Fox v. Horah

Decision Date30 June 1841
Citation1 Ired.Eq. 358,36 N.C. 358,36 Am.Dec. 48
CourtNorth Carolina Supreme Court
PartiesSTEPHEN FOX v. WILLIAM H. HORAH.
OPINION TEXT STARTS HERE

When a corporation is dissolved, unless the Legisture has otherwise directed, the real property, which had belonged to it and remains undisposed of, reverts to the donor or grantor--the personal property, as having no owner, goes to the sovereign for the benefit of the public--but choses in action such as debts &c. become extinct, because there is then no one to demand the money, &c.

None of the provisions of the act of 1831, Rev. St. c. 26 directing what proceedings may be had against corporations in certain cases, apply to cases, where the corporation has expired by the limitation of its charter.

Where a note was made payable to the Cashier of the State Bank, as trustee for the use and benefit of the bank by whom it was discounted, and the bank charter afterwards expired by its own limitation before the note could be collected; it was held that, although the cashier, having the legal title, might sue on the note and recover judgment at law; yet, in equity the bank had the sole right to the money secured by the note, that this right became extinct on the dissolution of the corporation, and that a Court of Equity, therefore, on application of the maker of the note, would grant a perpetual injunction against the collection of the jndgment.

This was a bill filed in Mecklenburg Court of Equity. The plaintiff had obtained an injunction from a Judge out of court, and at Fall Term, 1840, of the said court, a motion was made by the defendant to dissolve the injunction, and his Honor Judge SETTLE, upon hearing the motion, ordered the injunction to be dissolved with costs. From this decree the plaintiff, by leave, appealed to the Supreme Court. The facts of the case are stated in the opinion delivered in this court.

Alexander, Saunders and Boyden for the plaintiff .

D. F. Caldwell and W. H. Haywood, Jr. for the defendant .

GASTON, J.

A loan of money was obtained by one John G. Hoskins from the late State Bank of North Carolina, by the discount at the Salisbury Branch of said bank, of a note executed by said Hoskins as principal and Stephen Fox and William W. Long as sureties; payable at said branch to William H. Horah, cashier thereof. Upon this note an action at law was brought by Horah in the County Court of Mecklenburg against Hoskins, Fox and Long, which action was by successive appeals of the defendants carried up to the Superior Court of that county, and thence to this court, and a judgment was ultimately obtained by the plaintiff, after a deduction of sundry payments, for a balance of $468, 19 cents with interest on $385, 62 cents, part thereof, from the Febuary Term, 1839, of Mecklenburg Superior Court. Pending this action in the Superior Court the charter of the bank expired by its original limitation, and an attempt was there made to set up this occurrence as a legal defence; but the defence failed, because, in the language of this court, “the legal interest in the debt wasin Horah, and the action properly brought by him, and whether he was a trustee for the bank or any other person was an enquiry with which a Court of Law had no concern.” Horah v. Long, 4 Dev. & Bat. 274. Therefore Fox, the present plaintiff, filed this bill against Horah, in which, after setting forth the death and insolvency of Hoskins and also the insolvency of Long, and charging certain payments or equitable payments to have been made to the bank and its attorneys in full discharge of the debt, he insisted that the debt for which Horah had obtained a judgment, was due to the bank, that its charter had expired, that thereby the said debt, if any part thereof remained unpaid, was extinguished; that Horah was not entitled beneficially to the same or any part thereof; and that it is unconscientious in him to collect it for his own benefit, and praying for an injunction. Upon the filing of the bill an injunction was granted pursuant to the prayer. The defendant put in an answer, wherein he denied the payments alleged to have been made, and admitted the expiration of the charter as charged, and insisted that he, being the legal owner of the judgment, had a right, notwithstanding such expiration of the charter, to collect the same, and declared his purpose, when it should be collected, to apply the proceeds to the satisfaction of outstanding demands against the late corporation and the stockholders thereof. Upon the coming in of this answer the defendant moved for a dissolution of the injunction with costs. The court so decreed, and from this decree the plaintiff prayed and obtained an appeal to this court.

One at least of the questions arising upon this appeal is not free from difficulty, and, so far as we can learn, is now for the first time presented for judicial decision. Certain it is that neither our own researches nor those of the counsel have furnished any adjudications, which have a direct bearing upon it. To enable us, therefore, to come to a just conclusion, we must go back to principles in some degree elementary to endeavor to ascertain them with precision, and apply them, when ascertained, to the case before us.

