Covert v. Rogers

• Decision Date: 01 February 1878
• Citation: 38 Mich. 363
• Court: Michigan Supreme Court
• Parties: Benjamin R. Covert et al. v. Nelson F. Rogers

38 Mich. 363

Benjamin R. Covert et al. v. Nelson F. Rogers

Supreme Court of Michigan

February 1, 1878

Submitted January 22, 1878; January 23, 1878

Error to Ionia.

Trover by Rogers against the plaintiffs in error for the seizure and conversion of a quantity of lumber and logs. Rogers was assignee for the benefit of the creditors of the Hubbardston Lumber Company, to which corporation the property had belonged, and the defendants claimed it under an attachment sued out by part of them as creditors of the company. Defendants bring error.

Judgment affirmed with costs.

Wells & Morse and Mitchel & Pratt for plaintiffs in error. The directors of a manufacturing corporation are vested with full control of its stock, property and affairs (Comp. L § 2844), and the stockholders cannot interfere with it Redfield on Railways, § 13; Town v. Bank of River Raisin, 2 Doug. (Mich.), 553; Com. v. Trustees, 6 S. & R., 508; Dana v. U. S. Bank, 5 W. & S., 247; Com'rs v. Bank, 6 Har. 106; notice of all special meetings of directors must be given as the charter, by-laws or State law directs, and if there is no special provision it must be given personally to each stockholder (Ang. & Ames on Corp., § 492; Stow v. Wyse, 7 Conn. 219; Wiggin v. Freewill B. Church, 8 Met. 301; 1 Dill. Mun. Corp., § 201; Zabriskie v. C. C. & C. Ry., 10 Amer. Railw. Times, No. 15; People v. Batchelor, 22 N. Y., 128), and specify the nature of the business to be transacted, Rex v. Langhorn, 4 Ad. & El., 538; an assignment of the assets of a corporation for the benefit of its creditors to its business manager leaves the control of the property where it has been before, and seems to be meant to delay creditors, Cram v. Mitchel, 1 Sandf. Ch., 255; Currie v. Hart, 2 id. 356; Angel v. Rosenbury, 12 Mich. 253; Hays v. Doane, 11 N. J. Eq., 84; it is a fraud upon the rights of creditors to assign to a known insolvent, Connah v. Sedgwick, 1 Barb. 214; Reed v. Emery, 8 Paige 418; the question of his business competency is important, Heywood v. Reed, 4 Gray 578; Bartlett v. Decreet, 4 Gray 112; Lee v. Kilburn, 3 Gray 594.

Lemuel Clute and Blanchard & Bell, for defendant in error. The burden of proof is on those who deny the regularity of a meeting for want of notice, to prove it, Sargent v. Webster, 13 Met. 504; notice to a director would not cure the effect of his absence unless it was expressly required that all be notified, State v. Smith, 48 Vt. 286; Bank of Middlebury v. Rutland etc. R. R. Co., 30 Vt. 169; only stockholders can complain of an assignment made by the directors of a corporation without their consent, Buell v. Buckingham, 16 Ia. 284; Davoue v. Fanning, 2 Johns. Ch., 251; Bostwick v. Atkins, 3 Comst. 53; the intent of the directors in making an assignment may be proved, Watkins v. Wallace, 19 Mich. 76; Goddard v. Grand Trunk Ry., 57 Me. 223; Bartlett v. Kinsley, 15 Conn. 328; Fletcher v. Peck, 6 Cr. 87; corporations can assign for the benefit of their creditors, De Ruyter v. Trustees, 3 Barb. Ch., 119; Exp. Conway, 4 Ark. 357; Pope v. Brandon, 2 Stew. 401; State v. Bank of Maryland, 6 Gill & J., 205; a bona fide attempt to distribute the property of a debtor among his creditors will not be allowed to fail for want of a trustee, 2 Story's Eq., §§ 976, 1059.

OPINION

Marston, J.

It must be considered as settled by the clear and undoubted weight of authority, that an insolvent corporation has the right to make a general assignment of its property for the benefit of its creditors, unless prohibited by its charter or a statute of the State, nor can such an assignment be held void in this State, because opposed to the policy of our statutes relating to proceedings in chancery against corporations, or providing for their voluntary dissolution. Town v. Bank of River Raisin, 2 Doug. (Mich.) 530; Burrill on Assignments, 602 et seq.

The specific objections made to the introduction of the assignment in this case were first, that the action of the board of directors in making this assignment was not authorized by the stockholders; second, that the meeting of the directors which authorized the execution of the assignment was not properly called, no proper notice having been given; and third, that the notice calling a meeting of the directors did not specify the purpose and object of the meeting.

The first objection was removed after being made, as evidence was introduced showing that nearly two-thirds of the stock was represented at the meeting and consented, if any such consent could be considered necessary.

There was evidence given tending to show that a written notice, signed by the treasurer, calling a meeting of the directors for June 23d, at one o'clock in the afternoon, for the transaction of important business pertaining to the finances of the company, was, on the morning of June 20th, sent by mail to N. W. Taylor, one of the directors, who then resided at Cleveland, Ohio, and that a person could start from Hubbardston, the place where the notice was mailed and where the meeting was to be held, go to Cleveland and get back the night of the next day. There was also evidence tending to show that this notice had been received in Cleveland and brought back to Hubbardston in time for the meeting, by a person claiming to be attorney for Mr. Taylor, but no evidence of his authority was shown. No question of want of notice was made as to the other directors, they all being present and participating in the proceedings and consenting to what was done.

The statute under which this corporation was formed provides that "a majority of the directors of every such corporation, convened according to the by-laws, shall constitute a quorum for the transaction of business." The by-laws of the corporation authorized the president or treasurer to call special meetings when in his opinion the interests of the company require it, but did not specify in what manner the notice should be given or served, or the length of time it should be served before the time fixed for the meeting.

In the absence of any provision for the length of notice, the law will require it to be given a reasonable time before the meeting is to be held, in order that the person to whom it is addressed...