Heggie v. Building & Loan Ass'n

• Decision Date: 08 December 1890
• Citation: 12 S.E. 275,107 N.C. 581
• Parties: HEGGIE v. BUILDING & LOAN ASS'N.
• Court: North Carolina Supreme Court

12 S.E. 275

107 N.C. 581

HEGGIE v. BUILDING & LOAN ASS'N.

Supreme Court of North Carolina

December 8, 1890

1. A judgment against a corporation, regularly taken in a court of competent jurisdiction, cannot be attacked or impeached by any member of the corporation except for fraud or collusion.

2. Code N.C. § 667 et seq., provides that corporations whose charters have expired or been annulled shall continue as bodies corporate for three years, for the purpose of winding up their business, and that receivers shall be appointed to settle their affairs, etc. Defendant company's charter had neither expired nor been annulled, but the company took measures to close up its business and make settlement with its members. More than three years thereafter plaintiff brought suit against defendant and obtained judgment. Held that the statute did not apply to defendant, and that it could not be objected that plaintiff's judgment was irregular and void, because his action was brought more than three years after the closing up of its business.

3. The final settlement made between defendant and its members was not valid as against corporate creditors.

4. Orders issued by a corporation to a stockholder in payment for stock do not entitle such stockholder to share the corporate assets as a bona fide creditor, but only as a stockholder in the surplus after the coprorate debts are paid.

