Opinion
13891, 13892, 13893, 13894.
OCTOBER 14, 1941. REHEARING DENIED NOVEMBER 13, 1941.
Equitable petition. Before Judge Humphries. Fulton superior court. June 16, 1941.
G. H. Howard, G. B. Walker, and H. E. Edwards, for Manning et al.
Carl N. Davie and Alex McLennan, for Wills et al.
E. L. Reagan, assistant attorney-general, and Samuel L. Eplan, for Beasley et al.
1. Where in the liquidation of a bank the depositors have been paid in full, and proper provision is made to meet the requirements of the statute for the payment of other obligations of the bank, and there remain assets in the hands of the superintendent, he is neither required nor authorized to disburse such assets to satisfy stockholders for payments on stock assessments; but in such a case, at a meeting called by the superintendent, the stockholders may either authorize the superintendent to complete the liquidation or elect a liquidating agent for that purpose. If the superintendent of banks fails to perform the duties imposed upon him by statute, an interested party may compel such performance by the writ of mandamus; and equity, in the absence of special circumstances, has no jurisdiction.
2. While a liquidating agent of the superintendent of banks stands in a fiduciary relationship to the stockholders of the bank which he is liquidating, and, in a transaction whereby he purchases shares of stock from the individual stockholder, this relationship imposes upon him the duty to disclose all material facts not known or equally accessible to the stockholder, yet where the only material information relates to the assets of the bank, the records of which are accessible to the stockholder, the liquidating agent is not guilty of a breach of duty amounting to fraud when he fails to tell the stockholder of the existence of such assets.
3. While a contract may be rescinded for fraud, the party defrauded must exercise ordinary diligence to discover the fraud, and thereupon promptly announce a decision to rescind, and restore or tender the benefits received under the contract. Such a contract may be ratified, and when so ratified the fraud is waived and the contract can not be rescinded. In a suit to rescind, the petition must show that there has been a restoration or an offer to restore the benefits received under the contract.
4. An intervenor takes the petition as he finds it; and where the intervention prays for no additional extraordinary relief, and the action is dismissed on general demurrer, the intervention must fall along with the petition.
Nos. 13891, 13892, 13893, 13894. OCTOBER 14, 1941. REHEARING DENIED NOVEMBER 13, 1941.
W. H. Wills and Mrs. Blanche R. Maddox, as administratrix of the estate of Mrs. George D. Rucker, brought this action against R. D. Manning, I. N. Thompson, G. B. Walker, and C. B. Golsan as acting superintendent of banks of Georgia. J. C. Beasley, as successor superintendent of banks, filed pleadings as a defendant. The petition as amended alleged, that the Milton County Bank of Alpharetta suspended business, and its assets were taken over by the superintendent of banks for the purpose of liquidation on December 12, 1932; that the plaintiffs were stockholders of the bank at the time it was closed; that the superintendent of banks made stock assessments against all the stock of the bank, and issued executions for the collection thereof; that plaintiffs have paid stated amounts on their stock assessments, plaintiff Wills having paid $134.60 on an assessment of $200 against his two shares of stock and Mrs. Maddox as administratrix having, on June 25, 1936, paid $950 on the stock assessment of $1000 against the estate she represents, for ten shares of stock; that the defendant Manning as liquidating agent demanded such payment from Mrs. Maddox, although at the time the depositors had been paid in full, and there were additional assets of the approximate value of $10,000; that Manning, without advising her of the additional assets, induced her to execute a conveyance of the stock certificate and deliver the same to him, the purpose being to transfer the stock to Manning as an individual, and while Manning paid nothing to Mrs. Maddox he claims to have paid the interest due on her stock assessment; that neither of the defendants, who were stockholders and directors in the defunct bank, has paid the stock assessments against his stock, and they were indebted in stated sums to the bank; that Manning as the liquidating agent has applied none of his compensation as such agent to the satisfaction of his stock assessment; that the superintendent had an appraisal committee as required by law to appraise the value of the assets of the bank, including the stock assessments, and Manning acted as a member of the committee which appraised his stock liability as well as that of defendant Walker as being worthless; that the defendant Manning has for a number of years been liquidating agent