Moore v. Boise Land & Orchard Co., Ltd.

• Citation: 31 Idaho 390,173 P. 117
• Parties: CRAWFORD MOORE, Trustee, B. E. RAYBURN and W. D. MCREYNOLDS, Respondents, v. BOISE LAND AND ORCHARD COMPANY, LIMITED, a Corporation, WYOMING HOLDING COMPANY, a Corporation, DEAN PERKINS, Receiver of WYOMING HOLDING COMPANY, and M. F. DEAN, Appellants
• Decision Date: 01 April 1918
• Court: United States State Supreme Court of Idaho

173 P. 117

31 Idaho 390

CRAWFORD MOORE, Trustee, B. E. RAYBURN and W. D. MCREYNOLDS, Respondents, v. BOISE LAND AND ORCHARD COMPANY, LIMITED, a Corporation, WYOMING HOLDING COMPANY, a Corporation, DEAN PERKINS, Receiver of WYOMING HOLDING COMPANY, and M. F. DEAN, Appellants

Supreme Court of Idaho

April 1, 1918

CORPORATIONS-ESTOPPEL-RECEIVER-JUDGMENT CREDITORS-BONA FIDE PURCHASERS OF CORPORATE PROPERTY.

1. One who accepts a deed subject to a mortgage, and deducts the amount secured thereby from the purchase price, is, together with his privies, estopped from denying the validity of the encumbrance.

2. In the absence of fraud, neither the receiver of a corporation nor its judgment creditors can acquire any greater right in its property than the corporation had at the time their respective rights became fixed.

3. A bona fide purchaser of the assets of a corporation is not nor is the property conveyed, liable for its debts, except such as are contracted or incurred in the operation, use or enjoyment of its franchise, in the absence of an agreement to that effect, unless the purchaser is a reorganization of the vendor or unless, by merger or otherwise, the one is a continuation of the other.

[As to liability of a corporation for the debts of pre-existing corporation or partnership, see note in 59 Am.St. 547]

APPEAL from the District Court of the Third Judicial District, for Ada County. Hon. Carl A. Davis, Judge.

Action to foreclose mortgages, with cross-action by defendants Rayburn, McReynolds and Intervenor Dean, for adjudication of priority of their respective liens. Judgment for plaintiff and for Rayburn, McReynolds and Dean with priorities in the order named. Affirmed in part and reversed in part.

Decree affirmed in part and reversed in part. Costs awarded against appellants and in favor of respondents, Moore and Rayburn and one-third of appellants' costs upon appeal, incurred awarded in their favor against respondent, McReynolds. Petition for rehearing denied.

S. T. Schreiber, for Intervenor and Appellant Dean.

A deed by a corporation, after its charter has been forfeited, is a nullity. (Bradley v. Reppell, 133 Mo. 545, 54 Am. St. 685, 32 S.W. 645, 34 S.W. 841; Utah Optical Co. v. Keith, 18 Utah 464, 56 P. 155; Provost v. Morgan's L. & T. R. Co., 42 La. Ann. 809, 8 So. 584.)

A corporation cannot deed land after its charter has expired. ( Marysville Invest. Co. v. Munson, 44 Kan. 491, 24 P. 977.)

Stock cannot be transferred so as to pass title after the dissolution of the corporation, much less any of the assets of the corporation, nor can it assign mortgages nor make valid mortgages. (James v. Woodruff, 2 Denio (N. Y.), 574.)

"When the nullity of a contract becomes apparent the whole transaction falls to the ground. It is incapable of affirmation nor can third parties, bona fide, acquire right for value under it." (Anson on Contracts, sec. 205.)

"The court will, on its own motion, raise the question of the illegality of a contract against public policy or violation of public law." (Escambia Land & Mfg. Co. v. Ferry Pass Inspectors & Shippers' Assn., 59 Fla. 239, 138 Am. St. 121, 52 So. 715; Pietsch v. Pietsch, 245 Ill. 454, 29 L. R. A., N. S., 218, 92 N.E. 325.)

