McDowell v. Federal Land Bank of New Orleans

• Decision Date: 24 March 1930
• Docket Number: 28486
• Court: Mississippi Supreme Court
• Parties: MCDOWELL et al. v. FEDERAL LAND BANK OF NEW ORLEANS et al

127 So. 288

156 Miss. 820

MCDOWELL et al. v. FEDERAL LAND BANK OF NEW ORLEANS et al

No. 28486

Supreme Court of Mississippi

March 24, 1930

Division A

Suggestion of Error Overruled May 12, 1930.

APPEAL from chancery court of Sunflower county HON. J. L. WILLIAMS Chancellor.

Suit by James R. McDowell and others, as receivers for the Mississippi Life Insurance Company, against Federal Land Bank of New Orleans and others. From the decree dismissing the bill as to defendant named, complainants appeal. Affirmed.

Decree affirmed.

Earle N. Floyd, of Jackson, and James R. McDowell and W. P. Metcalf, both of Memphis, Tenn., for appellants.

Where a contract made without authority by a corporate officer is in contravention of public policy or of a positive statute, it cannot be ratified even by the acceptance by the corporation of its benefits.

Section 5047, Hemingway's Code 1917.

At common law the corporation itself, a stockholder, or creditor may question an ultra vires act of the corporation.

3 Cook on Corporations (8 Ed.), secs. 667, 668.

It was clearly the intent of the Legislature to add a penalizing clause as accumulative remedy in the hands of the state, thereby recognizing that the provisions contained in sections omitting the penalty are to be construed as at common law open to attack by any injured party.

An intent to repeal the common law will not be presumed from doubtful statutory construction. The presumption is that no such change is intended unless the statute is clear and explicit in that direction. The common law will be held no further abrogated than the clear import of the language used in the statute requires.

Sutherland on Stat. Con., sec. 294.

Wells, Jones, Wells & Lipscomb, of Jackson, for appellees.

The subordination of the lien held by the Mississippi Life Insurance Company was made by its president, its chief executive officer, in due form as required by law and complainants are therefore estopped as against these defendants to challenge in equity or in law the sufficiency of the subordination and the rights of these defendants thereunder. The president of a corporation, as its chief executive officer, represents the corporation in its dealings with the public and his actions are the actions of the corporation and binding upon it. The public is not charged with the duty of investigating whatever limitations may have been placed upon the president's powers by the bylaws, rules and regulations of the corporation.

Moyse Real Estate Company v. First National Bank of Commerce, 70 So. 821, 110 Miss. 620; Southern Electric Securities Company v. State of Mississippi, 91 Miss. 195; J. R. Kelly et al. v. Bank of Commerce, 101 Miss. 692; National Surety Company v. Hall-Miller Decorating Co., 104 Miss. 626; Fidelity Mutual Insurance Company v. Oliver, 111 Miss. 134; Ichabod T. Williams et al. v. Bank of Commerce of Memphis et al., 71 Miss. 858; Watts Mercantile Company v. Buchanan, 92 Miss. 540; New Orleans & N.E. Railroad Co. v. Jemison, 144 Miss. 890; Board of Supervisors of Quitman County v. Stritze et al., 69 Miss. 460; Hinds and Adams Counties v. Natchez, Jackson & Columbus Railroad Company et al., 85 Miss. 599; William R. Brown v. British & American Mortgage Company et al., 86 Miss. 388; H. C. Metzger v. Southern Bank, 98 Miss. 108; New York Life Insurance Company v. O'Dom, 100 Miss. 219; Allen Gravel Company v. Nix, 129 Miss. 809; Carey-Halleday Lumber Company v. Cain & Howe, 70 Miss. 628; Perry v. Sumrall Lumber Company, 95 Miss. 691; Belzoni Oil Company v. Yazoo & Mississippi Valley Railroad Company, 94 Miss. 58; First National Bank of Morristown, Tenn., v. C. W. Leeton & Bro., 131 Miss. 324; Griffis v. Martin Oil Company, 127 Miss. 606; Middleton v. Georgetown Mercantile Co., 117 Miss. 134.

