Calumet Paper Co. v. Haskell Show-Printing Co.

• Decision Date: 01 February 1898
• Citation: 144 Mo. 331,45 S.W. 1115
• Parties: CALUMET PAPER CO. v. HASKELL SHOW-PRINTING CO. (PARKER, Garnishee).
• Court: Missouri Supreme Court

45 S.W. 1115

144 Mo. 331

CALUMET PAPER CO. v. HASKELL SHOW-PRINTING CO. (PARKER, Garnishee).

Supreme Court of Missouri, Division. No. 2.

February 1, 1898.

CORPORATIONS — ASSIGNMENT FOR BENEFIT OF CREDITORS — RATIFICATION — GARNISHMENT — TRUST PROPERTY.

1. In the absence of special provisions of its charter, a corporation can, under Rev. St. 1889, § 2510, assign its property for the benefit of creditors only under authority conferred by resolution of the board of directors.

2. An assignment of the corporation property by part of the directors, acting as individuals, and therefore invalid, cannot be ratified by individual acquiescence of the remaining directors, but only by an act done in their capacity as the board of directors.

3. Where the property of a corporation was taken possession of by an assignee under an invalid assignment, and a creditor attached, and garnished the assignee, but the property was not seized in attachment, and the garnishee did not discharge himself, under Rev. St. 1889, §§ 5224, 5225, by paying into court, or giving bond to retain it, it did not become custodia legis.

4. An assignee, who, under an invalid assignment, took property of an insolvent corporation, which had ceased to be a going concern, holds it in trust for the corporation creditors, as bailee of the corporation; and garnishee process against him by a creditor of the corporation gives the latter no lien or preference over other creditors.

Appeal from circuit court, Jackson county; E. L. Scarritt, Judge.

Suit, by attachment, by the Calumet Paper Company against the Haskell Show-Printing Company and its assignee, Charles D. Parker, as garnishee. The attachment was sustained, but the validity of the assignment was upheld, and judgment was for the assignee. Plaintiff appealed. Reversed.

On July 5, 1893, and for some time prior thereto, the Haskell Show-Printing Company was a corporation organized under the laws of the state of Missouri, and doing business in Kansas City, Mo. The board of directors of the corporation consisted of five members, viz.: W. H. Haskell, W. L. Haskell, G. C. Wattles, J. P. O'Connell, and H. P. Schell, all of whom were stockholders. The corporation being insolvent, and unable longer to continue business, W. L. Haskell and G. C. Wattles on said 5th day of July, 1893, met together, and decided to make an assignment of the corporate assets for the benefit of all creditors of the corporation; and then and there executed to the garnishee, Charles D. Parker, a deed of general assignment for that purpose. None of the other directors were present at that time, nor had either of them notice of the meeting. The plaintiff, being a creditor of the Haskell Show-Printing Company, commenced suit by attachment against the defendant company on August 9, 1893, and served the assignee, Charles D. Parker, with a garnishee summons on the same day; claiming that the assignment was void, and that the property in possession of the assignee under the deed of assignment was liable to attachment for the debt of the Haskell Show-Printing Company. The attachment was sustained. There was some evidence tending to show a ratification of the assignment by the stockholders. The court below sustained the validity of the assignment, and rendered judgment in favor of the assignee for costs, from which judgment the plaintiff appeals.

Harwood & Meredith and S. S. Parks, for appellant. Haff & Van Valkenburgh and Henry Wollman, for respondent.

BURGESS, J. (after stating the facts).

The case was tried, and is presented here, as if the manner in which the assignment was executed, and its subsequent ratification by the stockholders of defendant company, were the principal questions involved. At the close of the evidence, plaintiff asked the court (sitting as a jury) to declare the law to be that an assignment of the property of the corporation for the benefit of its creditors could only be made by the direction of the board of directors, which the court refused to do; and in so refusing, plaintiff insists, error was committed. Where there is nothing in the charter or by-laws of an insolvent corporation prohibiting it, the board of directors of such a corporation may make an assignment of its property for the benefit of its creditors. Chew v. Ellingwood, 86 Mo. 260; Descombes v. Wood, 91 Mo. 196, 4 S. W. 82. But it must be done by resolution of the board. Chancellor Kent says: "There is a distinction taken between a corporate act to be done by a select and definite body, as by a board of directors, and one to be performed by the constituent members. In the latter case a majority of those who appear may act, but in the former a majority of the definite body must be present, and then a majority of the quorum may decide." Kent, Comm. (14th Ed.) *293; Foster v. Planing-Mill Co., 92 Mo. 79, 4 S. W. 260. In such circumstances, the corporation may not only make such an assignment, against the wishes of the stockholders, but, if they object, it is its duty to do so any way. Descombes v. Wood, supra; Hutchinson v. Green, 91 Mo. 367, 1 S. W. 853; Huse v. Ames, 104 Mo. 91, 15 S. W. 965. In so far as the case of Eppright v. Nickerson, 78 Mo. 482, holds that an assignment made under the circumstances disclosed by this record is void as to the stockholders, and that such an assignment cannot be attacked, upon the ground of fraud, by creditors of the corporation, it is overruled. As to the law proposition, see Louisville Banking Co. v. Etheridge Mfg. Co. (Ky.) 43 S. W. 169. "Unless otherwise provided by statute, the general rule is that a corporate assignment must be executed by the board of directors, or a quorum thereof, at a meeting duly called for that purpose, or by the president or some other officer of the corporation, as authorized by the directors." 3 Am. & Eng. Enc. Law (3d Ed.) 24; 3 Thomp. Corp § 3905. "Where a creditor elects to disregard the assignment, and attach the property of the corporation, and thereupon a contest arises between him and the assignee, the question is one which concerns the title of the assignee to the property, and it is properly drawn in question in such a proceeding. It is not a question where, in theory of law, the validity of the assignment is subject to collateral attack. But, if it were, the rule would be the same, since such an assignment is not a judicial proceeding; and in every case where any person asserts rights under it, as against a stranger, the burden is upon him to show at least an assignment valid on its face; and the other party may show that it was invalid by reason of extrinsic facts, as that it was unauthorized by a legal meeting of the directors." 5 Thomp. Corp. § 6478. "When such an assignment has not been validated by acquiescence or laches, it may...