Allis v. Jones

• Decision Date: 01 January 1891
• Citation: 45 F. 148
• Parties: ALLIS v. JONES et al. SKEEN et al. v. ALLIS.
• Court: U.S. District Court — District of Nebraska

45 F. 148

ALLIS v. JONES et al.

SKEEN et al. v. ALLIS.

United States Circuit Court, D. Nebraska.

1891

Harwood Ames & Kelly, for complainant and cross-complainant Skeen.

A. J Poppleton, for cross-complainant Red Cloud National Bank.

G. M Lambertson and Case & McNeny, for cross-complainants First National Bank of Denver and Red Cloud National Bank.

CALDWELL J.

The plaintiff, alleging that he is a general creditor of the defendant corporations in the Red Cloud Milling Company and the Alma Milling Company in the sum of $11,950, files this bill to annul certain mortgages executed by these milling companies to the Red Cloud National Bank and the First National Bank of Denver, and prays that the affairs of the milling companies may be wound up, and their assets distributed. The plaintiff holds as collateral security for his debt certain shares of the capital stock of the milling companies belonging to the defendant Jones, and by him pledged as security for the plaintiff's debt against the companies. The defendant Skeen filed a cross-bill, making the same allegations and praying for the same relief as the plaintiff; but confessedly, on the pleadings and proofs, his debt is the individual indebtedness of the defendant Jones and not the debt of the milling companies, and his cross-bill must for that reason be dismissed. The fact that he holds stock of the milling companies belonging to and pledged by his debtor, Jones, as collateral security for his debt gives him no standing in court on the proofs in this case, for, in any event, it is conceded the companies are hopelessly insolvent, and the stock worthless. The simple pledge of the stock by its owner, Jones, did not affect his right to vote and act in good faith as a stockholder of the milling companies. 1 Mor.Priv.Corp. § 483. The milling companies have filed their answers, admitting the execution of the mortgages, and alleging that they were executed for a bona fide indebtedness due from the companies, respectively, to the banks, and averring that the debts of the plaintiff and the defendant Skeen were the individual debts of the defendant Jones, and not the debts of the milling companies. The banks filed their answer, denying the allegations of the bill, and also filed cross-bills, praying for a foreclosure of their mortgages. Numerous other creditors of the milling companies have intervened and answered, but there is no contest at present over their claims. All parties concede the priority of the mechanics' liens, and the only issues now to be determined are those arising on the plaintiff's original bill and the cross-bill of Skeen, who makes common cause with the plaintiff, and on the cross-bills of the banks, seeking a foreclosure of their mortgages. The mortgages to the banks are alleged to be void for the following reasons:

'(1) Because, by the articles of incorporation of both of said milling companies, the management and control of the affairs of said corporations is vested in a board of five directors, who alone have the power to authorize the execution of said instruments by the president and secretary, and who in each and all of these instances failed to act.

'(2) Because none of said instruments were attested by the seal of said corporation, or any seal; nor does it appear that any form or description of seal was ever adopted by either of said corporations. vires.

'(3) Because said act is in excess of the corporate powers, and ultra vires.

'(4) Because the giving of said mortgages and bills of sale on all companies, and that, as a general creditor, he can maintain a bill of immediate domination over the same, is, in contemplation of law, an assignment, and void under the general assignment laws of the state of Nebraska.

'(5) With respect to the notes, bills of sale, and mortgages to the First National Bank of Denver, same are void because grossly in excess of the amount due said defendant.'

Assuming that the plaintiff is a general creditor of the milling companies, and that, as a general creditor, he can maintain a bill of this kind, we will proceed to inquire into the validity of the objections to the mortgages to the banks.

1. The proof shows that the first objection is not well founded in fact. A majority of the board of directors and all the stockholders directed the execution of the mortgages. If the authority to execute them before they were given was not in all respects regular, their execution was afterwards ratified. What may be authorized in advance may be ratified afterwards. Mor. Priv. Corp. Secs. 228-231, 623-625. Parol evidence is admissible to prove the action of the board of directors or stockholders where the record fails to state it. U.S. v. Dandridge, 12 Wheat. 72. The opinion is by Mr. Justice STORY. Mining Co. v. Anglo-Californian Bank, 104 U.S. 192; Eureka Co. v. Bailey Co., 11 Wall. 488; Whart. Ev. Sec. 663; Davidson v. Bridgeport, 8 Conn. 472; Ratcliff v. Teters, 27 Ohio St. 66; Taymouth v. Koehler, 35 Mich. 22; Bank v. Kortright, 22 Wend. 348.

2. The omission to attach the corporate seal to the mortgages is not fatal to their validity in equity. The companies admit their execution and assert their validity. The owners of all the stock of the companies assert their validity. They were given for debts actually due from the companies to the banks. The officers and stockholders of the milling companies had no personal interest in the debts secured by the mortgages. No part of the money belonged to them, nor were any of them sureties for its payment. On this state of facts, it is not necessary to inquire whether these mortgages are legal and sufficient securities at law against the general creditors of the companies. They are undoubtedly good in Mor. Priv. Corp. Sec. 338. In Koehler v. Iron Co., 2 Black, 716, the Jackson v. Parkhurst, 4 Wend. 369; In re Howe, 1 Paige, 124; Payne v. Wilson, 74 N.Y. 348; Pom. Eq. Jur. Secs. 383, 1237; Lake v. Dowd, 10 Ohio, 415; Daggett v. Rankin, 31 Cal. 321; Abbot v. Godfroy's Heirs, 1 Mich. 179; Peckham v. Haddock, 36 Ill. 39; Racouillat v. Sansevain, 32 Cal. 376; Jones, Mort. Secs. 166, 168; Miller v. Railroad Co., 36 Vt. 452; Gale v. Morris, 29 N.J.Eq. 222; Amer. Lead. Cas. 605; 1 Lead.Cas.Eq. (3d Amer.Ed.) 666, and cases...