Morton v. Lovell Bldg. Co., 1683
| Decision Date | 31 March 1931 |
| Docket Number | 1683 |
| Citation | 297 P. 799,43 Wyo. 81 |
| Parties | MORTON v. LOVELL BLDG. CO. (RIES, et al., Interveners) |
| Court | Wyoming Supreme Court |
APPEAL from District Court, Big Horn County; P. W. METZ, Judge.
Suit by S.E. Morton against Lovell Building Company, wherein H. J Ries and another intervened. Decree for plaintiff and interveners appeal.
Affirmed.
For the interveners and appellants there was a brief by E. J Goppert, of Cody, Wyoming, and L. S. Strahan, pro se, of Lovell, Wyoming, and oral argument by Mr. Strahan.
The mortgage and note was not authorized by the directors acting collectively. One director knew nothing about it until a long time afterwards. The mortgage and note are involved. 7 R. C. L. 439, 14a C. J. 84, 3 Fletcher Corps., Sec. 1854; Re Butler & Co., 207 F. 705; Baldwin v. Canfield, 26 Minn. 43 7 R. C. L. 441. The directors were without power to mortgage the premises. 7 R. C. L. 576, 577. T. E. Walls & Co. v. Sharp, 208 F. 393; Trent v. Sherlock, (Mont.) 61 P. 650; (Mont.) 66 P. 700; 3 Pomeroy's Eq. Jr. Sec. 1090. No consideration passed to the company for the execution of this note and mortgage, which was shown to be accommodation paper. 7 R. C. L. 576. The mortgage included all property owned by the company, and was in effect a sale of its assets without consideration, which was unlawful. People v. Ballard, (N. Y.) 32 N.E. 54. Strahan succeeded to all the rights of Ries as a stockholder. Rolitz v. Gould, (N. Y.) 94 N.E. 1088. The consent of all stockholders is necessary before directors of a corporation can dispose of its property. 3 Thompson Corp., Sec. 2420. The majority of stockholders cannot sell out the property of a corporation as against dissenting stockholders. Thompson, supra. Directors have no power of dissolution. 2 Thompson 1189. Directors must act as a board at an official meeting. 2 Thompson 1071-1073. Elyton Co. v. Dowdell, 113 Ala. 177; Phillips v. Providence, 21 R. I. 302; Theis v. Spokane Falls Co., 34 Wash. 33.
For the plaintiff and respondent there was a brief by Hagens & Murane, of Casper, Wyoming, and oral argument by Mr. Hagens.
The corporation had power to engage in the real estate investment business and do all acts necessary in carrying on said business. It had implied power to borrow money. 14a C. J. 548, and to give security therefor. 3 Fletcher Cyc. Corp. 2235. The mortgage recited that it was executed pursuant to authority and the presumption obtains that it was authorized until the contrary was shown. 3 Fletcher's Corp. 3077, 14a C. J. 396. This is particularly true where the corporation deals with innocent third persons. 14a C. J. 462. Ashley Co. v. Ill. Co., (Ill.) 45 N.E. 410; Kuser v. Wright, (N. J.) 31 A. 397, 7 R. C. L. 668; Mills v. Mining Co., (Calif.) 64 P. 122, 104 P. 470. Plaintiff is the holder in due course. 3985 C. S., and may enforce payment. 3990 C. S. Every holder is deemed prima facie to be a holder in due course. 3992 C. S.; 8 C. J. 508; Coyne v. Anderson, (Ky.) 73 S.W. 753; Beattyville Bank v. Roberts, (Ky.) 78 S.W. 901; Poole v. Gates, (Kans.) 225 P. 1069. A corporation cannot violate its charter for gain and invoke defense of ultra vires. 7 R. C. L. 678, 679; 14a C. J. 583; Wrightsville Co. v. McElroy, (Pa.) 98 A. 1053, 3 Fletcher's Corp. 1269; Iron Co. v. Paulle, (Minn.) 156 N.W. 268; Dexter v. Long, (Wash.) 27 P. 271, 14a C. J. 368, 370, 387, 389, 3 Fletcher's Cyc. 3081; Kuser v. Wright, (N. J.) 31 A. 397; Frank v. Hicks, 4 Wyo. 502; Bank v. Haun, 30 Wyo. 322; Collins v. Co., 203 F. 726. Strahan intervener at most is a creditor of a stockholder without right to intervene in this suit. 27 Cyc. 1580. Louisville Tr. Co. v. Rwy. Co., 84 F. 539; Glass v. Woodman, 223 F. 621; Thompson v. Co. , 30 P. 741; McHenry v. New York Co., 22 F. 130.
E. J. Goppert and L. S. Strahan, supplemental brief.
A subsequent holder even for a valuable consideration without notice has no higher right than a prior holder equally innocent with an equal meritorious ownership. 2 Pomeroy's Eq. 735; Scott v. Bankers Union, (Kans.) 85 P. 604. The charter of a corporation is the measure of its power. Head v. Ins. Co., 2 Cranch 127; Ins. Co. v. Ely, 5 Conn. 560. The consideration for this mortgage was a preexisting or antecedent debt, and purchaser was not an innocent holder for value. R. R. Co. v. Bank, 102 U.S. 14; Milton v. Boyd, 49 N. J. 142.
Hagens & Murane's answer brief of plaintiff and respondent to intervener's supplemental brief.
In citing National Association v. Bank, 72 A. S. R. 245, counsel failed to quote that part of the decision which answers the problem in this case, to the effect that the doctrine of ultra vires has never been carried to the extent, of requiring one, who honestly lends money to a corporation authorized to borrow it, to see that it is not applied to another use. When plaintiff took the note and mortgage here involved, she might have sued on the old $ 20,000.00 note which she acquired in good faith before maturity and which was then past due. Also, she was not required to pay the $ 15,000.00 mortgage due to the Dickermans. In consideration of the Lovell Building Company, agreeing to give her a new note and mortgage due at a later time, she did extend the time of payment on the $ 20,000.00 note. She also got the sum of $ 15,000.00 to relieve the Lovell Building Company of its debt, which no one has denied. This made her a purchaser for value. 27 Cyc. 1191. Plaintiff made a contemporaneous loan, and extended the time of the $ 20,000.00 loan which was a consideration sufficient to support the mortgage. Pomeroy's Eq. (4th) 1535. The measure of relief that could be granted to intervener's is that which could be granted to the company, no more, no less. Collins v. Copper Co., 203 F. 706.
This is a suit to foreclose a real estate mortgage and to recover a deficiency judgment upon the indebtedness claimed to have been secured thereby. Plaintiff, S.E. Morton, obtained a decree in her favor below, against the defendant Lovell Building Company and interveners H. J. Ries and L. S. Strahan. The interveners only, bring the record here by direct appeal for review.
The facts are very little, if at all, in dispute, and, so far as material to the disposition of the case in this court, are substantially as follows:
On or about the 12th day of June, 1916, the Lovell Building Company, hereinafter generally referred to as the "Building Company," was incorporated under the law of this state. It had a capital stock of $ 40,000, which was divided into 400 shares of the par value of $ 100 each. W. B. Snyder and J. M. Snyder of Lovell, Wyoming, each held 120 shares of this stock and the remainder, or 160 shares, was owned by H. J. Ries of Billings, Montana. The object of the company was, as expressed in its certificate of incorporation, "to carry on, conduct and engage in a general real estate investment business, and as incident to such business hold and acquire real estate and personal property and to carry on such transactions and do and perform all acts necessary and incident to the proper carrying on and conducting of said business." The directors of the corporation were three in number, and the stockholders already mentioned were selected to serve in that capacity for the first year of the corporation's existence and apparently until the commencement of this action, on July 5, 1928, remained the same. At the inception of its corporate existence, H. J. Ries became the Building Company's president, holding that position until 1925 or 1926, when W. B. Snyder, who had previous to that time been its vice president, took the office. J. M. Snyder has always been its secretary and treasurer. W. B. Snyder had charge of the active management of the company affairs, at least since 1920 and 1921, and he and his brother J. M. Snyder, as secretary, then customarily signed the Building Company's papers where loans were negotiated for it.
On or about October 24, 1917, Mr. Ries, the president of the company, with the concurrence of the Snyders, negotiated a loan of $ 15,000.00 to the Building Company by Dickerman Brothers of Duluth, Minnesota. This was evidenced by a note for that sum, secured by a first mortgage upon the corporation's real estate property. Ries, in like manner and about the same time, also arranged for a loan to the Building Company by the Montana National Bank for the sum of $ 10,000. This loan was represented by a note for that amount and a second mortgage on the property aforesaid. Subsequently this second mortgage loan was paid off.
From the years 1920-1921 until a comparatively short time before the trial of this action, Ries ceased to be active in or at all concerned with the affairs of the Building Company. Since those years he never attended any corporate meetings of either the stockholders or directors of the company and no notice of such meetings was ever given him. He never came to the Snyders or to the office of the company at all for the purpose of inquiring about the business of the company. In all that time he never even wrote to them to learn of the condition of the corporation; never asked for a statement regarding its matters or took any interest whatsoever in it. As Mr. W. B. Snyder testified: He lived in Billings, "until his banks failed and then he was worse than broke, and he went to Oregon." He seems to have negotiated a personal loan for $ 5800--just when the record does not show--with the First National Bank of Cheyenne, Wyoming, and to have given his note for that amount with his aforesaid 160 shares of stock as security. This note appears never to have been paid.
W. B Snyder and his...
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