Opinion
13955.
JANUARY 16, 1942.
Equitable petition. Before Judge Rourke. Chatham superior court. September 11, 1941.
Oliver Oliver, for plaintiff.
O. E. Bright and Perry Brannen, for defendants.
1. A decree of a court of a sister State having jurisdiction of the subject-matter and the parties, where an accounting was sought and had against executors, is, as to the amount due by them to the plaintiff in error, binding except as to all matters which may have arisen subsequently to its date.
2. As to a defendant not a party to the suit above referred to, plaintiff in error was not entitled to maintain the present petition as one in equity seeking an accounting, since it appears from the petition that there was pending in the city court of Savannah a suit by such corporate defendant against the plaintiff in error, such city court being empowered to render an accounting between the parties, and no special reason being set out why a court of equity should assume jurisdiction for such purpose.
3. Equity will not enjoin the proceedings and processes of a court of law in the absence of some intervening equity or other proper defense of which the party, without fault on his part, can not avail himself at law.
4. It is a condition precedent to the maintenance of a suit in equity by a minority stockholder against the corporation and its officers under the Code, § 22-711, that it be shown that he has made an earnest effort to obtain redress at the hands of the directors and stockholders, or why it could not be done, or that it was not reasonable to require it.
5. The bill of exceptions containing an assignment of error that the court erred in sustaining a general demurrer to the petition as amended, and that ruling being affirmed, the other exception which is directed to a ruling in relation to the sustaining of a plea of the defendant will not be passed upon.
6. It was not error to sustain the general demurrer to the petition as amended, and to dismiss the action.
No. 13955. JANUARY 16, 1942.
Thornwell K. Peeples, individually and as coexecutor of the will of Homer H. Peeples, deceased, filed a petition against Thomas R. and Walter C. Peeples, individually and as coexecutors of said will, and against Peeples Hardware Company and its alleged de facto officers, Albert F. Peeples, Pringle P. Peeples, and Thomas R. Peeples, praying for accounting and injunction. The plaintiff and all of the defendants are alleged to be residents of Chatham County. The petition was filed on September 27, 1939, and was amended on July 24, 1941. A plea of res judicata was filed by the defendants on April 3, 1940; their original answer having been filed on October 23, 1939. No additional plea of res judicata, or amendment thereto, was filed after the filing of the plaintiff's amendment. His petition as amended made the following allegations:
Homer H. Peeples by his will left all of his property to his widow and his eight children, naming them, and appointed as his executors the plaintiff and Thomas R. Peeples and Walter C. Peeples. The three executors qualified before the probate court in Hampton County, South Carolina, but the plaintiff is an executor in name only; the money, property, and effects of the estate are in the custody and under the control of the other two executors. Peeples Hardware Company was incorporated with a capital stock of $100,000 by Homer H. Peeples and four of his sons, but Homer H. paid in all of the capital stock, taking 960 shares of the par value of $100 per share. The remaining 40 shares were never issued. The incorporators and one son of Homer H. Peeples served as officers and employees during the life of Homer H. "at his pleasure, and for such compensation as might be named by him." In 1927, about three years before his death, Homer H. Peeples drafted and signed eight certificates of stock, of 120 shares each, for each of his eight children, which certificates, though not actually delivered to them, were by common consent of all of them considered as having been delivered and as thereafter being the property of each child respectively. He also drafted and signed a deed of gift, conveying to all of the children as tenants in common the lots and buildings occupied by Peeples Hardware Company; and while this deed was not actually delivered, and remained in his safe after his death, each child recognized that it was his intention to deliver the same, and each child thereafter conveyed to Peeples Hardware Company his or her one-eighth undivided interest in this real estate, and the same is still the property of that corporation. A large and lucrative business was done by the corporation before the death of Homer H., amounting to a net profit of about $25,000 per year. The plaintiff was a citizen of New York at the time of his father's death, and did not learn, until nine or ten months later, that his father had made a will, which had not been offered for probate; and he took possession of it and had it probated in Hampton County, South Carolina, on December 30, 1930. Because of his then residence in New York he could not give his personal attention to the administration of the estate, and left to his coexecutors the exclusive charge and control of the administration. All officers of the Peeples Hardware Company are mere de facto officers; no stockholders' meeting having been called, and no officers elected in accordance with the by-laws of the corporation. When its charter was renewed in 1932, no notice of a meeting for that purpose was given to any of the surviving children of Homer H. Peeples, and no legal and valid meeting of the corporation was held; a majority of the stock of the corporation was not voted at such meeting. At the time of Homer H. Peeples' death the salary of Albert F. Peeples was $175 per month, that of Thomas R. Peeples $150 per month, and that of Pringle P. Peeples $125 per month; and Walter C. Peeples, who was not an officer or director of the corporation, but a clerk in the store, drew $125 per month. Since the testator's death the above named individuals have drawn from the corporation many thousands of dollars over and above the salaries above named, without any authority given by either the executors of the will or by stockholders or directors of the corporation.
