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LAKEN et al. v. SUNBRAND SUPPLY COMPANY et al.
20327.
Receivership, etc. Wilcox Superior Court. Before Judge Horne. October 24, 1958.
DUCKWORTH, Chief Justice.
The original petition by creditors against the corporation alleged insolvency and a dissipation of assets, and prayed for the appointment of a receiver. The portion of the answer alleging possible misconduct and indebtedness of outside parties to the corporation, as well as an amendment of the petition, in which others joined, alleging the same matters and praying that such new parties be made parties defendant, required to account, and for a judgment against them, all related to a distinctly different cause of action and parties, and it was error to overrule the objections of such outside parties thereto.
On January 21, 1956, Economy Textiles Company, Joseph Fleder Manufacturing Company, and Sunbrand Supply Company filed in the Superior Court of Wilcox County their separate suits upon open accounts against Rochelle Manufacturing Company, each, seeking a judgment for the amounts of their respective accounts. On January 28, 1956, they filed in the same court a joint and several suit against Rochelle Manufacturing Company, alleging that the defendant was a corporation with its principal office and place of business in Rochelle, Georgia; that Cecil D. Crummey, a stockholder of the defendant corporation, is president thereof; that the defendant was chartered September 10, 1954, with Dave Laken, J. C. Robinson, both of Atlanta, Georgia, and J. R. Peavy of Rochelle, Georgia, as incorporators; that the defendant began operations immediately; and that, at the beginning of operations, Peachmar Manufacturing Company, Inc., one of whose stockholders and one-time president of the Rochelle Manufacturing Company was Dave Laken, ceased its operations and sold and transferred to Rochelle Manufacturing Company its assets for 50% of the outstanding capital stock of Rochelle Manufacturing Company. Then it is alleged that there are on the record enumerated liens on certain of the equipment; that the defendant gave a worthless check for $1,200 on December 1, 1955, to one of the plaintiffs; that the defendant is hopelessly insolvent; that certain unnamed stockholders are not only permitting but directing that certain properties be removed from the building in order that the defendant corporation's business be further crippled, which will injure petitioners; that petitioners would be agreeable to the president, Cecil D. Crummey, being appointed as receiver for the purpose of having returned all properties that have been removed, which were assets of the defendant from the beginning of operations; and that, to avoid a multiplicity of suits by other creditors, it is imperative that a receiver be appointed and all creditors allowed to intervene in the cause. The only substantial relief prayed for was the appointment of a receiver to take charge of and preserve assets of the defendant and report an inventory thereof to the court. Cecil D. Crummcy was appointed temporary receiver in the rule nisi which was issued.
Rochelle Manufacturing Company on February 20, 1956, filed an answer, in which it alleged that its business was carried on by J. C. Robinson and Dave Laken until recently when C. D. Crummey became president; that Peachmar Manufacturing Company gas to take $30,000 of stock in defendant corporation and in payment therefor would convey to defendant machinery and equipment and supplies, free and clear of all liens, valued at $30,000; that Peachmar Manufacturing Company was controlled by Dave Laken, as President; that it did not carry out its obligations, and a good portion of the equipment and machinery it delivered to the defendant was not paid for and had liens against it; that the stock was issued to Dave Laken, his wife Lena Laken, and J. C. Robinson without value being paid therefor; that, in order that the creditors may be protected and that the defendant pay as much of its debts as possible, Peachmar Manufacturing Company, Dave Laken, Lena Laken, residents of Fulton County, Georgia, and J. C. Robinson, a resident of California, should be made parties and required to account for the stock issued in their names; that they be required to pay for same at its par value; and that the defendant is unable to say what the value of the assets delivered to it by Peachmar Manufacturing Company is, but it is far short of $30,000. It prayed that Peachmar Manufacturing Company, Dave Laken, Lena Laken, and J. C. Robinson be made parties; that they be required to file a complete accounting between themselves and the corporation; and that judgment be rendered in accordance with equity.
