Opinion
6 Div. 241.
January 8, 1959.
Appeal from the Circuit Court, Jefferson County, W. A. Jenkins, Jr., J.
Chas. W. Greer, Birmingham, for appellants.
In order to give the court jurisdiction to grant declaratory relief, the complaint must contain an allegation of fact made by one party and denied by the other, and in the absence thereof, no issue is formed. Curjel v. Ash, 261 Ala. 42, 72 So.2d 732; Scott v. Alabama State Bridge Corp., 233 Ala. 12, 169 So. 273; Brantley v. Flowers, 254 Ala. 448, 48 So.2d 532. To support relief by way of specific performance, a contract must be definite and certain as to its subject matter and as to the purpose of the contracting parties and must be shown to be just and fair. Rushton v. McKee Co., 201 Ala. 49, 77 So. 343; Dozier v. Troy Drive In Theatres, 258 Ala. 417, 63 So.2d 368; Jones v. McCown, 251 Ala. 581, 39 So.2d 14; Derrick v. Monette, 73 Ala. 75. An agreement to sell a sufficient number of the shares of the capital stock of a corporation to give the purchaser "voting control thereof is vague, indefinite and uncertain as to whether the purchaser is to acquire stock sufficient to enable him to control the corporation in respect to all matters determinable by the vote of the stockholders or to enable him to acquire a limited control as the owner of a majority of the company's capital stock. Code 1940, Tit. 10, §§ 39, 40, 42, 91, 95; 9 Words Phrases 624, and P.P. A contract is too incomplete for specific performance if it does not fix the price or consideration or provide an adequate way in which it can be fixed. Citronelle Turpentine Co. v. Buhlig, 184 Ala. 404, 63 So. 951; 81 C.J.S. Specific Performance § 35(3), p. 498. The term "book value" of corporate stock has no generally accepted meaning; its significance varies according to the particular definitions or stipulations under which it is to be determined. 51 A.L.R.2d 608. The provision in a contract that "in determining book value, any insurance on the life of a deceased stockholder owned by and payable to the company and which is reasonably certain to be collected, shall be taken into consideration", renders the contract too vague and uncertain as to the purchase price to be paid for capital stock to warrant specific enforcement of the contract. Babb v. Carver, 7 Wis. 124. Declaratory relief construing a will cannot be granted in the absence of an allegation of a justiciable controversy in respect to the meaning of the will. Authorities, supra; Kimbrough v. Dickinson, 247 Ala. 324, 24 So.2d 424.
Whitmire, Morton Coleman, Birmingham, for appellee.
The test of the sufficiency of a bill in a declaratory judgment proceeding is not whether the bill shows that complainant will succeed in getting a declaration of rights in accordance with his theory and contention but whether under the facts alleged he is entitled to a declaration of rights at all. If complainant states the substance of a bona fide justiciable controversy, which should be settled, he states a cause of action for declaratory judgment and demurrer should be overruled. Curjel v. Ash, 261 Ala. 42, 72 So.2d 732; Percoff v. Solomon, 259 Ala. 482, 67 So.2d 31, 38 A.L.R.2d 1100; Water Works and Sanitary Sewer Board of City of Montgomery v. Campbell, 262 Ala. 508, 80 So.2d 250; Alabama State Milk Control Board v. Graham, 250 Ala. 49, 33 So.2d 11; Code 1940, Tit. 7, § 156 et seq. Book value of corporate stock is the net worth of all corporate assets less all liabilities. 33 A.L.R. 366; 51 A.L.R.2d 606. Relief by way of specific performance of an option to purchase corporate stock is available in equity, as relief supplemental to a declaratory judgment. Madison Limestone Co. v. McDonald, 264 Ala. 295, 87 So.2d 539; Boozer v. Blake, 245 Ala. 389, 17 So.2d 152; General Securities Corp. v. Welton, 223 Ala. 299, 135 So. 329; 49 Am.Jur. 155, § 132.
The agreement involved is as follows:
"Agreement made June 30th 1952, between R. A. Bailey and Carl M. Smith, hereinafter called Stockholders.
"Whereas, Leeds Telephone Company, Inc., (hereinafter called Company) is a corporation with an authorized capital of $100,000.00 divided into 1000 shares of $100 par value common stock, of which 680 shares are now outstanding, each of said Stockholders now owning 334 shares; and,
"Whereas, said Stockholders have been actively engaged in the management of the company and believe it is for their best interests and for the best interest of the Company that if one desires to dispose of his stock that the other be given the option to purchase same and that on the death of one the survivor should acquire voting control of the Company.
"It is therefore agreed.