On June 28, 1939, Eugene M. Dickinson as administrator of the estate of Mrs. Nettie P. Dickinson, deceased (she being one of the children of Homer H. Peeples), individually and in behalf of her estate and in his own behalf, and in behalf of all other heirs at law and devisees and legatees of Homer H. Peeples, instituted in the circuit court of Hampton County, South Carolina, an equitable proceeding for the purpose of requiring the executors of the estate of Homer H. Peeples to make a full and complete accounting of their acts and doings, to make disbursements of money and property of the estate, and for partition in kind or a sale for division of certain real estate. Said executors and all other heirs and legatees of Homer H. Peeples were made parties defendant, and were duly served. On December 12, 1939, an order was passed by the judge, appointing a special master, and said special master filed his report. The judge of that court, Hon. J. Henry Johnson, on May 13, 1940, passed a final order in the cause, based upon the report of the special master, in which it was decreed that $4763.70 was due and owing by the executors to Thornwell K. Peeples, the plaintiff in the instant case; but it was held, that these funds were in the jurisdiction of the city court of Savannah by reason of an attachment in that court, and that said funds were to be disbursed and accounted for by the executors, Thomas R. and Walter C. Peeples, subject to the orders of the city court of Savannah. Said two executors, without any order of the probate court of Hampton County, South Carolina, deposited the funds of the estate of Homer H. Peeples with the Peeples Hardware Company of Savannah, Georgia, which in turn deposited them in a Georgia bank; and said funds were not deposited separately, but were deposited jointly with the funds of the Peeples Hardware Company. The Peeples Hardware Company was acting as a depository for the funds, and knew that the funds in the hands of Thomas R. Peeples and Walter C. Peeples, as executors, were funds of the estate being administered in South Carolina. Judge Johnson's order provided for discharge of the executors and for cancellation of their bond. The decree of Judge Johnson was affirmed by the Supreme Court of South Carolina, except as follows (quoting from said Supreme Court's decision): "It is apparent that until this matter now in the jurisdiction of the city court of Savannah, Georgia, is finally disposed of, it can not be said that the estate has been finally settled by the executors. The action of that court might entail further action on their part. It was therefore error to give them a final discharge."