for the superintendent in the liquidation of the bank, and defendant Walker is attorney for the liquidating agent; that the superintendent, although demand has been made on him so to do, refuses to pay plaintiffs and others similarly situated the amounts paid by them on account of the stock assessments which they have heretofore paid; that the superintendent has on two occasions advertised that he has paid all creditors of the bank in full, and that he has called a meeting of the stockholders for the purpose of electing a liquidating agent and turning over the funds and assets he has on hand to such liquidating agent, before paying plaintiffs and others similarly situated; that the superintendent of banks, although claiming to have paid all creditors in full, as continued to hold the assets of the bank, consisting of more than $10,000, for a period of more than four years, and continues to withhold from plaintiffs and other creditors of the bank said fund belonging to them; that he has failed and refused to collect or to make an effort to collect the stock assessment against defendant Manning and other stock assessments which are collectible from stockholders, and for this reason the assets should be taken charge of by the court and marshaled, and the claims of creditors should be determined and paid by an order of court.
It was further alleged, that since the payment of the last dividend to depositors the defendant Manning, owing a duty to plaintiffs and other stockholders who have paid all or a part of their assessments, has been purchasing from the stockholders their stock certificates at from $5 to $25 per share, by falsely representing that the same was valueless; that in some instances he had the stock so purchased transferred to the defendant Thompson; that the defendants are engaged in a conspiracy to elect Manning as liquidating agent in order that he may control the remaining assets and tax the some with expenses; that there has been paid to the superintendent on stock assessments more than $10,000, and the superintendent now has on hand more than $3200 in cash and real estate, and bills receivable and choses in action of the approximate value of $8000; that the plaintiffs have requested of the superintendent that he distribute the funds now in his hands without expense to plaintiffs and other stockholders who have paid their stock assessments, while the defendant Manning and the stockholders whom he represents contend that the superintendent has no right to pay said assets to plaintiffs pro rata, but that the stockholders themselves should elect a liquidating agent and dispense the funds; that the defendants are not qualified to act or fill the place as liquidating agent, because they were officers of the bank before its failure, are indebted to the bank, and have been engaged in a conspiracy to defeat the rights of the plaintiffs and others similarly situated, in electing one of their number as liquidating agent; that the superintendent is not the proper one to determine the rights of defendants to vote stock illegally transferred to them and which was obtained by fraud, or to determine the conflicting claims to the possession of the remaining assets of the bank, but the court should do so; that the defendants have given written notice to the superintendent of their alleged ownership of stock belonging to plaintiffs, that they hold assignments of plaintiffs' stock, and that if the superintendent pays plaintiffs anything on the stock defendants will sue him therefor; that the superintendent is unwilling to pay plaintiffs the amounts which they are legally entitled to as owners of the stock, and he is unwilling to recognize the assignments because the plaintiffs have notified him that no valid transfer of said stock has been made by plaintiffs to defendants; that defendant Manning claims to have been elected liquidating agent by the stockholders, and the superintendent refuses to recognize his election; that Manning is disqualified to act as liquidating agent, because he is indebted to the bank and has been an officer and director, and because of his failure to pay his stock assessment; that there has been no valid election, and the claim of Manning to have been elected by a majority of the stockholders as liquidating agent is in furtherance of his attempt to defraud the plaintiffs and others similarly situated; that no interest has been paid to any depositor; that the plaintiffs are entitled to receive one hundred cents on the dollar as a refund, and the assets in the hands of the superintendent are sufficient to pay this sum; that as to the stock certificates transferred to defendant Manning he paid only twenty cents on the dollar therefor; that the plaintiffs claim and contend that the transfers of stock certificates do not carry with them the right to participate in the funds now in the hands of the superintendent and available for that purpose.
