the Eealty Investment Company for so doing. That on October 12, 1928, a purported meeting of stockholders of Eealty Investment Company was held in the offices of the company, and the following resolution passed:

"Whereas Eealty Investment Company and Silk Hope Company, both corporations of Savannah, Georgia, on September 11, 1928, entered into a written agreement of purchase and sale, providing for an exchange of an equity in the Realty Investment Company’s Eealty Building and the lot on which it is located, for unencumbered acreage in Chatham County, Georgia, owned by the Silk Hope Company, upon the terms and conditions therein specifically set forth', a copy of which agreement is recorded as a part of the minutes of the Board of Directors of the Eealty Investment Company, held on September 11, 1928, and a copy of which agreement has been submitted and read to the stockholders of this meeting of the stockholders of Eealty Investment Company; and whereas the Board of Directors of Eealty Investment Company, at a meeting held on September 11, 1928, authorized the making and execution of said purchase and sale, and resolved that it was necessary to make such exchange for the purpose of meeting the company’s obligations: Now therefore be it resolved by the stockholders of Eealty Investment Company that the making and execution of said agreement of purchase and sale be and the same is hereby ratified; and resolved further, that the Board of Directors of the Company be and is hereby authorized and empowered to pass such other resolutions as may be necessary, advisable, or required for the purpose of authorizing officers of the Company to execute and deliver the deed from Eealty Investment Company to the Silk Hope Company, to accept the deed from the Silk Hope Company to the Eealty Investment Company, and to otherwise comply with and carry out the terms of said agreement of purchase and sale.”

And that, pursuant to the above resolution of the stockholders, the board of directors of the Eealty Investment Company adopted the following resolution:

“Whereas the stockholders of Eealty Investment Company, at a meeting duly called for such purpose, this day held at the offices of the company, passed the following resolution [quoted above] : Now therefore be it resolved by the Board of Directors of Eealty Investment 'Company that the president and secretary of the company be and are hereby authorized and directed to execute and deliver, for and in the name of Eealty Investment Company, a deed of conveyance to the Silk Hope Company all the property mentioned, to accept the deed from the Silk Hope Company to the Eealty Investment Company, covering the unencumbered acreage described in said agreement of purchase and sale, and to otherwise comply with and carry out all the terms of said agreement of purchase and sale.”

The exchange of properties was completed November 1, 1928; and on November 3, 1928, the security deed now sought to be canceled was executed by the Eealty Investment Company through W. H. Stillwell acting as president. The consideration recited in this deed is $36,265.06. It is'alleged that this sum is composed of the following items, according to the sworn answer of L. H. Smith in a former suit brought by the plaintiff, which was dismissed : eommissons on deal for Silk Hope lands, $25,000.00; payment of $8,431.64 due by Eealty Investment Co. to L. H. Smith for cash advanced -by him to make Silk Hope deal; pajunent of two loans due Smith by Eealty Investment Co., $2295.00; payment of loan due Smith by Stillwell, $538.42. The petition alleges that Smith was repaid by the Silk Hope Co. $8,000.00 of the advance made by him in connection with the deal with them; that the loans claimed to be due by the Eealty Investment Co. to him of $2295.00, as well as the item of $538.42, were individual debts of Stillwell; that he was only due $8,000.00 for consummating the exchange of properties between the Eealty Investment Company and the Silk Hope Co.; and that payment of $25,000.00 for this service was never authorized by the directors of the former corporation.

It appears that the Eealty Building conveyed by the Eealty Investment Co. was encumbered with three mortgages, one in favor of Metropolitan Life Insurance Co., one in favor of F. M. Oliver and C. W. Miles, trustees, and a third one in favor of certain third-mortgage bondholders. The first loan was in arrears as to interest in the sum of $8,350. Smith entered into an agreement with the holders of the third mortgage, reciting the other encumbrances on the property, and that an exchange had been arranged between Realty Investment Co. and Silk Hope Co., by the terms of which the former was to convey to the latter its equity in the Realty Building, in exchange for certain unencumbered land owned by the Silk Hope Company. In this agreement Smith agreed to advance the $8,350.00 required to take care of the past-due interest on the first mortgage; and the holders of the third mortgage agreed to subordinate their claim to^ his claim for such amount paid, in the event the deal with the Silk Hope Company was not put through. It is recited in this contract that the Silk Hope Company was to pay Smith, in the deal, $8,000.00 which was to be credited on the amount of interest he was to pay. It was set forth that of the lands received by the Realty Investment Company, the tract known as the Silk Hope Plantation and Subdivision, and three small tracts facing the Louisville Road totaling approximately 65 acres, were to be pledged to Smith to secure money loaned in payment of taxes due by Realty Investment Company and his broker’s commission and other expenses connected with the closing of the deal between the Realty Investment Company and the Silk Hope Company; and that the holders of the third mortgage on tlie Realty Building would be given security for their money on other land to be received by the Realty Investment Company, and would release their claim on the Realty Building. The Realty Investment Company, by Stillwell as president, also made an agreement with the holders of the third mortgage, in accordance with the above contract with Smith; but this contract only provided for securing Smith for advances made by him in completing the deal, and not for securing the payment of any commission.

