Gorder v. Plattsmouth Canning Company
| Decision Date | 29 March 1893 |
| Docket Number | 4709 |
| Citation | 54 N.W. 830,36 Neb. 548 |
| Parties | FRED H. GORDER, EXECUTOR, ET AL., APPELLEES, v. PLATTSMOUTH CANNING COMPANY, APPELLEE, and WILLIAM WEBER ET AL., APPELLANTS |
| Court | Nebraska Supreme Court |
APPEAL from the district court of Cass county. Heard below before FIELD, J.
AFFIRMED.
G. W Covell and Beeson & Root, for appellants.
A. N Sullivan, contra.
This is an appeal from a decree of the district court of Cass county. In the petition it is alleged that on the 25th day of November, 1887, the plaintiffs executed their joint note for $ 5,000 to the First National Bank of Plattsmouth, due in six months from date, and that on the 30th day of December, 1887, they executed a second note to said bank, due six months after date, for $ 4,500; that said notes were both executed for the accommodation of the defendant, the Plattsmouth Canning Company; that to secure the payment of said notes, and to indemnify plaintiffs as sureties thereon, the defendant company on the day last named executed and delivered to them a mortgage upon certain real estate in the city of Plattsmouth; also a chattel mortgage upon all of the machinery, fixtures, and other personal property of said company. The petition, after an allegation of a breach of the conditions of the mortgage, contains a prayer for an accounting and foreclosure and for general equitable relief.
The canning company filed an answer, admitting all the allegations of the petition contained except as to the amount of indebtedness claimed therein. Shortly thereafter, and before trial, the court permitted the appellants to intervene and file answer, in which they allege, in substance, that they are stockholders in said company, and that it commenced business in 1885 with a capital stock of $ 18,000; that by the articles of incorporation it is provided that at no time shall the indebtedness of said company exceed one-half of the capital stock thereof; that the plaintiffs were elected directors of said company at its organization, and, with the exception of the plaintiff Lewis, have continued to act in such capacity; that the plaintiff Guthman has been the president of said company ever since its organization, and the plaintiffs Lewis and Gorder have been the only secretaries thereof; that at all times since the first year of the existence of said corporation its indebtedness has been largely in excess of the limit fixed by its articles of incorporation, and that said excess of indebtedness was incurred by the plaintiffs as directors of said company without any authority from its stockholders; that the notes and mortgages described in the petition were executed without any authority whatever, and that F. R. Guthman as president and E. B. Lewis as secretary, who pretended to execute said mortgages, are plaintiffs in this action; that the property described in said mortgages comprises the entire assets of said company, and that there are in addition to the amounts claimed on said notes and mortgages at least $ 4,000 of debts owing by said company, for which the stockholders are individually liable because of the neglect of plaintiffs to comply with the laws in regard to corporations; that the debts owing by said corporation were all contracted while the officers thereof were in default in complying with the statutory provisions governing corporations, requiring them to publish annually a statement of all the existing debts of said corporation. The intervenors pray that plaintiffs' petition be dismissed with costs, that said mortgages and the record thereof be canceled, and for equitable relief.
During the progress of the trial, by permission of court, intervenors filed an amendment to their answer, setting up that they and each one of them are creditors of the defendant canning company, having advanced various sums from $ 25 to $ 300 each by way of loans to said defendant at its request, which sums are still due and unpaid. In addition to the relief asked in their answer they pray for a receiver of said company to take charge of its property and convert the same into cash, to be applied first in payment of the general indebtedness thereof exclusive of the amounts owing to its stockholders, and that the funds remaining be applied pro rata between the different stockholders.