"The making of these interest payments or any other payment on the contract could not amount to an estoppel." (Tarr v. Western Loan & Savings Co., 15 Idaho 741, 750, 99 P. 1049, 21 L. R. A., N. S., 707.)

"Judgment creditors may intervene and contest validity of mortgage." (Tarr v. Western Loan & Savings Co., supra; Union Bank v. Bell, 14 Ohio St. 200; Cook on Corporations, 848d; Phoenix Nat. Bank v. Cleveland Co., 58 Hun, 606, 11 N.Y.S. 873, 875.)

"Estoppel cannot, ordinarily, result from an invalid contract or ultra vires acts." (Royal Consol. Min. Co. v. Royal Consol. Mines Co., 157 Cal. 737, 137 Am. St. 165, 110 P. 123; Kyser v. Miller, 144 Ill.App. 316.)

C. S. Hunter, for Appellant Perkins.

A conveyance by a corporation of real estate and a warranty of title when such corporation is unauthorizedly attempting to exercise corporate powers, where no power as a corporation has in fact been granted to it, is void. (Lafferty v. Evans, 17 Okla. 249, 21 L. R. A., N. S., 363, 87 P. 304; Eastman v. Parkinson, 133 Wis. 375, 13 L. R. A., N. S., 921, 113 N.W. 649.)

It is not shown in the evidence that the Wyoming Holding Company or any of its officers knew of the lack of integrity of the mortgages herein sued upon, and the conduct of such officers cannot amount to a ratification because of a lack of the knowledge of all of the material facts connected with the transaction. (7 Words & Phrases, 5928; Blackwell v. Kercheval, 27 Idaho 537, 149 P. 1060; Jones on Mortgages, 6th ed., sec. 93.)

"The receiver of the corporation may defend against or sue to set aside a mortgage which is fraudulent or otherwise illegal." (Cook on Corporations, 7th ed., sec. 848H.)

The estoppel of a person who has dealt with a corporation, to deny its existence, does not apply to prevent showing the subsequent expiration of its corporate life. (Dobson v. Simonton, 86 N.C. 492; Ensey v. Cleveland & St. Louis R. Co., 10 Ind. 178; Fort Wayne Turnpike v. Dean, 10 Ind. 563; Guaga Iron Co. v. Dawson, 4 Blackf. (Ind.) 202; Krutz v. Paola Town Co., 20 Kan. 397.)

The receiver, Dean Perkins, appears for all creditors and stockholders, as well as for the corporation. He is acting in a dual capacity, and in such capacity can raise any question which affects the material rights and interests of any of these three parties. (Curtis v. Lewis, 74 Conn. 367, 50 A. 878; Alaska Salmon Co. v. Standard Box Co., 158 Cal. 567, 112 P. 454.)

Barber & Davison, Chas. F. Koelsch and B. F. Neal, for Respondents.

"If one purchases land subject to a mortgage and there is a deduction from the purchase price on account thereof and either verbally or by deed he agrees to take the land subject to the mortgage, and in whole or in part makes the mortgage debt a consideration for the transfer, he is not at liberty to deny the existence or validity of the mortgage, or dispute the amount owing under it at the time of the transfer." (Burke Land etc. Co. v. Wells, Fargo & Co., 7 Idaho 42, 59, 60 P. 87; Hancock v. Fleming, 103 Ind. 533, 535, 3 N.E. 254; Merriman v. Moore, 90 Pa. 78; 2 Jones on Mortgages, 1491; Fremont County v. Warner, 7 Idaho 367, 63 P. 106; Hadley v. Clark, 8 Idaho 497, 69 P. 319; Johnson v. Thompson, 129 Mass. 398; Western Loan etc. Co. v. Kendrick, State Bank, 13 Idaho 331, 90 P. 112.)