It is alleged in the petition that Stillwell, as president of the Realty Investment Company, voted the shares of stock in the Realty Investment Company belonging to Realty Savings & Trust Co., when he had no authority to do so, that he assigned 770 shares of the stock in the Realty Investment Company to Smith, who voted them at the stockholders’ meeting of October 12, 1928; that the regular annual stockholders’ meeting should have been held in July, 1928; that no notice was given to stockholders of the meeting of October 12-, 1928, and that such meeting and the election of directors thereat was illegal. Smith, upon default being made in the payment of interest on the loan of $36,265.06, and in accordance with the terms of his loan deed, appointed Stephen A. Wilson as trustee, who proceeded to advertise the property covered by the security deed, and it was sold and bid in by Smith for $35,300.00. It is charged in the petition that Smith agreed to procure a loan of $20,000.00 or $30,000.00 on lands acquired by the Eealty Investment Company through its deal with the Silk Hope Company, which he failed to do, only procuring a loan of about $11,000.00; that part of “L. H. Smith’s duty in earning the $25,000.00 commissions was to borrow $20,000.00 or $30,000.00 on the property, or at least enough money to complete the transaction, he to be paid, for this service as well as selling the property, a lump sum of $25,000.00 as broker’s charges and commissions, and when he secured the loan from himself of approximately $11,000.00 and accepted the $25,000.00 commissions in full he paid himself for sécuring a loan of his own money, in addition to demanding 8% interest on the full amount.”

It is alleged that the trustee, Wilson, made no effort to preserve the equities of the Eealty Investment Company in making the sale under the power in Smith’s deed; that the security to be given Smith was to be only about 2300 acres, while the deed executed conveyed 4400 acres; and that the value of this 4400 acres was about $200,000.00, which Smith secured for his bid of $35,300 subject only to a first mortgage of $10,000.00. The prayers were: (a) That the sale by Wilson, as trustee under the power in the security deed executed by Eealty Investment Company to L. H. Smith, be set aside; (b) that the deed made to Smith by the trustee be canceled; (e) that Smith be required to execute a deed to the above property, placing the title to same in Eealty Investment Company; (d) that the security deed executed by the Eealty Investment Company to Smith be declared void; (e) that Smith be required to produce the security deed described, and that it be canceled; (f) that Smith be required to cancel the evidence of debt secured by the loan deed to him; (g) that this court ascertain what moneys were actually loaned to the Eealty Investment Company by L. H. Smith, add thereto $8,000.00 as a reasonable compensation for selling the property of Eealty Investment Company, and then require Eealty Investment Company to execute another debt deed for the amount due L. II. Smith, less $8350.00 taxes wrongfully charged back to Eealty Investment Company, and less $1500.00 which L. H. Smith was to have paid for the refrigerator system, and less such amounts as L. H. Smith charged against Eealty Investment Company, which amounts were charged under authorization from W. H. Stillwell, and which amounts were not chargeable to Eealty Investment Company or assumable by it, and also less interest charges illegally placed in the original deed to secure debt herein complained of; the total sum to be covered by the debt deed which petitioner prays to have Eealty Investment Company execute being approximately $6259.94; (h) that the debt deed prayed for in subsection (g) hereof convey to L. H. Smith' as security for such debt such an amount of the property described as will be sufficient to secure the debt; (i) that the defendants be required to show cause why the prayers of petitioner should not be granted; (j) that the court grant such other and further relief as may be equitable and just; (k) that the defendants be enjoined from selling, assigning, transferring, or in any manner disposing of any part or all of the property alleged to have been deeded to them, and from selling, assigning, transferring, or in any wise disposing of any or all of the deeds to secure debt, any part 'or all of the debt secured thereby, and any and all of the evidences of the debt secured thereby, that are herein alleged to have been executed, transferred, and delivered to them, etc.

L. H. Smith filed general and special demurrers. The substance of the general demurrer was that the plaintiff, while ratifying the illegal acts complained of in so far as the same resulted in the Eealty Investment Company acquiring title to the Silk Hope tract of land, sought to avoid other parts of this same transaction, by which the Eealty Investment Company became indebted to Smith for consummating the deal. Judge Meldrim passed the following order:

'“With some 36 pages of petition -and 16 of demurrers, it is difficult to determine with reasonable certainty the issues involved. As near as I can get at it, Smith, the defendant, was a real-estate broker, and Stillwell was president of the Eealty Investment Co. The Eealty Co. made a deed to Smith on November 3, 1938, conveying to him a large body of land in the Ogeechee district. The object of this suit is to cancel that deed. The action is by Mc-Whorter, trustee in bankruptcy of the Eealty Savings and Trust Co., which company owned 480 shares of the par value of $48,000 in the Eealty Investment Co. It is averred that Smith and Still-well made a corrupt bargain by which Smith was to receive $25,000 for commissions. What Stillwell was to receive, if anything, does not appear. The averment is that to carry out the scheme to defraud the stockholder, the Eealty Savings and Trust Co., the deed of November 3 was made and delivered, and that under the power of sale contained in said deed Smith had acquired at far below its value the property described in the exhibit attached to the petition. In making this brief statement of the substantial averments in the petition, it should be clearly understood that I am compelled on demurrer to accept the averments in the petition as true. Nothing herein contained is to be construed as the expression of opinion as to the truth of the averments. The 15th ground of demurrer is sustained. The ‘force’ averred to have been used by Smith should be stated,.the time when used, and the nature of the force. So much of the demurrers as object to the averments of usury, and especially subdivision (h) of the 17th ground of demurrer, are sustained. Let the petitioner comply with Code § 5674. Ten days are allowed in which to amend. The demurrers, other than the above, are overruled.

