Bassett v. Pamlico Cooperage Co.

• Decision Date: 05 November 1924
• Docket Number: 20.
• Citation: 125 S.E. 14,188 N.C. 511
• Parties: BASSETT v. PAMLICO COOPERAGE CO. ET AL.
• Court: North Carolina Supreme Court

125 S.E. 14

188 N.C. 511

BASSETT v. PAMLICO COOPERAGE CO. ET AL.

No. 20.

Supreme Court of North Carolina

November 5, 1924

Appeal from Superior Court, Beaufort County; Devin, Judge.

Action by Guy F. Bassett, trading as the Independent Cooperage Company, against the Pamlico Cooperage Company and others. Judgment for defendants, and plaintiff appeals. Reversed.

The action is principally for the purpose of recovering of defendants, the officers and directors of the Pamlico Cooperage Company, the proportionate part of a judgment held by plaintiff against said defendant company by reason of the alleged wrongful distribution of the assets of defendant corporation to plaintiff's prejudice. At the close of the evidence, on motion, there was judgment of nonsuit, and plaintiff, having duly excepted, appealed.

Where practically insolvent corporation conveyed its entire property with view of going out of business, it amounted to dissolution, and rule of distribution incumbent on directors and managers was that of equality among all creditors.

Ward & Grimes, of Washington, N. C., for appellant.

S. C Bragaw, of Washington, N. C., for appellee Pamlico Cooperage Co.

Small MacLean & Rodman, of Washington, N. C., for appellee National Veneer Co.

HOKE C.J.

It appears from the allegations and admissions in the pleadings and from the evidence offered on the trial that in 1919 plaintiff, having a claim against the Pamlico Cooperage Company, instituted suit to recover same in the District Court of the United States in the Eastern District of North Carolina, and in April, 1922, recovered a judgment thereon which said judgment is still due and unpaid; that in 1920, the defendant, the Pamlico Cooperage Company, sold and conveyed its entire interests and property for $109,000, the conveyance being made first to defendant W. B. Simmons, acting in the matter for defendant the National Veneer Company, and who later conveyed same to the Veneer Company, which said company has paid the purchase price in full; that the said Pamlico Company was practically insolvent, the sale being made with a view of paying off its indebtedness and going out of business, and the defendants, its officers and directors, in the management and control of its affairs, having received said purchase money, and with full knowledge or notice of plaintiff's claim, applied and distributed the entire purchase price to the payment and satisfaction of said company's existent indebtedness other than plaintiff's claim, and for the greater part of which said officers and directors were liable as indorsers on the company's notes.

On these the facts chiefly pertinent, and undisputed so far as we can discover, there is, in our opinion, nothing to justify or uphold further recovery against the Veneer Company, the purchaser. The Pamlico Company being at the time a going concern, the defendant the Veneer Company having bought and paid the purchase price, so far as appears the full value of the property, and there being no evidence tending to show any fraudulent or ulterior purpose on its part, the title acquired is valid, and it should be quit of further obligation by reason of the transaction. Bank v. Hollingsworth, 143 N.C. 520, 55 S.E. 809; Bank v. Cotton Mills, 115 N.C. 507, 20 S.E. 765; Hancock v. Holbrook, 40 La. Ann. 53, 3 So. 351; 14 Corpus Juris, § 3069.

With regard to the disposition of the purchase price, however, a different principle must prevail; for, the corporation being insolvent or nearly so, this conveyance of its entire property with a view of going out of business amounted practically to a dissolution, and in such case the rule of distribution incumbent upon its directors and managers is that of equality among all of its creditors, and they acted in their own wrong when they distributed the entire assets among the other creditors, having full knowledge and notice of plaintiff's claim, assuredly so when this was done for their own relief, and by paying off debts for which they were personally liable. Steel Co. v. Hardware Co., 175 N.C. 450, 95 S.E. 896; Drug Co. v. Drug Co., 173 N.C. 502, 92 S.E. 376; Wall v. Rothrock, 171 N.C. 388,...