A corporation and its receivers cannot raise the issue of ultra vires and no one but the state of Mississippi can do so.

People's Bank v. Lamar County Bank, 107 Miss. 852.

OPINION

McGowen, J.

James R. McDowell, William P. Metcalf, and Earle N. Floyd, as receivers for the Mississippi Life Insurance Company, filed their bill in the chancery court of Sunflower county against the Federal Land Bank and J. E. and Lela Walker. The appellee, the Federal Land Bank, interposed its demurrer to the bill of complaint, which was sustained by the court. The decree rendered, the appellants, receivers, and complainants herein, having declined to amend their bill further, dismissed the bill as to the bank but retained it as to the other appellees, the Walkers, who were required to make answer; and from this decree an appeal is prosecuted here.

The bill alleged that the appellants were appointed receivers of the Mississippi Life Insurance Company, a corporation organized and doing business under the laws of the state of Mississippi; that on the 18th day of July, 1922, J. E. Walker was president of the said life insurance company; that the said company was engaged in the business of investing such funds as accrued in its treasury, and that, in pursuance thereof, on the 18th day of July, 1922, loaned to L. C. and Lizzie Williams the sum of three thousand three hundred six dollars and sixty-six cents, and duly evidenced such loan by accepting the promissory note of the said parties payable on the 20th day of July, 1927, with interest, etc., secured by a first deed of trust which was filed for record on July 20, 1922, and recorded in the office of the chancery clerk of Sunflower county; that said trust deed constituted a first lien on said property, which, under the laws of Mississippi, was a prerequisite to the loaning of its funds on real estate.

The bill further alleged that Walker as president of the said insurance company, on November 20, 1922, executed in favor of the Federal Land Bank a waiver of the first lien hereinabove referred to, to secure an indebtedness of Williams and wife in the sum of two thousand five hundred dollars, and took a trust deed on such lands to secure the payment thereof, and promptly had same recorded; that Walker in the execution of said waiver did not refer the matter to, nor obtain the approval of, the directors of the insurance company, nor make any record pertaining to the said act; that he concealed with a fraudulent and unlawful purpose the execution of the waiver, and thereby subjected the security for the loan made by the said insurance company to Williams and wife to a prior incumbrance in favor of the Federal Land Bank, impairing the security held by the company to the extent of two thousand five hundred dollars.

It was further alleged that Walker, the president of said insurance company, was also at the same time president of the Delta Penny Savings Bank, which savings bank had, prior to this transaction, loaned to Williams and wife a large sum of money, secured by another and third deed of trust executed subsequent to the deed of trust to the insurance company; that the waiver was executed by Walker to enable Williams and wife to secure funds with which to repay the savings bank of which he was president, and that they did so secure said funds; that all of such acts and conduct by Walker was in violation of the trust and confidence imposed in him as president of said insurance company, and in violation of the laws of the state, which require the investment of such insurance funds only in the first lien securities, and in further violation of the law prohibiting such waiver as an ultra vires act; that all such unlawful acts and conduct of Walker constituted a fraud on the said insurance company, of which he was president, and were known to the Federal Land Bank, or could have been known by it by the exercise of reasonable diligence in such cases required. It is also alleged that the funds obtained from the Federal Land Bank were by Williams paid to the Delta Penny Savings Bank as a credit on an indebtedness then owing by them.

The receivers, complainants and appellants here, alleged that the deed of trust executed by Williams and wife to the insurance company was foreclosed on April 30, 1928, and that they, as the highest bidders, purchased the property for one thousand dollars, from which sum, after paying trustee's fees, notary fees, and advertising, there remained a balance of nine hundred fifty dollars and sixty-five cents, which was applied on the indebtedness owing by Williams and wife to the insurance company.

The bill also alleges...