Fagan v. Stuttgart Normal Institute

• Decision Date: 14 June 1909
• Citation: 120 S.W. 404,91 Ark. 141
• Parties: FAGAN v. STUTTGART NORMAL INSTITUTE
• Court: Arkansas Supreme Court

120 S.W. 404

91 Ark. 141

FAGAN v. STUTTGART NORMAL INSTITUTE

Supreme Court of Arkansas

June 14, 1909

Appeal from Arkansas Chancery Court; John M. Elliott, Chancellor reversed in part.

Decree affirmed, reversed and cause remanded.

C. E Pettit, for appellants.

1. Porter, by virtue of his position as director and controlling stockholder, was a trustee, and could not speculate upon the corporation's property, or purchase at sheriff's sale, except as trustee. 38 Ark. 17, 26, 30; 10 Cyc. 815 787, 791, 799; 35 Ark. 314; 75 Id. 188; 33 Id. 587.

2. The notice required by section 4923, Kirby's Digest, was not given, and the sale is subject to redemption.

3. The property was in fact redeemed in time. Porter accepted the amount tendered as sufficient, and cannot now object. He is estopped. 17 Cyc. 1334; 31 Ark. 252.

4. Hendrix College is not an innocent purchaser for value. Miller, the president, had notice of the trust and redemption.

5. Mrs Pettit, the intervener, is certainly entitled to relief, as she loaned the money in pursuance of the order of court.

6. Even if Edwin Pettit was estopped by signing the subscription list, the other stockholders are not.

John L. Ingram, for appellees.

1. No right to sue is shown in plaintiffs. 2 Beach, Priv. Corp., § 884. The question can be raised at any time. Kirby's Digest, § 6096.

2. They are barred by laches. 145 U.S. 368.

3. A director is not prohibited from purchasing corporation property when good faith is exercised. 2 Freeman on Ex., § 292 (3 Ed); 5 L. R. A. 166; 1 S.W. 408; 127 U.S. 589; 91 U.S. 587; 10 Cyc. 813; 2 A. & E. Dec. Eq. 255, par. 1; 2 Id. 257, par. 2.

4. The presumption is that due notice was given, and the burden was on appellants to show it was not. But if not given the sale was not invalid. 15 Ark. 209; 47 Id. 226.

5. The sheriff's deed is prima facie evidence that there was no redemption. Kirby's Dig., § 760; 50 Ark. 297. There is no common-law right of redemption. It is purely statutory, and the terms of the statute must be strictly complied with. A deposit in bank is not sufficient. 25 Enc. Law, 847; 38 N.E. 555; 35 S.W. 890; Rorer on Jud. Sales, §§ 1148, 1181 to 1193. The full amount requisite must be paid or tendered. 25 Am. & Eng. Enc. Law, p. 487. The statute was not complied with. Kirby's Dig., §§ 3281, 3293. General deposits are the property of the bank. 46 Ark. 537; 5 Ark. 283.

6. Hendrix College was an innocent purchaser, and plaintiffs are estopped by signing the subscription list.

7. Mrs. Pettit never loaned the receiver any money. She loaned it to Edwin Pettit. But the receiver still has the money to pay her.

OPINION

FRAUENTHAL, J.

In 1889 a number of the citizens of Stuttgart organized a corporation under the name of the Stuttgart Normal Institute. This corporation was formed under the general incorporation laws of Arkansas relating to "manufacturing and other business corporations." The purpose of its formation was "the establishment and maintenance of an institution of learning at Stuttgart, Arkansas." And it was not expected or intended that its stockholders should obtain any financial profit therefrom, although it was formed under the provisions of the statute relating to business corporations. It secured land known as block 96 in Improvement Company's Addition to the town of Stuttgart, and erected a school building thereon. It proceeded with its purpose and secured teachers and conducted a school, which had its varying periods of success and failure. At times efforts were made to get some organization to take the property free of charge and establish and conduct a permanent school or college there. But these efforts did not meet with success. The affairs of the corporation were conducted by a board of directors, consisting of nine members; and the defendant J I. Porter was one of these directors from its organization until its dissolution by the decree in this case.

The corporation became indebted to one James A. Gibson, who recovered a judgment against it in the Arkansas Circuit Court on November 10, 1901. Upon this judgment an execution was issued, and by the sheriff of said county levied on the above property, which was all the property owned by the corporation. The property was offered for sale under said execution by the sheriff at public outcry on March 2, 1901, and at this sale J. I. Porter was a bidder. He bid $ 1,100 for the property, and, this being the highest offer, the same was sold to him by the sheriff.

