National Wall Paper Company v. Columbia National Bank

• Decision Date: 18 December 1901
• Docket Number: 9,523
• Citation: 88 N.W. 481,63 Neb. 234
• Parties: NATIONAL WALL PAPER COMPANY ET AL. APPELLANTS, v. COLUMBIA NATIONAL BANK ET AL. APPELLEES
• Court: Nebraska Supreme Court

88 N.W. 481

63 Neb. 234

NATIONAL WALL PAPER COMPANY ET AL. APPELLANTS, v. COLUMBIA NATIONAL BANK ET AL. APPELLEES

No. 9,523

Supreme Court of Nebraska

December 18, 1901

APPEAL from the district court for Lancaster county. Heard below before HALL, J. Reversed.

REVERSED AND REMANDED.

Abbott Selleck & Lane, Ricketts & Wilson, Frank H. Woods, Mockett & Polk, C. S. Rainbolt, Fred K. