Morisette v. Howard

• Decision Date: 09 February 1901
• Docket Number: 11,812
• Citation: 63 P. 756,62 Kan. 463
• Parties: A. MORISETTE, as Sheriff, v. W. H. HOWARD, as Trustee, et al
• Court: Kansas Supreme Court

63 P. 756

62 Kan. 463

A. MORISETTE, as Sheriff, v. W. H. HOWARD, as Trustee, et al

No. 11,812

Supreme Court of Kansas

February 9, 1901

Decided January, 1901.

Error from Cloud district court; F. W. STURGES, judge.

Caldwell Wilmot & Ackley, and Ellis, Cook & Ellis, for plaintiff in error.

J. R Hamilton, and Pulsifer & Alexander, for defendants in error.

OPINION

JOHNSTON, J.:

This action was brought bye W. H. Howard, as trustee, to recover possession of a stock of merchandise from A. Morisette sheriff of Cloud county, who had seized it as the property of the Clyde Mercantile Company, at the instance of the creditors of that company. After the action was begun Fannie L. Holman intervened, and alleged that she had previously purchased and paid for the merchandise, and was the actual owner and entitled to the possession of the same. The creditors of the mercantile company, through the sheriff, claimed that the sale of the goods to Holman was fraudulent as against them, and was made by the company without power or authority lawfully exercised, and, therefore, was invalid. The trial resulted in a verdict in favor of the purchaser, and is in effect a finding that the sale was made in good faith and for a sufficient consideration.

The honesty of the transaction was decided by the jury and is no longer open to question, but there is a contention that the mercantile company had no power to transfer property, and that, if it had, the power was not exercised in a legal and effective manner. The stock of goods, business, and good-will, which constituted the entire assets of the corporation, were sold to Holman for $ 3000 in money, payable in installments, and also for certain real estate in Kansas City, Mo., known as the "Ramsey flats," upon which there was a mortgage. It is argued that the transfer of the entire assets and good-will of the corporation would disable it from continuing the business for which it was organized, and that the attempt to do so is ultra vires, and void. It is also contended that the acceptance of real property in consideration of the transfer, as well as the holding of the same, are not within the purposes for which the mercantile company was organized. Our statute, which is only declaratory of the common law, provides that a corporation shall not employ its stock, means, assets or other property for any other purpose than to carry out the objects for which it was created. (Gen. Stat. 1899, § 1243; Gen. Stat. 1897, ch. 66, § 23.) The mercantile company was organized for the purpose of buying and selling merchandise at retail, but that does not preclude the company from disposing of its property and closing out its business, if it be done in good faith and not for the purpose of delaying or defrauding its creditors. (The State, ex rel., v. Irrigating Co., 40 Kan. 96, 19 P. 349.)

Counsel cite a number of cases to the effect that a corporation cannot abdicate its corporate functions or relieve itself from carrying out the object of its creation by a transfer of its entire property, or by otherwise disabling itself from performing corporate duties. The doctrine of these cases is applicable to corporations established for quasi-public purposes, such as railroads and other companies having the right of eminent domain and other extraordinary privileges, but it has no application to corporations of a strictly private character, like the one in question. (H. & G. M. Co. v. H. & W. M. Co. et al., 127 N.Y. 252, 27 N.E. 831; Treadwell and another v. Salisbury Manufacturing Company and others, 7 Gray 393; Howe v. Boston Carpet Co., 16 Gray 493; Alexander Hodges v. New England Screw Company et al., 1 R.I. 312; Evans v. Boston Heating Co., 157 Mass. 37, 31 N.E. 698 27 A. & E. Encycl. of L. 387.)

The mercantile company exercised no powers of a public nature and a sale of its property and a retirement from business did not contravene public policy or affect the public in any way. It does not appear that the mercantile company obtained the real estate with a view of carrying on a real-estate business, but, on the other hand, that the mercantile business was unprofitable and the stockholders desired to wind up the affairs of the company by a sale and transfer of the business, and the real estate was taken in part payment and as a step in the closing up of the corporate business. It appears to have been done in good faith, with the consent of the stockholders, and we see no reason why a mere trading corporation, like this one, may not close up its business in the manner pursued in this instance. The money consideration of the sale was used in paying creditors of the corporation other than those now contesting; but it has been held that a corporation has the same dominion and control over the disposition of its assets and property as a partnership or an individual,...