The late State Bank was formed by an association of individuals, under authority of Acts of the Legislature, by which they were constituted a body corporate and politic to continue until the first day of January, 1835. Though the several Acts, by which the institution was created or its powers, duties and duration declared were public acts, the corporation itself was a private corporation. State Bank v. Clark, 1 Hawks, 36. As such it was an artificial person existing only in contemplation of law, and having those capacities, which its charter conferred upon it, either expressly or as incidental to its existence. Among these was the capacity to hold property of the description mentioned in its charter, as an individual, continuing its existence and preserving its identity, notwithstanding all the changes by death or otherwise, among the natural persons, of whom that body politic was formed. This capacity--and others by which a corporation is enabled to maintain its personality and identity--are sometimes spoken of as constituting a kind of ““legal immortality.” It is certain, however, that the capacity to enjoy property in succession exists only so long as the corporation exists--that if by its charter the duration of the corporation be limited, and if that duration be not extended by the sovereign authority, the corporation dies when the allotted term of its existence has run out--and that, before the expiration of this term, the corporation may lose its existence by forfeiture of charter, because of ascertained delinquency, or by a dissolution of the connection, by which its members had been compacted into one artificial person. We believe that the rules of the common law, governing the disposition of the property which the corporation held, at the moment of death are well settled--though differing according to the character of the property upon which they operate as being either realty, personalty, or choses in action. The real estate remaining unsold reverts to the grantor and his heirs, “because (in the language of Lord Coke) in the case of a body politic or incorporate the fee is vested in their political or incorporate capacity, created by the policy of man, and therefore the law doth annex a condition in law to every such gift and grant that if such body politic or incorporate be dissolved, the donor or grantor shall re-enter, for that the cause of the gift or grant faileth.” Co. Lit. 136. Goods and chattels, by the common law, were deemed of too transitory and fluctuating a nature to be susceptible of reversionary interests after an estate for life, and, on the death of a corporation, they do not revert to the grantor or donor, but, being bona vacantia or goods wanting an owner, they vest in the sovereign, as well to preserve the peace of the public, as in trust to be employed for the safety and ornament of the commonwealth. Choses in action are under the operation of a different rule.--They were rights of the corporation to demand money in the hands of persons, by whom it was withheld. They derived their existence from contracts or quasi contracts--by which the relation of debtor and creditor was created. When the creditor corporation died--and there was no successor, no representative--the relation of debtor and creditor ceased--and the debt became necessarily extinct. None but the creditor had a right to demand the money--and when his right is gone, the money becomes to all purposes the money of the possessor.--These rules of the common law, except so far as they have been modified by the Acts of our Legislature, and excepting also those cases, in which by the charters of incorporation, special provision is made in regard to the corporate property, are the law here.

Very important alterations, however, have been made by our Legislature, but it is manifest that these have no application to the case, where a corporation expires by having lived out its allotted term. The Act of 1831, ch. 24 of the Revised Code, re-enacted in the Revised Statutes, chapter 26, directs how an information may be filed against a corporation existing de facto, in order to procure a judicial decision that it has forfeited its charter, or has been dissolved by the surrender of its franchises or by any other mode, and declares that on a final judgment rendered against the corporation of forfeiture or dissolution, the consequence shall not be to extinguish the debts due to or from the corporation, but that the court rendering such judgment shall appoint a receiver, and the receiver so appointed shall have full power to collect in his name all debts due to the corporation, to take possession of all its property, and to sell, dispose of and distribute the same in order to pay off the creditors of the...

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21 cases
  • Hunter v. Fort Worth Capital Corp.
    • United States
    • Texas Supreme Court
    • July 15, 1981
    ...donor, personalty escheated to the sovereign, and choses in action were extinguished with the death of the corporation. Fox v. Horah, 36 N.C. 358, 36 Am.Dec. 48 (1841); Coulter v. Robertson, 24 Miss. 278, 57 Am.Dec. 168 (1857). Thus, creditors were left without a defendant to sue. See G. Wa......
  • University of North Carolina v. City of High Point
    • United States
    • North Carolina Supreme Court
    • November 23, 1932
    ... ... Burgess v. Wheate, 1 Eden's Cas. 177), it is ... sufficient to say that, whereas originally the law gave the ... escheat for want of a tenant to render feudal service, ... propter defectum tenentis, it now gives it for want of an ... owner or rightful claimant. Fox v. Horah, 36 N.C ... 358, 36 Am. Dec. 48; Gilmour v. Kay's Adm'rs, supra ... At one time privity between feoffor and feofee was thought to ... be essential; afterwards the crown came in on failure of ... heirs as parens patriæ. Note, 29 Am. Dec. 232. The word ... "escheat" is derived from the ... ...
  • Diamond State Iron Co. v. Husbands
    • United States
    • Court of Chancery of Delaware
    • August 14, 1898
    ...Digest 273; 1 Black. Com. 484; 2 Kyd on Corp. 516; 2 Kent's Com. 307-9; Angell and Ames on Corp. 513." In the case of Fox vs. Horah, 36 N.C. 358, 1 Ired. Eq. 358, decided June 1841, Judge Gaston says, "We believe the rules of common law, governing the disposition of the property which the c......
  • Scott v. Gittings
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    ...of the High Court of Errors and Appeals announced in the case of Coulter v. Robertson.'' The Supreme Court of North Carolina held in Fox v. Horrah, supra, that the English common-law doctrine before stated was force in that state, and that decision was approved in Malloy v. Mallett, 59 N.C.......
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