Home Powder Co. v. Geis

• Decision Date: 22 March 1913
• Docket Number: 3,674.
• Citation: 204 F. 568
• Parties: HOME POWDER CO. et al. v. GEIS et al. In re LINCOLN MIN. & MILL. CO.
• Court: U.S. Court of Appeals — Eighth Circuit

204 F. 568

HOME POWDER CO. et al. v. GEIS et al.

In re LINCOLN MIN. & MILL. CO.

No. 3,674.

United States Court of Appeals, Eighth Circuit.

March 22, 1913

Hiram W. Currey and George Vest Farris, both of Webb City, Mo., for appellants.

Hugh McIndoe and A. W. Thurman, both of Joplin, Mo., for appellees.

Before HOOK and SMITH, Circuit Judges, and VAN VALKENBURGH, District judge.

SMITH Circuit Judge.

The Lincoln Mining & Milling Company was incorporated under the laws of Arizona in October, 1907, and in October, 1908, it was licensed to do business in Missouri. The company acquired a lead and zinc mine by lease and constructed a mill at Duenweg, Jasper county, Mo., and the management of this mine and mill constituted the sole business of the company. The company was engaged in carrying on these lines of business from its organization until about June, 1910, when it closed down. Shortly thereafter its property was attached by certain of its creditors, including the Home Powder Company. Later and on August 16, 1910, a called meeting of its directors, of which meeting all the directors were notified, was held in Chicago, Ill. It was attended by five of the eight directors and a preamble was adopted stating that the company was unable to pay its debts and had been obliged to shut down its plant at Duenweg, and by a resolution, which was entered at large on the company's records, it admitted its inability to pay its debts and its willingness to be adjudged a bankrupt on that ground. August 27, 1910, Albert J. Geis, A W. Van Hafften, and Herman B. Meyers filed a petition as creditors of the company, alleging that it had admitted in writing its inability to pay its debts and its willingness to be adjudged a bankrupt on that ground, and asking that it be so adjudged. The company answered, admitting the allegations of the petition; but certain creditors, including the United Iron Works and the Southwest Supply Company, answered, contesting the proceedings upon numerous grounds. The whole matter was referred to a master, who reported in favor of the petitioners. Exceptions were filed by the Home Powder Company, the United Iron Works, and the Southwest Supply Company. The court confirmed the report of the master, adjudged the company a bankrupt, and the Home Powder Company, the United Iron Works, and the Southwest Supply Company appeal.

Geis and Van Hafften were directors, and attended the meeting in question of the board, and as only a bare quorum was present, counting them, if they or either of them were disqualified, there was no quorum present.

It was originally contended that there was no power in the board of directors, as distinguished from the stockholders, to commit the act of bankruptcy by admitting the inability of the corporation to pay its debts and its willingness to be adjudged a bankrupt. The law requires that the corporation admit in writing its inability to pay its debts and its willingness to be adjudged a bankrupt on that ground, and in every case the question is one of authority of the agent, which must be determined by an examination of the special charter or the general laws of the state of the residence of the corporation and the articles of incorporation and the by-laws lawfully adopted. The residence of the corporation is always the state where incorporated. Thompson on Corporations (2d Ed.) Sec. 490. The question, therefore, is whether the directors were authorized to make the admission for the corporation by the laws of the state of the residence of the corporation. In this case that was Arizona.

While all the authorities agree to this, it has been held that the laws of Massachusetts and Oregon do not confer such authority upon the board of directors. In re Bates Machine Co. (D.C.) 91 F. 625; In re Quartz Gold Mining Co. (D.C.) 157 F. 243, affirmed under the title of Van Emon et al. v. Veal, 158 F. 1022, 85 C.C.A. 547. On the other hand, it has been held that by their laws New York, Pennsylvania, Wisconsin, New Jersey, and Rhode Island authorize the board of directors to make these admissions. In re C. Moench & Sons Co., 130 F. 685, 66 C.C.A. 37; In re Lisk Mfg. Co. (D.C.) 167 F. 411; Cresson & Clearfield Coal & Coke Co. v. Stauffer, 148 F. 981, 78 C.C.A. 609; In re T. L. Kelly Dry Goods Co. (D.C.) 102 F. 747; In re Mutual Mercantile Agency (D.C.) 111 F. 152; In re Marine Machine & Conveyor Co. (D.C.) 91 F. 630.

While there is thus a disagreement between the courts as to the conclusion, there is no difference of opinion as to the principle which governs in such cases. The question in every case is: What authority had the directors, as distinguished from the stockholders, in the home of the corporation? Loveland on Bankruptcy (4th Ed.) Sec. 136. It is not to be presumed that there will be found in the general laws of the state, or in the articles of incorporation or by-laws, any express provision authorizing such admission; but under the general law the board of directors or trustees of a corporation have the power to authorize execution of an assignment of all property of the corporation for the benefit of its creditors, when such a step is advisable, unless such an assignment is prohibited by law, the articles, or by-laws. Clark & Marshall on Private Corporations, par. 691; Thompson on Corporations (2d Ed.) Sec. 6138.

There is no law in Arizona prohibiting such an assignment, and the power to...