Both the grantee of property and its creditors are estopped to set up as a defense in a suit to foreclose a mortgage that the act of creating the mortgage was ultra vires. (Bowman v. Foster etc. Hardware Co., 94 F. 592; Blue Rapids Opera House Co. v. Mercantile Bldg. etc. Assn., 59 Kan. 778, 53 P. 761; Illinois Trust etc. Bank v. Pacific Ry. Co., 117 Cal. 332, 49 P. 197.)

One taking and retaining the benefits of a transaction is bound by the transaction, cannot avoid its obligations, and is estopped from taking a position inconsistent therewith. ( Ryer v. Oesting, 119 Cal. 564, 51 P. 857; Hobbs v. Nashville etc. Ry. Co., 122 Ala. 602, 82 Am. St. 103, 26 So. 139; Fremont County v. Warner, 7 Idaho 367, 63 P. 106; Poole v. Lowe, 24 Colo. 475, 52 P. 741; Winslow v. Baltimore etc. R. Co., 188 U.S. 646, 23 S.Ct. 443, 47 L.Ed. 635; Hartman v. Hornsby, 142 Mo. 368, 44 S.W. 242; Goodwin v. Central etc. Bldg. Co., 21 Cal.App. 376, 131 P. 896.)

One who has dealt with a corporation, even if it be de facto only, and who has received the benefit of his contract, or any contract with it, is estopped from denying corporate capacity. (1 Thompson on Corp. 231; Commonwealth v. Philadelphia County, 193 Pa. 236, 44 A. 336; Richards v. Minnesota Sav. Bank, 75 Minn. 196, 77 N.W. 822; McDonnell v. Alabama etc. Ins. Co., 85 Ala. 401, 5 So. 120; Winget v. Quincy Bldg. etc. Assn., 128 Ill. 67, 21 N.E. 12; Exchange Nat. Bank v. Capps, 32 Neb. 242, 29 Am. St. 433, 49 N.W. 223.)

Those in privity with the grantee are estopped to the same extent as is the grantee. (Simson v. Eckstein, 22 Cal. 580; Dismukes v. Halpern, 47 Ark. 317, 1 S.W. 554; Waco Bridge Co. v. Waco, 85 Tex. 320, 20 S.W. 137.)

The receiver can acquire no greater or better interest than the debtor had in the property, and to this extent the receiver stands in the shoes of the debtor. He has the same rights which the insolvent would have had, and can set up no rights which the debtor could not have set up. (34 Cyc. 191; Fourth St. Nat. Bank v. Yardley, 165 U.S. 634, 17 S.Ct. 439, 41 L.Ed. 855; Tilford v. Atlantic Match Co., 134 F. 924; Black v. Manhattan Trust Co., 213 F. 692; Albien v. Smith, 24 S.D. 203, 123 N.W. 675; Southern Granite Co. v. Wadsworth, 115 Ala. 570, 22 So. 157; New Haven Wire Co. Cases (Baring v. Galpin), 57 Conn. 352, 18 A. 266, 5 L. R. A. 300; Crine v. Davis, 68 Ga. 138; Shinkle v. Knoll, 99 Ill.App. 274; Brownson v. Roy, 133 Mich. 617, 95 N.W. 710; State ex rel. v. Superior Court, 8 Wash. 210, 35 P. 1087, 25 L. R. A. 354.)

MORGAN, J. Budge, C. J., and Rice, J., concur.

OPINION

MORGAN, J.

Certain notes and mortgages involved herein were executed and delivered by Boise Land and Orchard Company on December 6 1912, duly recorded and thereafter assigned to respondent, Moore, as collateral security. He holds legal title thereto and is such a party in interest that he may foreclose in his own name. (Craig v. Palo Alto Stock Farm, 16 Idaho 701, 102 P. 393; Utah Implement-Vehicle Co. v. Kenyon, 30 Idaho 407, 164 P. 1176.) On November 30, 1912, the charter of the Orchard Company was forfeited for non-payment of its corporate license tax. On July 14, 1913, upon payment of the amount due, it was reinstated. (Sess. Laws 1912, chap. 6, p. 13.) ...