Manchester Mill & Elevator Co. v. Strong

• Decision Date: 05 April 1916
• Docket Number: 4524.
• Parties: MANCHESTER MILL & ELEVATOR CO. v. STRONG et al.
• Court: U.S. Court of Appeals — Eighth Circuit

231 F. 876

MANCHESTER MILL & ELEVATOR CO. v. STRONG et al.

No. 4524.

United States Court of Appeals, Eighth Circuit.

April 5, 1916

Charles Blood Smith, of Topeka, Kan. (Samuel Barnum, of Topeka, Kan on the brief), for plaintiff in error.

E. R Morrison, of Kansas City, Mo. (Hurd & Hurd, of Abilene, Kan and Morrison, Nugent & Wylder, of Kansas City, Mo., on the brief), for defendants in error.

Before ADAMS, Circuit Judge, and REED and ELLIOTT, District Judges.

ADAMS Circuit Judge.

The B Strong Grain & Coal Company, Goffe & Carkener, and Norris & Co. filed an involuntary petition in bankruptcy against the Manchester Mill & Elevator Company, plaintiff in error in this case. The petition alleged, in substance and effect, that the several petitioning creditors had claims against the Elevator Company arising out of contracts for the purchase by them from the Elevator Company of certain quantities of wheat for future delivery, and that the Elevator Company failed and refused to make deliveries according to the terms of their several contracts, to their damage in the aggregate sum of $5,000. The petition further alleged that the Elevator Company was insolvent and within four months prior to the institution of the proceeding had committed an act of bankruptcy by executing a mortgage conveying its property to one O. C. Barney, to secure the payment of a pre-existing indebtedness in the sum of $8,500.

The Elevator Company answered the petition, alleging that the contracts made with the several petitioning creditors were made without the authority of the corporation and in conflict with the provisions of its by-laws, and that the claims of the petitioning creditors arose out of gambling transactions, and were illegal and void, under the provisions of sections 5167 and 5176 of the General Statutes of Kansas of 1909.

In due course the issues so joined came on for a hearing before a jury in the District Court, and at the conclusion of the evidence the cause was submitted to the jury on a full charge by the court, with instructions to answer the following questions:

(1) 'Was the Manchester Mill & Elevator Company insolvent at the date the petition was filed in this case, which date was the 4th day of December, 1914? ' To which the jury answered, 'Yes.'

(2) 'On that date do you find the bankrupt, the Manchester Mill & Elevator Company, was indebted to the B. Strong Grain & Coal Company, petitioning creditor herein? If so, in what amount? ' To which the jury answered, '$1,552.50.'

(3) 'Do you find the Manchester Mill & Elevator Company was indebted to Norris Grain Company, petitioning creditor herein, on December 4, 1914? If so, in what amount? ' To which the jury answered, '$8,271.02.'

(4) 'Do you find the Manchester Mill & Elevator Co. was indebted to Goffe & Carkener, petitioning creditor herein, on December 4, 1914? If so, in what amount? ' To which the jury answered, '$2,800.'

(5) 'Do you find the Manchester Mill & Elevator Company, being insolvent, made a mortgage on its property to O. C. Barney to secure a past-due indebtedness of $8,500, as charged in the petition? ' To which the jury answered, 'Yes.'

(6) 'Were the contracts made by McAndrews in the name of the Mill Company with the petitioning creditors, or any of them, wagering or gambling contracts? ' To which the jury answered, 'No.'

Thereupon the Elevator Company was duly adjudicated a bankrupt, and now prosecutes its writ of error to reverse that judgment.

There were many formal assignments of error, but counsel for the bankrupt, in a manifest effort to conform in their brief to our rule 24, specified the ones relied on for reversal of the judgment in the following way:

'While it was asserted in the answer that all these contracts were void and illegal as gambling transactions, the respondent submitted no proof to sustain such defense. It, however, urged upon the trial court the lack of power in the corporation itself to enter into these speculative contracts in the first instance, and also denied that McAndrews, the president of the corporation, had any authority, as president, to bind the corporation by executing these contracts. These are the two principal questions involved in this hearing. * * * '

The first contention is that the Elevator Company was without power to enter into the contracts upon which the petitioning creditors predicated their claims; that the contracts were not made for any legitimate purpose for which the Elevator Company was organized. The company was organized under the general law of the state of Kansas concerning private corporations (General Statutes of Kansas 1909, Sec. 1699), which provides, among other things, that the purposes for which private corporations may be formed are:

'(39) The conversion and disposal of agricultural products by means of mills, elevators, markets and stores, or otherwise.'

Section 1701 of that law provides that the corporate name of every such corporation ' * * * shall indicate by its corporate name the character of the business to be carried on by the corporation.'

It is argued that the adoption by the corporation of the corporate name 'the Manchester Mill & Elevator Company' imposed a limitation upon the scope of its business, confining it to the operation of a mill and elevator, thereby excluding the purchase and sale of wheat as any part or portion of its legitimate business. It is noticeable that clause 39 of section 1699 provides for the creation of corporations for 'the conversion and disposal of agricultural products by means of mills, elevators, markets and stores, or otherwise. ' This, in our opinion, necessarily implies that the operation of mills and elevators is an appropriate and lawful method to be resorted to for 'converting and disposing of agricultural products. ' If so, the corporate name of the plaintiff in error 'Mill & Elevator Company' indicates that a part of its business is the purchase and sale of wheat.

In harmony with this view, the charter of the defendant corporation, as granted to and accepted by it, specified that the purpose for which it was created was 'to conduct a general grain and milling business, to buy, sell, and ship and handle any and all kinds of grain, manufacture...