Petitioner shows that the following provisions are incorporated in the stock certificates of the Peeples Hardware Company and in the certificates held by petitioner: "Stockholders desiring to sell any or all of their stock shall give the corporation written notice, delivered at its principal office, that such stock is for sale; whereupon the corporation shall have the right, within five days (Sundays and holidays excepted) from the date when such notice is received, to purchase for cash such stock at its book value, as determined by the board of directors. If the corporation declines to buy such stock, then said stockholder may sell to others; but if the corporation accepts such stock and offers to pay the book value, then the sale shall be complete and the stockholder be compelled to deliver. This company shall have a lien upon the shares of stock held by the stockholders, for any and all indebtedness which may be due by the said stockholders to the Company, and no stock shall be transferred upon the books of the Company until all of such indebtedness shall have been paid." Since it has been decreed that $4763.70 was due and owing by the executors to petitioner, and that said amount is in the jurisdiction of the city court of Savannah, and is on deposit with the Peeples Hardware Company, and is to be disbursed and accounted for by said two executors, subject to the orders of the city court of Savannah, thus necessitating the consideration of said amount in arriving at the value of the capital stock of said corporation, and since the value of the 120 shares of the capital stock of the Peeples Hardware Company belonging to petitioner can not be judicially and accurately determined without an accounting of all business transacted, moneys collected and disbursed by the corporation since the death of Homer H. Peeples; and since petitioner claims that the officers of said corporation have not been duly elected and qualified, and that the salaries paid by them to themselves have not been duly and legally fixed by the corporate authority, the value of services so rendered to the corporation must be legally determined; and since the value of all of the real estate, personal property, stock in trade, books of account, bills receivable and bills payable, and debts of the corporation and the amount of rent which should have been paid by the salaried officers of said corporation for the use of the company must be determined, and all questions of fact upon which the book value of the stock must be determined before the book value of petitioner's stock can be determined, an accounting in equity is imperatively necessary.
It is further alleged that in July, 1939, an attachment affidavit and a declaration in attachment were filed in the city court of Savannah by and on behalf of Peeples Hardware Company, declaring this petitioner, Thornwell K. Peeples, to be owing to said corporation the sum of $35,000 on a promissory note for that amount, with interest, the corporation giving a bond in the sum of $70,000; that the bondsman is not worth that amount, and hence the bond does not give petitioner the protection to which he is entitled; that petitioner filed in that court an application to have the bond strengthened, and a plea of non est factum, and said attachment is now proceeding as a suit at law. The attachment was levied by serving process of garnishment on Thomas R. Peeples and Walter C. Peeples as executors of the estate of Homer H. Peeples; and the garnishees have not answered the summons of garnishment. Petitioner alleges, that since full and adequate redress of the claims of all parties for and against each other, on all issues between the executors and the legatees and distributees under the will and the Peeples Hardware Company, can be secured in a court of equity without a multiplicity of suits, and since full and complete relief can not be secured to petitioner in a court of law without a full accounting in equity, he prays that the attachment proceedings in the city court of Savannah be permanently enjoined, and be consolidated with this cause; and that the rights of all parties be determined in this equitable proceeding.
The defendants pleaded res judicata, in substance as follows: In the action brought in the South Carolina court by Eugene M. Dickinson against the executors of Homer H. Peeples, and his heirs and legatees (the suit referred to in the plaintiff's petition) it had been judicially determined by the judge of that court, as follows: "Peeples Hardware Company has been so at the times mentioned in the plea, is now, a corporation duly organized and existing under and by virtue of the laws of the State of Georgia with its principal place of business in the City of Savannah, State of Georgia, and that said corporation was not an asset or part of the estate of Homer H. Peeples, deceased. I find the testimony and report and hold that prior to his death Homer H. Peeples owned 960 shares of stock in said corporation, and that prior to his death he made equal distribution of this stock and made transfers to his eight living children. . . I further find and hold that for the period covered in the audit that Thomas R. Peeples and W. C. Peeples, executors, have made a full, true, and proper accounting." The defendants contended in their said plea that the plaintiff in the present action, Thornwell K. Peeples, is the same party who was named as a party in the case in the South Carolina court; that he appeared and made answer, and he is bound by that decision; that the issues which were determined by that court adversely to this plaintiff are: that the title to the stock of the Peeples Hardware Company passed to the children of Homer H. Peeples under and by virtue of a transfer made by him, and that each one became the owner of 120 shares; that the land and buildings occupied by Peeples Hardware Company also became the property of the children; and that the executors, Walter C. Peeples and Thomas R. Peeples, have made a full, true, and proper accounting up to and including August 18, 1939. They prayed that their plea of res judicata be sustained "as to the issues herein enumerated, and to such other issues as might have been put in issue by the plaintiff herein in the suit in Hampton County, South Carolina, to which he was made a party, and that said issues be stricken from the original petition as filed by the plaintiff in Chatham County superior court." This plea was filed April 3, 1940.
