Blalock v. Kernersville Mfg. Co.

• Decision Date: 16 February 1892
• Citation: 14 S.E. 501,110 N.C. 99
• Parties: BLALOCK et al. v. KERNERSVILLE MANUF'G CO. et al.
• Court: North Carolina Supreme Court

14 S.E. 501

110 N.C. 99

BLALOCK et al. v. KERNERSVILLE MANUF'G CO. et al.

Supreme Court of North Carolina

February 16, 1892

Appeal from superior court, Forsyth county; JOHN GRAY BYNUM, Judge.

Action by R. A. Blalock and another against the Kernersville Manufacturing Company, T. C. Starbuck, and others. Judgment for plaintiffs. Defendant Starbuck appeals. Modified.

The other facts fully appear in the following statement by MERRIMON, C.J.:

This is a creditors' action, brought against the defendant corporation, which was organized under and in pursuance of the statute. Code, § 677. This corporation is indebted to divers creditors for considerable sums of money, and is insolvent. While it was so indebted, on the 11th day of June 1886, it executed a deed of trust to C. W. Hunt, which was duly registered, whereby it conveyed to him all its property of every kind whatsoever, to secure a debt due to the Wachovia National Bank of Winston, and also a debt due to its president, T. C. Starbuck. This deed contains the following provision, declaring its purpose: "To have and to hold unto him, the said C. W. Hunt, as trustee aforesaid, in trust, nevertheless, that he shall use all due diligence in collecting all the aforesaid debts due the aforesaid company and with full authority vested in him to sell any and all of said property of the Kernersville Tobacco Manufacturing Company at such prices, at private sale, as may be approved of by the president of said company and a majority of the directors; and the money arising from such sales and collections aforesaid the said trustee shall apply, first, to the payment of a debt due to the Wachovia National Bank of Winston, and, after that is satisfied, then to the payment of said T. C. Starbuck for the amount of money paid by him as indorser aforesaid to said bank, with all the interest due him thereon, and to said Starbuck such money as he may pay to relieve the property from any prior legal lien; and any balance of money remaining in his hands, after making said payments, the said trustee shall apply in the payment of other debts of said company, under the direction of the president and a majority of the directors, and such compensation to himself for his services as may be agreed on with said president and directors." It is alleged and insisted that this deed of trust is void "as to the creditors of said corporation existing prior to or at the time of the execution of said deed." It is also alleged that it is upon its face fraudulent and void, because "it in reality confers upon the directors of the company the right to force a compromise or to withhold a settlement." All the debts embraced by the action existed prior to the execution of this deed. It is also alleged that it was executed with intent to defraud the plaintiff, etc. In the course of the action, it appearing that the controversy involved the examination of complicated accounts, it was ordered, without objection, that a referee "hear evidence, and to report his findings upon both law and fact." The referee took evidence, found the facts and the law, took and stated an account, and made report thereof. The appellant filed exceptions upon the ground that the referee failed to find certain facts specified therein. He further filed the following exceptions: "(1) The defendants except to the conclusions of law of the referee that the deed in trust executed by the company to C. W. Hunt trustee, is void and inoperative. (2) That the Kernersville Manufacturing Company and its stockholders are bound by the contract to purchase stock from shareholders. (3) That after payment of debts the said stockholders who sold their stock are to be paid the purchase price thereof out of the assets of the company. (4) That the referee held that the payment of the debt paid for the company by T. C. Starbuck as surety, as evidenced by the company's note and explained in the testimony, is postponed until all the stockholders who attempted to sell their stock and those who withdrew their money are paid in full, when he should have found that, upon the payment by Starbuck of the bank debt, he was subrogated to the rights of the bank, and should be paid in the same class with H. L. Shields and D. W. Harmon. (5) That the referee did not find as a conclusion of law that the mortgage or deed in trust executed by the company is a valid and subsisting lien upon the property and effects of the company for the payment of the T. C. Starbuck debt." The court overruled all the exceptions, confirmed the report, and gave judgment thereon, and T. C. Starbuck appealed to this court, assigning as error that the court refused to sustain his exceptions.

Jones & Kerner and Glenn & Manly, for plaintiff.

Watson & Buxton, for defendant.

MERRIMON C.J., (after stating the facts.)

The exceptions, based upon the ground that the referee failed to find certain facts which the appellant deemed important, are untenable. The objection, if well founded, was ground for a motion to recommit the report, with appropriate instructions, to make inquiry and find that the facts did or did not exist. Williams v. Whiting, 92 N.C. 683; Scroggs v. Stevenson, 100 N.C. 354, 6 S.E. Rep. 111.

The shares of the capital stock of the defendant corporation were the lawful subjects of purchase and sale, might be bought and sold in the market, and, in the absence of statutory provision to the contrary, it might buy such shares for its own benefit from owners of them, upon such terms as might be agreed upon, subject to the rights of its creditors in proper cases to resort to its capital stock, paid and unpaid, as a trust fund out of which they may be entitled to have their debts paid. It is bound by its agreements with persons from whom it may purchase such shares of stock, and they may enforce the same by proper legal remedies, just as they might do in case of like agreements in respect to any other species of property. Hence, if it made its promissory note to one of its stockholders for the price, or any part of it, that it agreed to pay him for his shares of stock, he would have his remedy, so far as it is concerned, just as any other creditor would, certainly subject only to the possible rights of other creditors against him as a stockholder in some cases wherein he might be liable. If he were not...