Hallam v. Indianola Hotel Co.

Decision Date08 June 1881
PartiesHALLAM v. INDIANOLA HOTEL CO. AND OTHERS.
CourtIowa Supreme Court
OPINION TEXT STARTS HERE

Appeal from Warren district court.

The defendant E. W. Perry and the defendant J. E. Lucas each obtained a decree of foreclosure of a real estate mortgage against the defendant the Indianola Hotel Company, a corporation duly incorporated under the laws of Iowa. An execution sale was made thereon, and the property was purchased by Perry for the amount of both decrees and interest and costs, and the property is now held by him for himself and Lucas. The plaintiff, Hallam, is a stockholder in the hotel company, and he brings this action to set aside the sale, and the decrees and the mortgages upon which the decrees were rendered. The alleged ground of the action is that the mortgages were invalid, and that the decrees were obtained by fraud, and that the purchase by Perry at the foreclosure sale should be set aside because Perry is one of the directors of the company. The court dismissed the plaintiff's petition, and he appeals.Cole & Cole and H. McNeil, for appellant.

Todhunter & Hartman, for the company.

Henderson & Berry, for Perry.

Seevers & Sampson, for Lucas.

ADAMS, C. J.

One of the mortgages is exceedingly informal, and neither appears to have been executed by the authority of the board of directors of the defendant company. If, therefore, the foreclosure of the mortgages had been resisted by the company, it seems doubtful to us whether the decrees thereon could properly have been obtained. But, having been obtained, they constitute an adjudication, and are binding upon the company, unless they were obtained by fraud. It appears to us, also, that, if the company is bound by them, all the stockholders are bound by them, including the plaintiff. His interest in the litigation was represented by the company, and he was not only not a necessary party, but not a proper party.

Coming to the question as to whether there was any fraud practiced in obtaining the decrees, we have to say that we think that there was not. The amount for which the decrees were rendered was due from the company, and had become payable. The complaint seems to be that these creditors combined with the officers of the company, and were allowed to take decrees of foreclosure, whereas they should have granted an extension, or the company should have borrowed money and paid them off. The objection is not to the mode of foreclosure, so far as obtaining the decrees is concerned, but to the fact of foreclosure. But it is not for us to say that the creditors should have granted an extension, or that the company should have borrowed money and paid them, and thereby prevented a foreclosure. If we should conclude that the affairs of the company were very unwisely managed, and that the foreclosure might have been prevented, such conclusion would fall short of justifying us in holding the decrees were obtained by fraud.

Nor do we think that the fact that Perry was a director of the company, necessarily precluded him from making a valid purchase at the foreclosure sale. His right to become a creditor of the company by loaning it money cannot be questioned for a moment. It was equally his right to take security and enforce it, and it...

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10 cases
  • Worthen v. Griffith
    • United States
    • Arkansas Supreme Court
    • November 3, 1894
    ... ... 1117; [59 Ark. 581] S. C. 50 N.W. 1117; Planters ... Bank v. Whittle , 78 Va. 737; Hallam v ... Hotel Co. 56 Iowa 178, 9 N.W. 111; S. C. 9 N.W. 111; ... Smith v. Skeary , 47 Conn ... ...
  • Lackawanna Trust & Safe Deposit Co. v. Gomeringer
    • United States
    • Pennsylvania Supreme Court
    • April 29, 1912
    ... ... sheriff's sale of the corporate property: Jackson v ... Ludeling, 88 U.S. 616; Hallam v. Indianola Hotel ... Co., 9 N.W. 111; Huntley v. Goodyear, 182 Pa ... 613; Hill v. Frazier, 22 ... ...
  • Wabash Ry. Co. v. Iowa & S. W. Ry. Co.
    • United States
    • Iowa Supreme Court
    • March 10, 1925
    ...and must be in the utmost good faith and fair. And this is true both as to the stockholders and creditors. It was held in Hallam v. Hotel Co., 56 Iowa, 178, 9 N. W. 111, that a director of a corporation had an unquestioned right to become a creditor of the corporation, and that at an execut......
  • Adams & Westlake Co. v. Deyette
    • United States
    • South Dakota Supreme Court
    • December 28, 1895
    ...47 Conn. 47; Bank v. Whittle, 78 Va. 737; Ashhurst's Appeal, 60 Pa. St. 314; Sargent v. Webster, 13 Metc. (Mass.) 497; Hallam v. Hotel Co., 56 Iowa, 178, 9 N.W. 111. supreme court of Alabama is equally pronounced against this "trust-fund" doctrine, and in a very able and elaborate opinion, ......
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