Several paragraphs of the petition were stricken by the plaintiff in his amendment filed on July 24, 1941. The substance of such stricken allegations is not set forth above; they related to the question of the ownership of the stock of the Peeples Hardware Company, the petition contending that the drafting and signing by Homer H. Peeples of said stock certificates in the names of his children, but not actually delivering same to them, did not consummate a gift of the stock to them; and for a similar reason that the conveyance by warranty deed to his children of the lot and buildings occupied by Peeples Hardware Company, when said deed was not actually delivered to them, did not constitute a legal transfer of such property to them. These contentions were stricken by the plaintiff in his amendment filed on July 24, 1941, which was after the filing by defendants of their plea of res judicata.
The judge of Chatham superior court entered two judgments, one sustaining the plea of res judicata, and the other sustaining the defendants' general demurrer and dismissing the action. The plaintiffs excepted.
1. The petition concedes that the South Carolina court was an equity court, states that all the executors, heirs, and legatees were made parties to the litigation in that State, and the brief for the plaintiff contains the statement that it is admitted that the judgment of the South Carolina court is binding as to all questions except such as may have arisen subsequently to the date of its decree. As to the binding effect of the decree of a court of a sister State, see the authorities cited in Drake v. Drake, 187 Ga. 423 (5) ( 1 S.E.2d 573). It is insisted that such decree does not preclude the plaintiff from obtaining an accounting in equity against his coexecutors, and from seeking an injunction against further progress of the attachment suit in the city court of Savannah, because the Supreme Court of South Carolina did not affirm the decree of the trial court that the executors be given a final discharge. As affirmatively appears from the averments in the petition, in all other respects it was affirmed. See Dickinson v. Peeples, 196 S.C. 124, ( 13 S.E.2d 124). On the issue between plaintiff in the case at bar and the defendant executors, as to the accounting feature, the decree of the circuit court of South Carolina was affirmed without qualification. As the result of the accounting there had, a balance was struck, and it was adjudicated that a fund amounting to a certain sum was due and owing by the executors to the present plaintiff, but that these funds were in the jurisdiction of the city court of Savannah, by reason of an attachment in that court, and that said funds were to be disbursed and accounted for by the executors, subject to the orders of the city court of Savannah. There is no issue in the present case as to the right of the executors to a discharge. There is one as to whether an accounting should be had with them. The former proceedings between the same parties in the South Carolina court and the conclusion there reached prevent the courts of this State from going into that question again.
2. The Peeples Hardware Company does not appear to have been a party to the South Carolina litigation. Did the judge err in dismissing the action on general demurrer, since the petition prayed for an accounting between the plaintiff and the Hardware Company? An accounting may be had at law. Code, § 10-102. The mere fact of such a prayer does not call into action the equity powers of a court. Burress v. Montgomery, 148 Ga. 548 ( 97 S.E. 538); Henderson v. Curtis, 185 Ga. 390 ( 195 S.E. 152); Ferrell v. Wight, 187 Ga. 360, 367 ( 200 S.E. 271); Manry v. Hendricks, 192 Ga. 319 ( 15 S.E.2d 434). There must be some special reason why a court of equity should take charge. Compare Code, § 37-301. The petition must show (and this means more than the mere assertion of a conclusion) some reason why the remedy at law is inadequate. Burress v. Montgomery, supra; Henderson v. Curtis, supra; Branan v. The Holding Commission, 183 Ga. 736 ( 189 S.E. 593). Since it appears from the petition as amended that the Peeples Hardware Company has pending in the city court of Savannah a suit at law against the plaintiff, seeking a money judgment, that is the court in which plaintiff should seek for appointment of an auditor, and an accounting. Compare Code, § 37-122. In so far as it was directed to the effort of the plaintiff to obtain an accounting in equity, the defendants' demurrer was properly sustained.