The last amendment, which was filed after the evidence had been heard, and asserted that it was made for the purpose of having the pleadings conform to the evidence, contains certain averments elaborating the claims made by certain interventions that had been filed in the case. All intervenors made claims to a portion of the assets, but prayed for no extraordinary relief, and adopted the averments of the petition as amended. They prayed, that the assets of the bank be marshaled, and by decree of court paid pro rata to the stockholders who had paid stock assessments, until such claims should be paid, and thereafter further disbursements as provided by law; for a receiver; for an accounting by the liquidating agent; for injunction preventing the depositors, stockholders, and others holding claims against the assets of the bank from taking action to enforce such claims, and requiring them to intervene in this action; and for general relief. To the petition as amended the defendants filed general demurrers and answers. By order of the court the case was referred to an auditor, who, after hearing evidence, made his report consisting of findings of fact and of law. The defendants excepted to a number of the auditor's findings of law and of fact, one of the exceptions being to the finding of law overruling the defendants' general demurrer to the petition as amended. The court overruled all exceptions and approved all of the findings excepted to. The defendants excepted pendente lite to the court's rulings. Decree conforming to the findings of the auditor was entered in favor of plaintiffs and against Manning, Walker, and Thompson. These defendants excepted, assigning error on the final judgment and on the exceptions pendente lite to the judgment overruling the exceptions to the findings of law and findings of fact of the auditor and approving these findings. The plaintiffs by cross-bill (case number 13892) excepted to that part of the judgment overruling their motion that they be allowed reasonable attorney's fees from the funds belonging to the bank. Intervenors Powell and Nesbitt by cross-bill (13893) excepted to the overruling and their exceptions to the finding of the auditor against their claims, and the approval by the court of the auditor's finding. Sarah E. Eison and a number of other named persons by cross-bill (13894) excepted to the overruling of their exceptions to the findings of the auditor denying their claim, made by intervention, to interest on their deposits and making the finding of the auditor the judgment of the court.
1. The primary complaint of the petitioners is that the superintendent of banks, although he has paid all depositors in full and still has approximately $10,000 in assets of the bank in hand, refuses to refund from the assets in hand the amounts which petitioners and other stockholders have paid in satisfaction of stock assessments made against them. The first inquiry therefore is whether or not the law requires or even authorizes the superintendent to make the disbursements sought by petitioners. The law provides that "whenever the superintendent shall have paid to each and every depositor and creditor of such bank, whose claim shall have been duly proven and allowed, the full amount of such claim, and shall have made proper provision for unclaimed and unpaid deposits and disputed claims and deposits, and shall have paid all the expenses of liquidation, the superintendent shall call a meeting of the stockholders of such bank; . . and at such meeting the stockholders shall determine whether the superintendent shall continue as liquidator and shall wind up the affairs of such bank, or whether an agent or agents shall be elected for that purpose; and in so determining, the stockholders shall vote by ballot in person or by duly executed proxy, each share of stock entitling the holder to one vote, and a majority vote of the stock shall be necessary to a determination." Code, § 13-827. The same section of the Code further provides that if the superintendent is chosen to complete the liquidation, he shall make disbursements as follows: "After paying the expenses thereof, and reimbursing the stockholders who have paid any assessments upon their stock the amounts paid by them, respectively, he shall distribute the proceeds among the stockholders in proportion to their several holdings of stock." The powers and duties of a liquidating agent elected at such meeting are defined in the Code, § 13-828, as follows: "Such agent or agents shall convert the assets coming into his or their hands into cash, and shall act for and make distribution of the property of said bank, as is herein provided in case of distribution by the superintendent." It is further provided in the same section that after such agent has executed the required bond and duly qualified, the superintendent shall transfer and deliver to the agent all of the assets of the bank remaining in his hands, and that the superintendent shall thereupon be discharged from any and all liability to the bank and its creditors. Thus it is clear that the superintendent of banks in the present case is neither required nor authorized by law to make the payments to plaintiffs which they seek in this action. The amended petition elsewhere makes general complaints to the effect that the superintendent has not been diligent in protecting the interest of the bank