On February 17, 1956, an order was entered, appointing Cecil D. Crummey permanent receiver of Rochelle Manufacturing Company. On April 7, 1956, a pleading on behalf of the petitioners and a number of other creditors of the defendant, entitled "Answer petition for receivership," was filed, in which substantially what was alleged in the answer of the defendant was alleged, including the allegation that the business of the defendant was carried on until January 16, 1956, by J. C. Robinson and Dave Laken; that it lost money, and they together with Mrs. Laken should be held liable for some unstated amount for unspecified disloyalty and violation of trust; and praying that Peachmar Manufacturing Company, Dave Laken, Lena Laken, and J. C. Robinson be made parties and required to file a complete accounting between themselves and the defendant; that judgment be entered according to equity; that each of the plaintiffs have judgment against the defendant corporation, and against any funds that may be due and owing by virtue of the accounting therein sought. Thereafter, Peachmar Manufacturing Company, Dave Laken, Mrs. Lena Laken, and J. C. Robinson were ordered to show cause on April 13, 1956, why the prayers should not be granted.
Peachmar Manufacturing Company, Dave Laken, and Lena Laken on May 3, 1956, filed their separate objections to being made parties to the proceedings. The objections were: (1) all pleadings seeking to make parties show on their face that these objectors reside in Fulton County, Georgia, and the suit is in Wilcox County, hence the court has no jurisdiction of the objectors; (2) no facts are alleged to authorize making the objectors parties; (3) the objectors are neither necessary nor proper parties for a determination of the questions involved in the pending action; (4) that the action against Rochelle Manufacturing Company is not related to or connected with any alleged controversy between any of the plaintiffs and these objectors; and (5) that the record shows that a permanent receiver has been appointed, and hence none of the pleaders can lawfully maintain the purported action against the objectors. On August 14, 1957, the objections were overruled, and the objectors were made parties. Thereafter, each objector made a motion to dismiss, and said motions were denied. The exceptions are to the orders overruling the objections to being made parties and denying the motions to dismiss and to strike an amendment to the petition.
No evidence in support of the original suit would prove any allegation against the nonresident new parties. In City of Columbus v. Anglin, 120 Ga. 785, 792 (48 S. E. 318), this court enumerated some of the tests that would determine if a new cause of action is alleged. These are: (1) whether the original petition and the amendment would be subject to the same plea; (2) whether the same evidence would support both; (3) whether the same measure of damages is applicable to both; (4) whether both could have been pleaded cumulatively in the same count; and (5) whether an adjudication upon one would bar a suit under the other. Certainly the amendments here would fail under each and all of those tests. "New and distinct matters, not involved in the original action, may not be introduced by cross-action, and a cross-action which sets up matters of defense not germane to the case made by the petition is not maintainable." Bowles v. White, 206 Ga. 343 (1, 2b) (57 S. E. 2d 187). The rule just quoted demolishes all that is set forth in the answer of the defendant corporation, aside front answering whether or not a receiver should be appointed for it. It is inadmissible to combine numerous parties and causes of action under the claim of avoiding a multiplicity of suits. "No amendment adding a new and distinct cause of action . . . shall be allowed unless expressly provided for by law." Code 81-1303. This rule applies to equity cases. Roberts v. Atlanta Real Estate Co., 118 Ga. 502 (45 S. E. 308); Magid v. Byrd, 164 Ga. 609 (139 S. E. 61). Of course it is provided by law that necessary parties may be added. Code 37-1005. This does not include unnecessary and even improper parties, as was sought to be done here.
We believe that every controlling question here involved is controlled in favor of the plaintiffs in error by the full-bench decision of this court in Franklin Bank-Note Co. v. Augusta &c. Ry. Co., 102 Ga. 547 (30 S. E. 419). The material facts here and there are substantially the same. There, as here, the original action by creditors against a corporation sought a receivership. There, as here, it was sought to amend by making a number of private persons parties and alleging fraud upon the part of such persons and praying for a judgment rendering them liable. This court there said (headnote 2), and we quote it as definitely applicable here, "Whether these persons were or were not primarily liable, such an amendment was not germane to the action as brought, and undoubtedly set forth an entirely new and distinct cause of action."
The court erred in making these plaintiffs in error parties over their timely objections.
Judgment reversed. All the Justices concur.
R. McCormick, J. C. McDonald, Gower & McCormick, Cecil D. Crummey, McDonald & McDonald, Otis L. Hathcock, Mixon & Forrester, C. Arnold Shulman, D. E. Turk, contra.
Sam F. Lowe, Jr., Smith, Field, Doremus & Ringel, Will Ed Smith, Davis & Friedin, Roy B. Friedin, for plaintiffs in error.
ARGUED JANUARY 14, 1959 -- DECIDED APRIL 9, 1959.
Saturday May 23 00:46 EDT


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