Mushrush v. Downing

• Decision Date: 24 February 1930
• Docket Number: 163
• Parties: MUSHRUSH v. DOWNING
• Court: Arkansas Supreme Court

24 S.W.2d 972

181 Ark. 85

MUSHRUSH v. DOWNING

No. 163

Supreme Court of Arkansas

February 24, 1930

Appeal from Poinsett Chancery Court; J. M. Futrell, Chancellor affirmed.

Decree affirmed.

Maddox & Greer, for appellants.

Horace Sloan, for appellees.

OPINION

SMITH J.

A. H Vieth recovered a judgment against the Mushrush Lumber Company, a corporation organized under the laws of the State of Illinois, in this court on February 16, 1925 (167 Ark 669, 269 S.W. 44), which was duly assigned on March 31, 1927, to W. P. Downing, and a certified copy of the judgment, with the assignment thereof, was later filed in the office of the clerk of the circuit court of Poinsett County, in which county the corporation owned certain real estate. Downing later assigned a half interest in the judgment to Jess Brown.

The corporation was organized under the laws of Illinois on January 6, 1913, and on March 14, 1914, was authorized to do business in this State by filing a certified copy of its articles of incorporation and designating an agent upon whom process might be served. For the nonpayment of its franchise tax to the State of Illinois the Secretary of State certified the corporation to the Attorney General of that State for dissolution, but no action was taken by the Attorney General to forfeit the charter of the corporation. On April 25, 1923, the Governor of this State, acting under act 158 of the Acts of 1923, page 132, declared the corporation to have forfeited its authority to transact further business in this State on account of the nonpayment of the Arkansas franchise tax. The principal, but not the only, stockholders of the corporation were Mark Mushrush, who died intestate June 19, 1926, survived by his widow and several children, and W. M. Pepple, who died testate April 11, 1926, and whose estate was devised to his widow.

On February 3, 1927, Asa Mushrush filed suit in the chancery court of Poinsett County against the widow and heirs of Mark Mushrush, in which he alleged that Mark Mushrush had become indebted to him in a sum evidenced by two notes, to secure the payment of which a mortgage was given on certain lots in the town of Weiner, in Poinsett County, and it was prayed that this mortgage be foreclosed, as the notes had not been paid. These are the lots to which the corporation had the record title.

On April 26, 1927, another suit was filed in the chancery court of Poinsett County by W. P. Downing and A. H. Vieth, for the use of W. P. Downing, against the Mushrush Lumber Company, the widow and heirs of Mark Mushrush, the widow of W. M. Pepple, Jesse S. 22 Baker, a stockholder in the corporation, and Asa Mushrush, which contained the following, among other, allegations: The facts herein stated were alleged, and it was further alleged that the lots in the town of Weiner, mortgaged to Asa Mushrush by Mark Mushrush, were not the property of Mark Mushrush, but were the property of the Mushrush Lumber Company, and were subject primarily to the payment of its corporate debts. It was prayed that the real estate in the county be declared to be subject to the lien of the plaintiff's judgment, and that the mortgage from Mark Mushrush to Asa Mushrush be canceled. Brown was later made a party to this proceeding.

These cases were consolidated and tried together, and the decree of the court below, from which this appeal comes, canceled the mortgage from Mark Mushrush to Asa Mushrush, and the correctness of this action is the question in the case.

Testimony was offered on behalf of Asa Mushrush to the effect that the assets of the corporation were divided between Mark Mushrush and Pepple, who were the principal stockholders, and that Mark Mushrush took the Arkansas assets of the corporation, while those in Illinois were given to Pepple. No deed was produced from the corporation to Mark Mushrush, and no competent or sufficient testimony was offered to prove that one had ever been made; in fact, the testimony to the effect that such a deed had been executed consisted principally in the proof of declarations of Mark Mushrush, that he owned all the Arkansas property which had once belonged to the corporation, and that he acquired this title by the division of the corporate assets between himself and Pepple, who, together, had acquired and owned all the stock of the corporation.

It is the insistence of Asa Mushrush, who was never at any time a stockholder in the corporation, that his mortgage from Mark Mushrush is valid and superior to the judgment lien, and, further, that Brown could not and did not acquire any interest in the judgment lien, for the reason that, at the time when he claimed to have done so, he was in possession of the Weiner property as the tenant of Mark Mushrush, and, as a tenant, he could not purchase a lien on the demised premises and claim thereunder before a surrender of the possession to his landlord, which he had not done.

It appears that Brown took possession under a written lease executed in the name of the corporation, but Asa Mushrush testified that Brown told him that he took the lease from Mark Mushrush, but had it changed in the name of the corporation, because the record title to the property was in the corporation.

A number of interesting questions are raised in the briefs of opposing counsel, but we find it unnecessary to consider many of them to dispose of this appeal.

Under the laws of Illinois, the cancellation of a corporate charter by the Secretary of State does not dissolve the corporation but it is a mere declaration of that fact as a preliminary administrative act upon which a dissolution suit can be based. People v. Rose, 207 Ill. 352, 69 N.E. 762; 8 Fletcher, Cyclopedia Corporations, § 5445, p. 9060; 4 Harker's Illinois Statutes Annotated (1919), §§ 118-123, p. 4542 and 4543. But it also appears that under the laws of that State the corporate existence is continued, even after dissolution, for the purpose of enforcing corporate liability. 4 Harker's ...