The plaintiff amended as follows: “First. By striking from the 28th paragraph of said petition the word ‘forced,’ which appears in the fourth line from the bottom of the sixteenth page, and by substituting for and in lieu thereof the word ‘had.’ Second. By adding to said paragraph as paragraph forty-three thereof the following: 43rd. Petitioners show that the sum upon which' usury was to be paid was $11,000.00, for which the Eealty Investment Company executed to L. EL Smith a deed to secure debt and delivered a note bearing 8% per annum. That the contract was executed on November 3, 1928; and in 'addition to agreeing to pay 8% per annum on the $11,000.00 borrowed from L. EL Smith, the Eealty Investment Company paid L. EL Smith, as securing the loan, the sum of $900.00, and further paid L. EL Smith $2,000.00 and interest, debts of other people which the Realty Investment Company was not obligated to pay, and further paid $1500.00 which was a bill for refrigerators and which Realty Investment Company was not obligated to pay, as it was a personal debt of L. H. Smith. That the amount of usury agreed upon and taken and reserved was $4500.00, and it was deducted from the $11,000.00 at the time the loan was made on November 3, 1928, and the debt deed was executed to secure said loan. That the loan of $11,000.00 was to be paid back in 3 years, but was to bear 8% during that time in addition to the usurious amount deducted from the $11,000.00.” The defendant renewed his demurrer to the petition as amended; and Judge Meldrim ruled as follows:

“It appears from the amendment filed by plaintiff, May 6, 1930, that the Realty Investment Co. executed to Smith, on November 3, • 1928, a deed to secure debt. It further appears that $900 was paid by the company to Smith, which sum it is alleged was usury. The law is well settled that an action to recover usury must be brought within one year after such payment is made. The demurrant says that it appears on the face of the amendment that the alleged payment was made more than a year before the suit was commenced. I do not so read the amendment. Smith, it appears, lent the company $11,000, for which he charged interest at 8 per cent. This contract was executed November 3, 1928. But when was the $900 paid to Smith for ‘securing the loan’? It may have been paid on November 3, 1928, or November 3, 1929, so far as the amendment shows. The demurrer, as to the $900, must be overruled; but in overruling it, nothing is to be taken as depriving the defendant of his right to file a plea that the action is barred. I do not understand that the payment by the Realty Investment Co. to Smith of $2,000, ‘debts of other people,’ and of $1500, ‘a bill for refrigeration,’ are sought to be recovered as usury paid by the Investment Co. to Smith. As I understand the plaintiff’s case, it is this: Smith lent to the company, either directly or indirectly, $11,000. He charged the company 8 per cent, interest. He also charged the company $900 for securing the loan, and deducted this sum, together with $2000, ‘debts of other people,’ and $1500, ‘a bill for refrigeration.’ I do not think that the two items of $2000 and $1500 can be recovered as usury. It seems to jne that what the trustee ip bankruptcy is seeking to do is to have an accounting with. Smith. If Smith' had and is receiving money or other thing of value for which he should account in equity and good conscience, then the duty of the trustee is to have Smith come to an account. I hold, as to the demurrer filed May 7, 1930: 1. That the demurrer to the $900 is overruled for the reason heretofore stated.. 2. That the demurrer as to the items $2000 and $1500 is sustained as to usury. The plaintiff can not recover these items, or either of them, as usury.”

To the judgment on the demurrers Smith excepted.

The first and second headnotes require no elaboration.

A distinction is to be drawn between mere useless pleading and that which may properly be styled duplicitous. A declaration is duplicitous when it contains in the same count more than one fact, or set of facts, for the recovery of a single demand, any one of which would justify the recovery. 7 Enc. Pl. & Pr. 237. An allegation with respect to, or a prayer for, alternative relief, or relief to which the party is not entitled, if based upon a consistent statement of a single set of facts, can not properly be made the subject-matter of a charge of duplicitous pleading. The petition in this case is not subject to demurrer on the ground of duplicity. “Duplicity in pleading on the part of a plaintiff consists, not in asserting a right to and praying for relief inappropriate to the cause of action set forth in his petition, but in making therein equivocal statements with a view tb getting the benefit of two or more inconsistent theories as to his right'to recover, or in basing his complaint upon different versions with respect to the facts which gave rise thereto.” Orr v. Cooledge, 117 Ga. 195 (3) (43 S. E. 527). In view of this principle, it can not be said that the judge erred in overruling the several special demurrers to the petition. Judgment affirmed.

All the Justices concur.