and has not expedited the liquidation thereof. While these general charges do not set forth specific facts to sustain them, yet if the superintendent has failed in any of the respects complained of, petitioners and others having an interest are afforded an adequate remedy at law. Code, § 64-101; Bankers Savings Loan Co. v. Better Business Division, 177 Ga. 334 ( 170 S.E. 291); Hunter v. Moss, 41 Ga. App. 13 ( 151 S.E. 831). The superintendent of banks is an official of the State whose duties are prescribed by statute, and, under the last cited Code section, he can be required by the writ of mandamus to faithfully perform his duties. It is there declared: "All official duties should be faithfully performed; and whenever, from any cause, a defect of legal justice would ensue from a failure or improper performance, the writ of mandamus may issue to compel a due performance, if there shall be no other specific legal remedy for the legal rights." Having this adequate remedy at law, the petitioners are not entitled to equitable relief. The Code, § 37-102, declares: "Equity jurisdiction is established and allowed for the protection and relief of parties, where, from any peculiar circumstances, the operation of the general rules of law would be deficient in protecting from anticipated wrong or relieving for injuries done." There are no "peculiar circumstances" alleged in the amended petition.
2. The petition as amended, without specifically praying for a rescission, alleges that plaintiff Maddox and an unnamed number of other stockholders similarly situated had previously transferred their stock certificates to one of the defendants. While in the case of the transfer by the plaintiff it is alleged that she received no consideration, it is also alleged that the defendant claims to have paid to the superintendent of banks in her behalf an unstated amount of interest due on her stock assessment, and the petition nowhere denies the truth of the defendant's claim. It is therefore construed to admit such payment. The petition states that the purpose of the assignment was to transfer from the plaintiff to the defendant Manning her bank stock, but it is alleged that the transfer was fraudulent in that at the time of the transfer all depositors of the bank had been paid in full, and the defendant, being a director as well as the liquidating agent, stood in a confidential relationship to the plaintiff and thus was under duty to disclose the financial condition of the bank to her. It is not asserted that she was without knowledge of the bank's condition and of the amount of assets then held by it. No reason is alleged why the records disclosing the assets were not available to the plaintiff as well as to Manning. Assuming, but not deciding, that under the prayer for general relief the petitioner would be entitled to a rescission if the allegations made a case justifying same, we now examine the law as applicable to the foregoing statement of facts.
While a director of a bank does not hold title and is not a strict trustee, he does occupy a fiduciary relation to the stockholders with reference to their shares of stock, and this relationship obtains when such director is dealing with an individual stockholder in the purchase of such stockholder's shares. Oliver v. Oliver, 118 Ga. 362 ( 45 S.E. 232); Swann v. Wright, 180 Ga. 323 (3) ( 179 S.E. 86); Code, § 37-707. This rule does not apply to a person who was formerly a director, as to information obtained after the time when the bank was taken over by the superintendent for liquidation, but applies only to information acquired before that time. In the present case it does apply to the defendant Manning as liquidating agent. When such fiduciary relationship exists, concealment of material facts may amount to fraud. It is declared in the Code, § 96-203: "Concealment of material facts may in itself amount to a fraud. . . When, from any reason, one party has a right to expect full communication of the facts from the other. . . Where the concealment is of intrinsic qualities of the article which the other party, by the exercise of ordinary prudence and caution, could not discover." The shareholder can not negligently refuse to examine the facts available to him and still rescind the contract because the director failed to inform him of such facts. Where the opportunities for knowledge are equal, the stockholder takes the consequences of failing to inform himself. Dortic v. Dugas, 55 Ga. 484. In Oliver v. Oliver, supra, where this question was under consideration, it was said: "If the market or contract price of the stock should be different from the book value, he would be under no legal obligation to call special attention to that fact; for the stockholder is entitled to examine the books, and this source of information, at least theoretically, is equally accessible to both." Although this court in the Oliver case went further than most of the courts of other jurisdictions in holding that a director stands in a fiduciary relation to the individual stockholder, yet it was there ruled that the stockholder can not substitute the duties of the director for his own duty to examine the facts available and accessible to his inspection. The pleaded facts in the present case are insufficient to show fraudulent concealment or breach of duty on the part of Manning in the purchase of the plaintiff's stock.