On January 13, 1902, the plaintiffs, W. M. Price, Edwin Pettit and S. J. Parks, instituted this suit in the chancery court of Arkansas County against the defendants, the Stuttgart Normal Institute and J. I. Porter, and in the complaint asked for the appointment of a receiver to take charge of the property of the corporation and for the authorization of the receiver to borrow money and redeem the property from said execution sale, and for the dissolution of the corporation. The chancery court, with the agreement of the parties, appointed G. W. Fagan, receiver. On March 1, 1902, the receiver, under the above direction, borrowed from Angeline Pettit the sum of $ 743.21 for the purpose of paying on the redemption of said property from said execution sale. It appears that at the time of said execution sale the amount due on the judgment and cost was $ 617.23, and that in making good his bid J. I. Porter paid in money the sum of $ 617.23, and executed his note for the balance of the bid: $ 482.77. This cash payment so made by Porter amounted with interest at the rate fixed by the statute in redemption at execution sales to said sum of $ 743.21 on March 1, 1902. At this time and prior thereto the receiver was also cashier of the German-American Bank, of Stuttgart, Arkansas, and J. I. Porter was vice-president of this bank and carried an account there. The receiver placed to the credit of J. I. Porter on this account with said bank said sum of $ 743.21. The receiver testified that he did this in the way of paying this sum to Porter in redemption of the property. But Porter refused to recognize this as a payment, and it remained in this form on the books of said bank at the time of the final hearing of the case in 1907. The note for $ 482.77 which had been executed by Porter on his bid was left with the circuit clerk by the sheriff, and Porter paid the amount thereof to the clerk who thereupon paid the same to the receiver. Thereafter, on May 22, 1902, the sheriff executed a deed to J. I. Porter for the property under the above execution sale.

About this time and prior to June 4, 1902, J. I. Porter entered into negotiations with the president of Hendrix College for the purpose of establishing a school on the property under the supervision and ownership of said Hendrix College or the Trustees of the Methodist Episcopal Church, South. It appears that Hendrix College is a corporation organized under the laws of Arkansas governing the incorporation of institutions of learning, and that its board of trustees are selected by controlling authorities of the Methodist Episcopal Church, South.

On June 4, 1902, the plaintiffs W. M. Price and Edwin Pettit and a number of citizens of Stuttgart, Arkansas, signed an instrument which therein is denominated, "Subscription paper for funds to establish a Hendrix Academy at the Town of Stuttgart, Arkansas;" and is as follows:

"For the purpose of securing the property of the school known as the Stuttgart Normal Institute and sufficient money to meet the $ 10,000.00 conditions of the trustees of Hendrix College (the college of the Methodist Episcopal Church, South, located at Conway, Ark.), we, the undersigned, agree to pay to the properly designated representatives of Hendrix College the sums set opposite our respective names; provided, that: First, all money and property donated under the terms of this subscription shall be used to improve, equip and maintain the college property at Stuttgart; second, the deed shall be made in fee simple to Hendrix College, but provision shall be made so that if it may become necessary to separate the college and academy the latter shall be owned and controlled by trustees appointed by the annual conference of the Methodist Episcopal Church, South, in which it is located, and, while the college and academy shall not be liable each or either for the other's debts, if the property should be sold, the proceeds must be invested in a similar school in Stuttgart, so that the object for which these subscriptions are made shall not be defeated; and, third, these subscriptions shall not be due and payable until the president of Hendrix College, in writing, acknowledges that the conditions of the constitution of Hendrix College can be satisfied."

Each of the subscribers to said instrument agreed to its terms, and amongst them was the defendant, J. I. Porter, who subscribed the above school property, which was placed at $ 5,000, and also $ 1,000 in money; and the remainder of the $ 10,000 was subscribed by numerous public spirited citizens of Stuttgart. On the same day J. I. Porter executed an instrument whereby he agreed to convey to Hendrix College or said trustees all the property described in said sheriff's deed upon demand, this being the property referred to in said subscription instrument. Thereupon, the various subscriptions were substantially all collected; and with the funds buildings were erected on the said land during 1902. And Hendrix College at once took possession of the property for the purpose of conducting a school thereon; and ever since said time such school has been maintained thereon under the name of the "Stuttgart Hendrix Academy." In pursuance of the above agreement, J. I Porter executed a deed for said property to certain named...