"(1) Acquisition of voting control by survivor. Upon the death of either of said Stockholders, the surviving Stockholder shall purchase and the estate of decedent shall sell that number of shares of the stock of the Company which, when added to shares owned by the surviving Stockholder, will give the surviving Stockholders voting control of the Company. The purchase price of each share shall double its book value at the end of the month in which the death of the Stockholder occurs. In determining book value any insurance on the life of the deceased Stockholder owned by and payable to the Company and which is reasonably certain to be collected shall be taken into consideration. The purchase price for said shares shall be paid to the estate of the decedent within thirty days after the appointment and qualification of a legal representative of such estate. Upon receipt by the estate of the deceased Stockholder of the purchase price in cash, the legal representative of the estate shall endorse and deliver such shares of the decedent to the surviving Stockholder.
"(a) If the surviving Stockholder acquires all of the stock of the deceased Stockholder, as provided in succeeding paragraph '(2)', the purchase price shall be as stated in that paragraph and not as set forth in this paragraph.
"(2) Option to purchase all of shares of deceased Stockholder. In the event the personal representative of the estate of the deceased Stockholder desires to sell all of the stock of the Company owned by said estate, he shall first offer such stock for sale to the surviving Stockholder at the same price offered by a bona fide prospective purchaser of such shares, and on the same terms he would sell to such bona fide purchaser. If such surviving Stockholder fails to purchase all of such shares within 60 days after written notice from the personal representative of the deceased Stockholder, said personal representative may sell all of said stock, except those shares the surviving stockholder is obligated to purchase under the provisions of preceding paragraph '(1)', to others.
(3) Option to purchase in event one stockholder desires to sell. If one of said Stockholders, during his life time, desires to sell all or any part of his stock (the Stockholder desiring to sell being hereinafter called Seller) he shall first offer, in writing, such stock to the other Stockholder (said other Stockholder being hereinafter called Purchasing Stockholder) at the same price and on the same terms offered by a bona fide prospective purchaser. The Purchasing Stockholder is hereby given the option of either purchasing all of said stock at the same price and on the same terms offered Seller by a bona fide prospective purchaser or of purchasing only that number of shares, at double their book value, which, when added to the number of shares then owned by the Purchasing Stockholder, will give said Purchasing Stockholder voting control of the company. Within ten days after receiving the offer from the Seller the Purchasing Stockholder must notify the Seller, in writing, of his intention to purchase and within an additional period of twenty days must pay to the Seller the purchase price in cash. On payment of the purchase price the Seller must transfer and deliver to the Purchasing Stockholder the shares purchased as above provided. If the Purchasing Stockholder fails to notify the Seller of his intention to purchase or fails to pay the purchase price within the period stated, the Seller may then dispose of his stock to others.
"(4) The price of double the boo d value, in the event only sufficient stock is purchased to give voting control, is fixed at this figure because the parties feel that more should be paid per share for just sufficient stock to give voting control than should be paid for all the stock of a Stockholder. This price should not be construed or considered as the value of the shares of the Stockholder not purchased.
"(5) Endorsement on stock certificate. All certificates of stock of the Company owned by said Stockholders shall be endorsed with the following statement: "The shares of stock represented by this certificate are subject to the terms of an agreement dated June 30th 1952, a copy of which is on file at the office of the Company.
"(6) Restrictions on Stock. So long as both said Stockholders are alive, neither shall encumber or dispose of his stock, except as herein provided, without written consent of the other.
"(7) Duration of Agreement. This agreement shall terminate upon the occurrence of any of the following events:
"(a) Bankruptcy, receivership, or dissolution of the company.
"(b) Death of both Stockholders simultaneously or within a period of 30 days.
"(c) Mutual agreement of parties hereto.
"(8) Benefit. This agreement shall be binding upon the Stockholders, their heirs, legal representatives, successors and assigns, and each Stockholder in further nance thereof shall execute a will directing his executor to perform this agreement and to execute all documents necessary to effectu tate the purposes of this agreement, but the failure to execute such will shall not affect the rights of any Stockholder.
"In witness whereof the partners have signed this agreement.
"R. A. Bailey
"Carl M. Smith
"Witness:
"McCoy Whitmire
"Inez W. Owen"
This litigation grows out of a written contract executed on June 30, 1952, by Carl M. Smith (appellee) and R. A. Bailey, who is now deceased. R. A. Bailey died testate, leaving his estate to his widow, Lou S. Bailey, for life with a remainder to Lynn Bailey, the only child of the deceased, and appointing Lou S. Bailey (appellant), as executrix of the will.
Suit for a declaratory judgment and other relief was brought by Carl M. Smith in the Circuit Court of Jefferson County, in Equity, against Lou S. Bailey, individually and as executrix of the will of R. A. Bailey, deceased, and against Lynn Bailey. The Leeds Telephone Company is also made a party respondent, but no relief is asked against it and it has filed no pleadings in the case.