3. The petition as amended contains an averment that the defendant Manning represented to some of the stockholders from whom he purchased stock that it was without value; and while there is no prayer for rescission because of fraud, we examine this phase of the amended petition to determine whether or not grounds are alleged sufficient to authorize a rescission, again assuming, but not deciding, that the prayer for general relief would be sufficient to authorize rescission. It is provided by the Code, § 20-906, that a contract may be rescinded for fraud. But a contract procured by fraud is not void, but voidable only. Jordy v. Dunlevie, 139 Ga. 325 ( 77 S.E. 162). Such a contract may be ratified by the party defrauded, and when so ratified it becomes valid and binding upon all. Legg v. Hood, 154 Ga. 28 (2) ( 113 S.E. 642); Horne v. Evans, 31 Ga. App. 370 (7) ( 120 S.E. 787). To rescind such a contract one must be diligent in discovering the fraud ( Cohron v. Woodland Hills Co., 164 Ga. 581, 139 S.E. 56), and upon discovery of the fraud he must act at once and announce his purpose to rescind and adhere thereto. Gibson v. Alford, 161 Ga. 672 (5) ( 132 S.E. 442). A delay in seeking a rescission and restoring or offering to restore the benefits received under the contract may constitute a waiver of the fraud and a bar to a rescission. Smith v. Estey Organ Co., 100 Ga. 628 ( 28 S.E. 392); Petty v. Brunswick Western Railway Co., 109 Ga. 666 (5) ( 35 S.E. 82); Reynolds Hamby Estate Mortgage Co. v. Martin, 116 Ga. 495 (2-c) ( 42 S.E. 796); Williams v. Fouche, 157 Ga. 227 ( 121 S.E. 217). As was held in DeLamar v. Fidelity Loan Investment Co., 158 Ga. 361 ( 123 S.E. 116), there must be restitution before there can be absolution. And such restitution or tender thereof must be pleaded. Garner v. Butler, 144 Ga. 441 ( 87 S.E. 471). The petition does not show that the plaintiff Maddox has ever announced to the defendant Manning an intention to rescind, nor does it show a restoration or tender of the amount paid by Manning as interest on her stock assessment. The petition as amended therefore alleged no ground for equitable relief, and the general demurrer raising this question should have been sustained.
4. An intervention was filed by a number of stockholders, attacking various transfers of shares of stock to one of the defendants, and seeking the right to participate as stockholders in the remaining assets of the bank, but praying for no additional equitable relief. Although this intervention was by order of court allowed and intervenors were made parties plaintiff to the case, the intervention gave no strength to the amended petition, but rather was dependent upon the sufficiency of that petition. Since the petition was insufficient and must fall because no cause of action is alleged therein, the intervention must likewise fall and meet the same fate as the petition. Branan v. Baxter, 122 Ga. 222 ( 50 S.E. 45); Smith v. Manning, 155 Ga. 209 (4) ( 116 S.E. 813); Continental Trust Co. v. Sabine Basket Co., 165 Ga. 591 ( 141 S.E. 664). The error in the judgment overruling the general demurrer to the amended petition renders nugatory all subsequent proceedings in the case.
Judgment reversed on the main bill of exceptions; cross-bills dismissed. All the Justices concur.