Gibson v. Trowbridge Furniture Co.

• Decision Date: 15 June 1892
• Citation: 96 Ala. 357,11 So. 365
• Parties: GIBSON ET AL. v. TROWBRIDGE FURNITURE CO. ET AL.
• Court: Alabama Supreme Court

11 So. 365

96 Ala. 357

GIBSON ET AL. v. TROWBRIDGE FURNITURE CO. ET AL.

Supreme Court of Alabama

June 15, 1892

Appeal from city court of Decatur; WILLIAM H. SIMPSON, Judge.

Creditors' bill, filed by the Trowbridge Furniture Company and others against R. F. Gibson and others, to have a transfer made by the Decatur Furniture Company to R. F. Gibson set aside and annulled as fraudulent, and to have a statement of an account between Gibson and Estes and the Decatur Furniture Company. The case was, in effect, tried upon the bill and sworn answer, which agree substantially upon the following facts In the latter part of 1888 or the first part of 1889 Sessions & Estes, a partnership dealing in furniture in the city of Decatur, failed, and made an assignment for the benefit of creditors. Gibson effected a compromise with the said partnership, and procured the assigned stock for himself. Some time afterwards Gibson opened up a retail furniture store on his own account, employing Estes, of the late firm, as general manager. The name Gibson bestowed upon the establishment was "The Decatur Furniture Company." July 11, 1889, Gibson, Estes, and some members of their families, filed a petition with the probate judge for the incorporation of the said company, and subscribed to the capital stock thereof, which was fixed at $4,000, Gibson taking, with some members of his family, 20 shares, and the Estes family taking the remainder. Gibson was president, and Estes general manager. Both were directors, elected for one year. December 9, 1889, Gibson, having acquired the shares of stock held by his wife and son, sold all his stock (20 shares) to the company, taking from the company its note signed also by the Esteses, for $2,704, to cover the price of the stock, and some alleged loans made by Gibson to the Esteses and assumed by the company, and also some alleged loans made to the said company. This note not being paid at maturity, Gibson took in payment thereof or thereon the stock in trade of the company, and all, or a large part of, its notes, accounts, etc., and converted the assets, which he says were valued at $1,800, to his own use. Some averments in his answer tend to show that the sale of his shares of stock was made to the Esteses, and some that it was made to the corporation itself. At all events, the note of the company was taken for the price thereof; and the assets of the company were taken in payment on the note. Several creditors were made parties by petition. No objection was ever made to the filing of these petitions, or to the order of the court making the petitioners parties complainant. On final hearing the court granted complainants the relief prayed for, and ordered a reference to the register to ascertain the amount of the debts due complainants and the petitioning creditors and the value of the assets transferred to and converted by Gibson, who, on such reference, reserved numerous exceptions to the rulings of the register. These exceptions were overruled, and the report confirmed. Respondents appeals. Reversed.

Kyle & Skeggs, for appellants.

E. W. Godbey, for appellees.

STONE C.J.

This is the second appeal in this case. Gibson v. Furniture Co., 93 Ala. 579, 9 South. Rep. 370. In the former appeal the question presented for decision was the decretal order of the chancellor, overruling the demurrer to the bill as amended. We affirmed the chancellor's decree. The present appeal is from the final decree rendered in the cause. Considering this case in the light most favorable to appellants which the record facts permit us to consider it in, we find no error in the chancellor's decree, granting relief to the complainants. So far as Gibson's claim is rested on his alleged contribution of furniture as the subscription price or consideration paid for the stock he subscribed for in the corporation, we declared in the former appeal that such payment or contribution furnished him no valid claim against the assets of the corporation until all the latter's debts are paid.

93 Ala. 579, 9 South. Rep. 370. We adhere to that opinion, and need not add to what we there said. But Gibson, in his answer, avers that, while the corporation was in active business, he on two several occasions lent it money. If that be true, he became a creditor of the corporation to the extent of the loan. The corporation, however, became insolvent, and he, being a director, could not purchase its stock in trade and close its operations, and thereby make himself a preferred creditor. Nor could he accomplish that end by the means resorted to, as set up in his answer. What cannot be done directly cannot be done indirectly. In the recent case of Corey v. Wadsworth, (Ala.) 11 South. Rep. 350,

we considered this question so fully that we do not propose to add anything to what is there said. The assets of the insolvent corporation had become so far a trust fund in the hands of the managing body as that by no artifice could a member of the governing body have himself preferred over other creditors of the insolvent corporation.

If it be claimed that Gibson, being a creditor to the extent of his loan, has the right to share ratably with the other creditors in...