Beaumont v. Folsom
| Decision Date | 28 April 1939 |
| Docket Number | 30482. |
| Citation | 285 N.W. 547,136 Neb. 235 |
| Parties | BEAUMONT v. FOLSOM ET AL. |
| Court | Nebraska Supreme Court |
Syllabus by the Court.
1. While the dealings of a director with respect to corporate property will be given most careful scrutiny, he is not prohibited from purchasing, in good faith, an outstanding lien on such property, with the knowledge of the other stockholders, to protect his own investment, where the corporation is without financial ability to take up the lien and the other stockholders have refused to join in a contribution for this purpose.
2. He is permitted, also, in protecting the interest thus acquired to bring foreclosure on the lien in regular course, and openly and fairly to purchase the property at ju dicial sale, particularly where he has given the other stockholders notice of each stage of the proceedings.
3. In such a situation, where each stockholder has had notice of the sale and an opportunity to bid; where none has seen fit to make objection to confirmation; where no fraud or overreaching in connection with the sale is charged, and where no other controlling circumstances are present, the confirmation of the sale may ordinarily be accepted as sufficiently establishing that the property was purchased for its full value under all the conditions.
4. Under such circumstances, where the title acquired is subsequently sought to be avoided, the facts that the director has earnestly endeavored to get the stockholders to join in a contribution to relieve the financial distress of the corporation and to prevent a judicial sale, which they have refused to do, and that, on taking over the property, he has offered them the opportunity to participate in organizing a new corporation, on the same proportional basis as in the old, by payment of their share of the money expended, are rather strongly persuasive on the issue of good faith and fidelity to duty as a director.
Appeal from District Court, Lancaster County; Polk, Judge.
Action by Fred E. Beaumont against Willard M. Folsom and others for an accounting and distribution of the assets of a dissolved corporation. From a decree in favor of the defendants, the plaintiff appeals.
Affirmed.
Beghtol, Foe & Rankin and W. E. Nolte, all of Lincoln, for appellant.
Field, Ricketts & Ricketts, of Lincoln, for appellees.
Heard before SIMMONS, C. J., and ROSE, CARTER, MESSMORE, and JOHNSEN, JJ.
This is an action by a stockholder against the directors of a dissolved corporation, for an accounting and distribution of assets. Plaintiff has appealed from the dismissal of his petition.
The corporation was dissolved by action of its stockholders in 1933. It had owned two buildings on the southeast corner of Fifteenth and " O" streets, in the city of Lincoln, purchased in the boom period for $91,500, on which the rents, grossing $19,000 a year at their peak, had paid the upkeep and reduced the mortgage from $60,000 to $25,000. From 1928 on, however, the rents were insufficient to carry the property, and the usual story of the depression followed. An extension was obtained on the mortgage. Tax sale certificates were issued against the property. The mortgagee complained of the tax defaults. Defendants Willard M. Folsom, Homer K. Burket and Harry J. Hall, the directors and majority stockholders, tried to get the other shareholders to join in a contribution sufficient to redeem from the tax sales, but all of them refused. Finally, in 1932, defendants Folsom, Burket and Helen E. Hall, daughter of Harry J. Hall, purchased the tax sale certificates from the holder and took an assignment in their own names, with an agreement that their lien was to be subordinate to the mortgage. The other stockholders, including plaintiff, were informed of what had been done and were invited to participate, but none of them would contribute.
In 1933, foreclosure was commenced on the tax sale certificates, and cross-petition was filed on the mortgage, which was then in default. Decree was entered for $26,279.87 on the mortgage and for $7,530.07 on the tax lien. The mortgagee offered to trade its decree for Beatrice Creamery Company stock, on a par value basis. Such stock, in an amount necessary to effect the trade, was then purchasable on the market for $15,000. The corporation was not in a position to take over the decree and pay the tax liens. In order to fortify their tax lien investment, defendants Folsom, Burket and Helen E. Hall purchased the necessary Beatrice Creamery Company stock and took an assignment of the mortgage decree. At sheriff's sale they bid in the property and had deed issued to them, which was duly recorded on July 23, 1933. All the stockholders, including plaintiff, were notified of the foreclosure, of the purchase of the mortgage decree, and of the sheriff's sale.
On August 8, 1933, a special meeting of the stockholders was held, and all appeared in person or by proxy. Plaintiff was represented by his son and by an attorney. Every stockholder, except plaintiff, voted to dissolve the corporation. Defendants Folsom, Burket and Hall advised of their intention to form a new corporation and to convey title to it, and offered each stockholder the privilege of participating, on payment of his proportional share of the expenditures made. Neither plaintiff nor any other minority stockholder availed himself of the privilege. The stock in the new corporation was accordingly issued to defendants Folsom, Burket and Harry J. Hall. Conveyance was made to it of the property on September 11, 1933, and it has since owned and operated the building, with some further financial assistance from the shareholders in 1934.
This action was brought on September 7, 1937, against defendants Folsom, Burket, Harry J. Hall, his daughter Helen E. Hall and the new corporation. Plaintiff contends that, in taking an assignment of the tax sale certificates, in instituting foreclosure upon them, in effecting a compromise with the mortgagee and taking an assignment of its decree, and in acquiring title to the property at sheriff's sale, the directors were trustees ex maleficio for the old corporation, and, on its dissolution, they became trustees of its assets for the benefit of plaintiff and the other stockholders, under sections 24-107 and 24-110, Comp.St.1929. These sections constitute the directors of a dissolved corporation as trustees to liquidate its assets, pay its...
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