3. The right of the plaintiff to enjoin the prosecution in the city court of Savannah of the attachment case of the Peeples Hardware Company against him must be tested by the averments of the petition as amended, and upon application of the legal principles involved. Equity may restrain a proceeding in another court which is contrary to equity and good conscience and for which no adequate remedy is provided by law. Code, § 55-101. Equity, however, will not enjoin the proceedings and processes of a court of law, unless there be some intervening equity or other proper defense of which the party, without fault on his part, can not avail himself at law. Code, § 55-103. Not one of the matters asserted by the plaintiff as reason why he should not pay the note which is the subject-matter of the suit he seeks to enjoin involves the grant of any affirmative equitable relief. Every suggestion contained in his allegations as to defenses he has to the litigation pending in the city court is a matter which he could plead in that suit, and there assert his contentions as effectively as in a court of equity. House v. Oliver, 123 Ga. 784 ( 51 S.E. 722); Armstrong v. American National Bank, 144 Ga. 245 ( 86 S.E. 1087); Clower v. Bryan, 175 Ga. 790 ( 166 S.E. 194). Therefore he showed no right to injunction against the suit in the city court.
4. Can the petition as amended be maintained as a suit in equity by a minority stockholder against the corporation and its officials, under the Code, § 22-711? An examination of the plaintiff's averments will disclose that a serious question is presented as to whether or not it affirmatively appears therefrom that he has not acted with that promptness which is required, and also whether on the whole such a case is presented as shows such conduct on the part of the directors as is contemplated by the section. Compare Cozart v. Georgia R. c. Co., 54 Ga. 379; Bartow Lumber Co. v. Enwright, 131 Ga. 329 ( 62 S.E. 233); Proctor v. Piedmont Portland Cement Co., 134 Ga. 391 ( 67 S.E. 942); Bush v. Bonner, 156 Ga. 143 ( 118 S.E. 658); Smith v. Albright-England Co., 171 Ga. 544 ( 156 S.E. 313); Loxair Corporation v. Biscoe, 192 Ga. 357 ( 15 S.E.2d 438). Neither of these subject-matters need be considered, however, because there is absent from his pleadings any showing "that he made an earnest effort to obtain redress at the hands of the directors and stockholders, or why it could not be done, or it was not reasonable to require it," which under § 22-711 must be shown.
The petition discloses that no board of directors of the corporation has been "regularly elected." No effort has been made to seek redress at the hands of those who, for aught that appears, are acting as directors, although not regularly elected. If it be said that it would be unreasonable to require such an effort (as to the correctness of which position we express no opinion), the same thing does not apply to the stockholders, although it is alleged that no stockholders' meeting has been called. There are eight of these. It is not alleged that the defendants exercised a controlling influence over a majority of the stockholders, and it is not suggested that it would be unreasonable to require that the effort to right the wrongs be sought at the hands of the stockholders. Nor is the case aided by the allegations as to what is contained in the face of the stock certificates, it not appearing that it is obligatory on the corporation to purchase his stock, or that there exists any intention on its part or that of any of the other defendants to acquire it. It is one of the conditions precedent to the bringing of a suit of the character now under discussion that redress must first be sought at the hands of the stockholders, as well as the directors. Nussbaum v. Nussbaum, 186 Ga. 773 ( 199 S.E. 169). Since this was not done, the petition as amended can not be maintained as a proceeding in equity by a minority stockholder against the corporation and its officials, under the Code, § 22-711.
5. Since the judgment sustaining the general demurrer to the petition as amended must be affirmed, and controls the entire case, no necessity exists for passing on the assignment of error dealing with the plea of res judicata.
6. For reasons indicated above, it was not error to sustain the general demurrer to the petition as amended, and to dismiss the action.
Judgment affirmed. All the Justices concur.