On the hearing before the district court there was a general finding for the plaintiffs and a decree of foreclosure in accordance with the prayer of the petition, from which the intervenors have appealed to this court. The first proposition argued is that the evidence fails to show authority from the board of directors for the execution of the mortgages or either of them. Both mortgages purport to have been executed by the Plattsmouth Canning Company and acknowledged in behalf of said company by F. R. Guthman, president, and E. B. Lewis, secretary, and attested by the seal thereof. The genuineness of the signatures to the mortgage, as well as the official character of the signers, is specifically admitted, but we understand counsel for intervenors to contend that authority for the execution of the mortgages must affirmatively appear from the record of the board of directors.
To that proposition we cannot give our assent. The signatures of the officers with the corporate seal attached is prima facie evidence that the mortgages were executed by authority of the company, and the burden of proving want of authority is upon the intervenors. (Ang. & Ames, Corp., sec. 217; Boone, Corp., sec. 50; Blackshire v. Iowa Homestead Co., 39 Iowa 624; Whitney v. Union Trust Co., 65 N.Y. 576; Davis v. Jenney, 42 Mass. 221, 1 Met. 221; Williamsburg City Fire Ins. Co. v. Frothingham, 122 Mass. 391; Murphy v. Welch, 128 Mass. 489; Hamilton v. McLaughlin, 12 N.E. 424; Morris v. Keil, 20 Minn. 531; Musser v. Johnson, 42 Mo. 74.)
2. It is claimed that the mortgages are void for the reason that they are in excess of the amount of indebtedness authorized by the articles of incorporation of the company. It is provided by article 4 that "the highest amount of indebtedness to which the corporation shall at any time subject itself shall not exceed one-half of the amount of its capital stock issued." It appears from the bill of exceptions that $ 5,000 of the indebtedness represented by the mortgages was incurred on the 18th day of August, 1885, on which day the plaintiffs executed their joint note to the First National Bank of Plattsmouth for the accommodation of the company, the note of like amount, described in the mortgages, being a renewal thereof. At that time the amount of stock issued does not appear, although it is alleged in the answer that the capital stock in February, 1885, was $ 18,000, nor is the amount of the company's indebtedness apparent from the record. It appears also, from the minutes of a meeting of stockholders held January 4, 1886, that 148 1/2 shares of stock were represented thereat, from which it is evident that the stock at that date amounted to at lest $ 14,850. The date when the additional indebtedness of $ 4,500 was incurred does not appear, but the note for said amount is in renewal of an accommodation note executed by plaintiffs for the benefit of the company long prior to the execution of the mortgages. The presumption is in favor of the validity of the contract in question. It is not upon its face necessarily outside the scope of the corporate power of the defendant company. The recognized rule is that the contracts of a corporation not contrary to the express provisions of its charter are presumed to be within its powers, and the burden is upon one seeking to invalidate them to prove the facts which render them ultra vires. ( Ohio & M. R. Co. v. McCarthy, 96 U.S. 258; Curtis v. Gokey, 68 N.Y. 300; Elkins v. Camden & Atlantic R. Co., 36 N.J.Eq. 241; Wood, Law of Railroads, 526; Boone, Corp., 43.) This case is clearly within the rule recognized in the authorities cited. The district court evidently found against the intervenors on the question of the validity of the mortgages and with that finding we are entirely satisfied.
3. The next question, and the one to which most prominence is given in the brief of intervenors, is whether the mortgages are void by reason of the fact that the plaintiffs were directors of the company at the time the indebtedness was incurred and when the mortgages were executed. It should be observed in this connection that two of the plaintiffs, to-wit, Guthman and Lewis, were acting as president and secretary respectively, and as such executed the mortgages in behalf of the company. There is no claim made of fraud against the plaintiffs. In fact their conduct throughout proves that they were actuated by no motives but to promote the success of the company and the interest of the stockholders. It is...
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Gorder v. Plattsmouth Canning Co.
... ... Evidence examined, and held to sustain the finding that the indebtedness of the defendant company to the plaintiffs, directors thereof, was contracted with the knowledge and approval of the interveners, who were stockholders, and that the execution of certain mortgages to secure such indebtedness was sanctioned by such stockholders.6. In order to recover from stockholders of a corporation on ... ...