Mcewen v. Kelly
| Court | Supreme Court of Georgia |
| Writing for the Court | LUMPKIN, J |
| Citation | 140 Ga. 720,79 S.E. 777 |
| Parties | McEWEN. v. KELLY et al. |
| Decision Date | 15 October 1913 |
79 S.E. 777
(140 Ga. 720)
McEWEN.
v.
KELLY et al.
Supreme Court of Georgia.
Oct. 15, 1913.
1. Corporations (§, 310*)—Directors—Duties and Liabilities.
Directors of a trading corporation must exercise ordinary care and prudence in the administration of its affairs. They may commit the active management of the business to authorized officers; but this will not relieve them from the duty of reasonable supervision.
[Ed. Note.—For other cases, see Corporations, Cent. Dig. §•§ 1352-1362; Dec. Dig. § 310.*]
2. Bankruptcy (§ 145*)—Trustee—Corporations—Liabilities op Directors.
A trustee in bankruptcy of such a corporation succeeds to any right which it may have to sue directors and officers for a breach of duty, resulting in loss.
[Ed. Note.—For other cases, see Bankruptcy, Cent. Dig. §§ 205, 230-232, 234; Dec. Dig. § 145.*]
3. Corporations (§ 331*)—Directors—Liability to Creditors.
In a solvent going concern directors are the agents and fiduciaries of the corporation rather than of its creditors; but, under some circumstances, creditors of the corporation may have a cause of action against its directors on account of losses occurring from their maladministration and ultimately resulting in injury to the rights of such creditors.
[Ed. Note.—For other cases, see Corporations, Cent. Dig. §§ 1448, 1449; Dec. Dig. £ 331.*]
4. Bankruptcy (§ 302*)—Action by Trustee —Petition—Sufficiency.
The allegations of the petition considered, and held not to show a case for recovery against the directors of the corporation, except the one who was also secretary and treasurer.
[Ed. Note.—For other cases, see Bankruptcy, Cent. Dig. § 1325; Dec. Dig. § 302.*]
5. Appeal and Error (§ 440*)—Correction of Judgment Pending Appeal.
After a judgment has been entered sustaining a demurrer to an action brought against
[79 S.E. 778]three defendants and dismissing the entire case, and while the case is pending in this court on a bill of exceptions assigning error on such judgment, the judge of the trial court is without jurisdiction, even by consent of counsel, to enter another judgment reciting that it was intended to overrule the demurrer as to one of the defendants and altering the former judgment accordingly.
[Ed. Note.—For other cases, see Appeal and Error, Cent. Dig. §§ 2198-2201; Dec. Dig. § 440.*]
Error from Superior Court, Bartow County; A. W. Fite, Judge.
Action by C. McEwen, as trustee, etc., against W. M. Kelly and others. Judgment for defendants, and plaintiff brings error. Affirmed in part, and reversed in part.
McEWen, as trustee in bankruptcy of the Southern Iron Company, brought suit against W. M. Kelly, W. H. Totten, Jr., and W. C. Satterfield, seeking to recover $3,490.57. So far as necessary to be set out, the allegations were as follows: Kelly, Satterfield, and Totten formed a partnership, in the latter part of the year 1905, for the purpose of mining and shipping ore, which continued until October 23, 1906, when a charter was granted to them. During the continuance of the partnership, Kelly was the treasurer. All of the stock in the corporation was taken by the three, Kelly taking 34 shares, and each of the others 33, and the three elected themselves directors. During the continuance of the partnership, the other two partners frequently asked Kelly for "a statement of the partnership, " and he promised to make them a full and complete statement of its affairs but failed to do so. He drew numerous drafts on Totten to meet the expenses of the partnership. Totten and Satterfield became suspicious of Kelly and of his handling of the business. Upon incorporation, Totten and Satterfield intended to elect Satterfield secretary and treasurer, and Totten nominated him for that office and Kelly for president; but Kelly, winking at Totten and shaking his head, stated that Totten should have the honors of the corporation and nominated him for president, Satterfield for vice president, and himself for secretary and treasurer. All of them appear to have acquiesced in this, and the election was accordingly made. At some unspecified time prior to January 1, 1907, Kelly wrote to Totten, who was a nonresident, that he did not wish