5. A corporation cannot buy in or deal in its own stock to the prejudice of its creditors.

This is an appeal from a judgment of MACRAE, J., sustaining a demurrer to an interplea filed by C.E. Cheatham, in certain proceedings supplementary to execution, rendered at the July term, 1890, of the superior court of Granville county. The record is voluminous, but the following summary is sufficient for the purpose of this appeal: At the February term, 1889 of the superior court of Granville, the plaintiff recovered judgment against the defendant association for the sum of $2,091.54, with interest on $1,086 till paid, subject to a credit of $600. Execution was issued thereon and duly returned unsatisfied. The defendant has no known and visible property subject to execution, and no equitable interest in land within the lien of the judgment, but has and owns choses in action and things of value unaffected by any lien and incapable of levy, which, it is alleged, ought to be applied to the payment of said judgment, particularly $350, in the hands of its treasurer, J.C. Cooper, and an equitable interest in a tract of 200 acres of land, set out in the affidavit, and it is alleged that the defendant and its officers unjustly refuse to apply said money and equitable interest in said land to the satisfaction of plaintiff's judgment, and he prays that an order may issue, requiring the defendant, through its officers named, to appear and answer etc., and that the defendant and its officers in the meanwhile, and until the further order of court be directed not to dispose of the fund and the interest in said land. Upon this application on affidavit, January 3, 1890, the judge made an order enjoining the defendant, its agents, and officers, and ordering them to appear and answer concerning the property of the defendant association. Thereafter, by an order made upon the application of Mrs. Catherine E Cheatham, allowing her to interplead in the proceeding, she filed an interplea, alleging, in substance, that, though the plaintiff had recovered the judgment set out in his application, he was not, in law or in equity, entitled to recover said judgment, and that she had brought an action in the superiour court of Granville county against the plaintiff and defendant association, within a year after the rendition of said judgment, for the purpose, among others, of having said judgment set aside and canceled, because, "if the proper defense had been set up to J.M. Heggie's [plaintiff's] claim, the same could not have been recovered;" that the judgment "is unconscionable and unjust, and, if the same be collected," she will fail in the collection of her claim agianst the defendant association which she alleges to be "just and honest." There is no allegation of any fraud or collusion between the plaintiff and the defendant association, and we need not, for the reason presently to be given, notice the grounds set out at great length in the record, upon which Mrs. Cheatham bases her application to have plaintiff's judgment set aside. But she further says by her interplea that the defendant association has no property except that now sought to be subjected to the payment of the plaintiff's judgment; that it has long since ceased to do business under its charters,--many of its members are insolvent, some dead and some have removed to distant states, so that an assessment cannot be made upon their shares of stock to satisfy her claim, to the payment of which the money and property now sought to be subjected by the plaintiff had been specifically appropriated, assigned and set apart. In June, 1879, the president and executive committee of the defendant association drew two orders on their treasurer,--one in favor of L.A. Paschall, administrator, with the will annexed of Dr. William R. Hicks, for $272.86, with interest at 8 per cent. on $247.08, from December 20, 1874, until paid, "being the amount payable to said intestate's estate on his six shares of stock in said association," and the other in favor of Catherine E. Hicks, administratrix of H.C. Hicks, deceased, for $424.17, with interest at 8 per cent. until paid, "being the balance payable to said intestate on his stock in said association." These orders are now owned by Mrs. Cheatham who was Mrs. C.E. Hicks, widow and administratrix of H.C. Hicks, and succeeded to the shares of stock owned by him and by Dr. W.R. Hicks, and who "owned, in her own right," certain shares of stock in said association, and she alleges in her affidavit that, "at the time said orders were drawn, there were just sufficient assets and credits in the hands of the treasurer for the payment of the same in full; that the officers of said association now admit, and have all along admitted, the correctness and justice of said debts," and the "drawing and accepting the orders aforesaid was, and is an equitable assignment of said funds, in the hands of said officers of said association;" that the property now sought to be applied by the plaintiff to the payment of his judgment is a part of the assets originally in the hands of the said treasurer for the payment of said orders, upon which they were drawn, "and the same have ever since been treated by said association, and its managing officers as the property" of the affiant, and ought to be paid to her, "and that plaintiff should be adjudged to have no right, title or interest, therein, or any lien thereon by reason of his said judgment," etc. She further alleges that one C.C. Heggie, a son of the plaintiff was a member of the defendant association, and, in 1873 and 1874, borrowed money of the defendant association, and executed mortgages on lands mentioned to secure the payment of the same, and his equity of redemption therein was sold in February, 1875, and bought by the plaintiff, and she believes the same was bid in by the plaintiff for said C.C. Heggie, and paid for with his money, and the money sought to be recovered by the plaintiff, J.M. Heggie, was charged by the defendant association against the said C.C. Heggie "as fines, forfeitures, penalties, and interest upon certain shares of stock in said association held by said C.C. Heggie; and that said transactions were usurious, yet they were in strict accordance with the charter and by-laws of said association, of which said C.C. Heggie was a member, entitled to all its privileges, and liable to all the penalties of usury that the association was liable for; and, as to said transactions, he and the said corporation were in pari delicto," and he is estopped, by reason of his participation in said unlawful dealings, to sue for usury or set up the plea of usury.

Accompanying the interplea of Mrs. Cheatham, and as part thereof, is an affidavit of J.W. Hays, secretary of the defendant association, in which he sets forth in "full and voluminous" detail "all the facts relative to the orders drawn by the executive committee in favor of said Catherine E. Hicks, (now Cheatham,) Henry C. Hicks, and W.R Hicks, and the "defendant association has not recognized the claim set up by the plaintiff to the same. He also says, in his full and exhaustive statement, among other things, that in the administration of the affairs of said corporation the said officers endeavored to observe, keep, and maintain the laws, rules, and regulations of said corporation, as set forth and prescribed in the said charter and by-laws, so long as they were permitted to do so under the general laws of the state of North Carolina; and to the best of the knowledge, information, and belief of this defendant, the business and affairs of said corporation were conducted and managed strictly in conformity with the said charter and by-laws of said corporation, as the same were understood and interpreted by the officers and managers thereof, and by all the members of said corporation, until after the publication of the decision of the supreme court of North Carolina at the June term, 1876, thereof, in the case of Mills v. Association, reported in 75 N.C. at page 292, from which decision it was perceived that the methods upon which this and other similar building and loan associations in this state had been conducting their business were discountenanced, and would not be sustained by the courts, and therefore the officers and managers of 'the People's Building & Loan Association of Oxford' took measures for closing its...