The court rendered a decree overruling the demurrer of Lou S. Bailey individually and as executrix of the will of R. A. Bailey, deceased, and also overruling the demurrer of Lou S. Bailey as guardian of Lynn Bailey, a minor, who has joined in this appeal. The appeal here is from the aforesaid decree.
The allegations of the bill show in substance the following. For some time prior to August 28, 1951, Carl M. Smith and R. A. Bailey engaged as partners in the ownership and operation of a telephone business and telephone exchange at Leeds, Alabama. On August 28, 1951, Carl M. Smith together with R. A. Bailey and his wife, Lou S. Bailey, Eleanor M. Smith, the wife of Carl M. Smith, and Bill Dorrough became the incorporators of the Leeds Telephone Company, Inc., a public service corporation, under articles of incorporation filed in the office of the Probate Judge of Jefferson County, Alabama.
Under the certificate of incorporation Leeds Telephone Company, Inc., had an authorized capital stock of $100,000, divided into 1,000 shares with a par value of $100 each, of which 680 shares were subscribed and issued on incorporation, as follows: Carl M. Smith 334 shares; R. A. Bailey 334 shares; Lou S. Bailey 1 share; Eleanor M. Smith 1 share; Bill Dorrough 10 shares, total 680 shares.
Carl M. Smith and R. A. Bailey discharged their respective subscriptions for said shares by transferring and conveying to the corporation all the property, real and personal, owned by them as partners in and about carrying on the aforesaid telephone business. After incorporation the telephone business formerly owned and conducted by Carl M. Smith and R. A. Bailey, was carried on by the Leeds Telephone Company, Inc. The corporation was so engaged on the date of the filing of complainant's original bill.
From the creation of the corporation to the death of R. A. Bailey, Carl M. Smith and R. A. Bailey each continued to own in their respective names 334 shares of capital stock of the corporation and together had active charge of the management of the affairs and business of the corporation. By virtue of the ownership of their shares of stock Carl M. Smith and R. A. Bailey had voting control in the management of the affairs of the corporation.
On June 30, 1952, Carl M. Smith and R. A. Bailey entered into a written agreement providing in substance that in the event one of them should elect to sell his shares of stock in the corporation, the other should have the option to purchase the same, and also that on the death of one of them the survivor should have the right to purchase from the estate of the one deceased, sufficient shares of the stock of the corporation to acquire voting control of the corporation.
The instant controversy grows out of the disputed rights of Carl M. Smith under said agreement to purchase from the estate of R. A. Bailey, deceased, sufficient shares of the stock of the corporation owned by R. A. Bailey at the time of his death, which, when added to the shares owned by Carl M. Smith would give Carl M. Smith voting control of the corporation. This agreement is marked Exhibit A to the bill of complaint and made a part thereof. It will appear in the report of the case.
The allegations of the bill further show that the will of R. A. Bailey, deceased, was probated in the Probate Court of Jefferson County, Alabama, on January 8, 1957. Letters testamentary were granted to his widow, Lou S. Bailey, on January 8, 1957. The widow and Lynn Bailey are the only heirs at law and distributees of the testator. Together they constitute all of the beneficiaries under the aforesaid will. A copy of the will of R. A. Bailey, deceased, is also attached to the bill of complaint in this cause and made a part thereof. The will was made on July 1, 1950. It made no reference to the agreement in question as it was made two years prior to the date of the agreement. The testator bequeathed his property as follows:
"I give and bequeath to my beloved wife, Lou S. Bailey, all my property, both real and personal, which I shall be entitled upon my decease, for and during her life.
"Upon the death of my wife, Lou S. Bailey, I give and bequeath to my beloved child, Lynn Bailey, all of my estate, both real and personal, to have and to hold the same to her and her heirs and assigns forever."
The allegations of the bill further show that prior to the death of R. A. Bailey eleven additional shares of the authorized capital stock of the corporation, which were authorized but not issued at the time the corporation was created, were issued, so that at the time of the death of R. A. Bailey 691 shares of the capital stock of the corporation had been issued. At the time of the death of R. A. Bailey he owned 334 shares of said capital stock and Carl M. Smith owned 334 shares. The allegations of the bill further show that during the lifetime of R. A. Bailey the corporation issued 386 shares of nonvoting preferred stock. When R. A. Bailey died and on the date of the filing of the bill in this cause, said 691 shares of capital stock constituted all the voting stock of the corporation.