Satterfield to have charge of the office of secretary and treasurer, and if it were given to him he (Kelly) would withdraw from the company. It was further alleged that Totten "was unable to get any statement at that time, or between the date of incorporation and said January 1, 1907, from said Kelly as to the business of said corporation." On or about January 1, 1907, Kelly made to Totten and Satterfield a statement of the business of the company "that was unsatisfactory and meager and an ex tremely poor showing of the business of the company." After January 1, 1907, Kelly established the practice of drawing a draft on Totten for the amount of the pay roll and sending to Totten a check for the amount, so that Kelly could cash the draft and Totten could deposit the check in Cincinnati, Ohio, and pay the draft, thus getting the use of the money for four or five days without interest; in other words, indulging in the practice known to the business world as "kiting." Totten protested against this, but Kelly gave a plausible explanation of it. In April, 1907, Kelly telegraphed to Totten to remit to him $600 or $700 to pay an open account. Totten went to Cartersville, the home office of the company, and called a meeting of the stockholders, at which Kelly was deposed from office and a new secretary and treasurer elected. Kelly turned over to his successor "what purported to be the books of the company." They were audited by the direction of Totten and Satterfield, and the "auditor reported * * * that W. M. Kelly had expended from the funds of the company the sum of $1,655.33, for which there appeared to be no authority from the officers or directors of said company, and that in addition thereto said W. M. Kelly was due said company...
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...and directors of the corporation' when this type of misconduct occurs." Id. (quoting Hickman , 401 S.E.2d at 738, and McEwen v. Kelly , 140 Ga. 720, 79 S.E. 777 (1913) ); see also Hickman , 401 S.E.2d at 738 ("The abuse of this duty gives rise to an action against the directors to recover s......
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...of our decisions. At common law, corporate officers and directors in Georgia owed a duty to exercise ordinary care. See McEwen v. Kelly, 140 Ga. 720, 723(1), 79 S.E. 777 (1913) (“[T]hose who accept the position of directors impliedly undertake to exercise ordinary care and diligence in disc......
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...Mass. 386, 391, 162 N. E. 770;Putnam v. Handy, 247 Mass. 406, 142 N. E. 77;Farmer v. Brooks, 213 Ala. 137, 104 So. 322;McEwen v. Kelly, 140 Ga. 720, 79 S. E. 777;Stephan v. Merchants' Collateral Corp., 256 N. Y. 418, 421, 176 N. E. 824. It has been held that claims against directors of nati......
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...trial court 'of jurisdiction to take further proceedings towards the enforcement of the judgment excepted to.' See also McEwen v. Kelly, 140 Ga. 720(5), 79 S.E. 777. The trial court thus loses jurisdiction to take any steps in such direction until the supersedeas is terminated, which in thi......
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Baker v. Allen
...Mass. 386, 391, 162 N. E. 770;Putnam v. Handy, 247 Mass. 406, 142 N. E. 77;Farmer v. Brooks, 213 Ala. 137, 104 So. 322;McEwen v. Kelly, 140 Ga. 720, 79 S. E. 777;Stephan v. Merchants' Collateral Corp., 256 N. Y. 418, 421, 176 N. E. 824. It has been held that claims against directors of nati......
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Baker v. Allen
...Mass. 386, 391, 162 N.E. 770; Putnam v. Handy, 247 Mass. 406, 142 N.E. 77; Farmer v. Brooks, 213 Ala. 137, 104 So. 322; McEwen v. Kelly, 140 Ga. 720, 79 S.E. 777; Stephan v. Merchants' Collateral Corp., 256 N.Y. 418, 421, 176 N.E. 824. It has been held that claims against directors of natio......
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Ga. Commercial Stores, Inc. v. Forsman, A17A0727, A17A0728.
...23-2-58."In a solvent, going concern, directors are the agents or fiduciaries of the corporation, not of its creditors." McEwen v. Kelly , 140 Ga. 720, 724 (3), 79 S.E. 777 (1913). In contrast, when a company becomes insolvent, "the directors stand in a trust relation toward creditors." Id.......
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