The bill of complaint further shows that within 30 days after the grant of letters testamentary to Lou S. Bailey upon the estate of R. A. Bailey, deceased, Carl M. Smith offered to purchase from the estate of decedent twelve shares of the capital stock owned by decedent when he died. It is further alleged that twelve shares of stock owned by decedent when added to complainant's 334 shares, making a total of 346 shares, would give complainant "voting control" of the corporation. It is further alleged that the price which complainant offered to pay the executrix for said twelve shares of stock, was determined in keeping with the agreement. The executrix refused to accept the purchase price and endorse and deliver the shares of stock to Carl M. Smith.
I. Under § 167, Title 7, appearing in the 1955 Cumulative Pocket Part of the Code of 1940, we are admonished to give the declaratory judgment act a liberal construction, the statute declaring that the purpose of the declaratory judgment act is to settle and afford relief from uncertainty with respect to rights, status and other legal relations. Wolff v. Woodruff, 258 Ala. 1, 61 So.2d 69; Dozier v. Troy Drive In Theatres, Inc., 258 Ala. 417, 63 So.2d 368. In Anderson on Declaratory Judgments, Vol. II, p. 1304, it is said: "The courts will take jurisdiction by resort to declaratory procedure and determine the meaning of the contract and the rights and liabilities of the parties."
We have in the instant case a situation where there is an actual controversy between the complainant Carl M. Smith and the respondent Lou S. Bailey, as executrix of the will of R. A. Bailey, deceased, as to the rights of the complainant under the terms and provisions of the aforesaid agreement, marked Exhibit A to this bill, to purchase from the estate of the decedent certain stock of the corporation known as the Leeds Telephone Company, Inc., and as to the duty and obligation of the said executrix to accept the purchase price therefor and to endorse and deliver the shares of stock so purchased to the complainant. We, therefore, think that the court was correct in overruling the demurrer taking the point that the bill showed no justiciable controversy under the declaratory judgment act. Madison Limestone Co. v. McDonald, 264 Ala. 295, 87 So.2d 539.
II. We furthermore think that the court was correct in holding that the bill shows that the complainant is entitled to the relief of specific performance. Boozer v. Blake, 245 Ala. 389, 17 So.2d 152. Such relief is expressly provided for in § 163, Title 7, Code of 1940, where the bill shows a justiciable controversy which should be settled. Dozier v. Troy Drive In Theatres, Inc., 258 Ala. 417, 63 So.2d 368. We know of no reason why the executrix in her representative capacity is not bound by the contract made by the decedent. 33 C.J.S. Executors And Administrators § 189, p. 1168.
III. It is argued that there is no way under the allegations of the bill to interpret the meaning of the term "voting control" as used in Paragraph One of the contract. We do not agree. Under the Alabama statute each share of stock in a corporation carries with it the power of one vote, except where it is provided to the contrary. § 38, Title 10, Code of 1940; Western Grain Company Cases, 264 Ala. 145, 85 So.2d 395. Allegations of the bill show that the preferred stock has no voting power. § 39, Title 10, Code of 1940. Accordingly, ownership of a majority of the common stock of the Leeds Telephone Company carries with it the voting control of the corporation.
IV. There is no merit in the contention that the term "book value" as used in the contract cannot be given a meaning because of its uncertainty and ambiguity. On this demurrer at least, book value as set out in the contract will be given its ordinary meaning, which is the net worth of all corporate assets less all corporate liabilities. 5 Words Phrases, Book Value, p. 693, and Cumulative Annual Pocket Part; 33 A.L.R. 366; 51 A.L.R.2d p. 610. In this connection, we think that when the sentence "In determining book value any insurance on the life of the deceased stockholder owned by and payable to the company and which is reasonably certain to be collected shall be taken into consideration," is read in its context, it shows that such insurance is to be taken into account as an asset on the books of the company when arriving at the book value of the stock whether the proceeds of the insurance have or have not been collected, provided the insurance is reasonably certain to be collected.
V. It is argued that since there is no ambiguity or uncertainty in the will of R. A. Bailey, deceased, there is no room for construction of this will. No need for construction because of ambiguity is alleged in the bill but the bill does pray for a construction of the will. However, the mere fact that the bill may pray for unwarranted relief does not make the bill demurrable, where the allegations of fact make a case for equitable relief and the bill contains a proper prayer. United Steel Workers Union A.F.L.-C.I.O. v. Manley, 267 Ala. 452, 104 So.2d 306; Creson v. Main, 260 Ala. 318, 70 So.2d 417. The court accordingly will not be put in error for overruling the demurrer to this aspect of the bill.
We conclude that the court was correct in overruling the demurrers to the bill as a whole and to each and every aspect thereof.
Affirmed.
LAWSON, GOODWYN and MERRILL, JJ., concur.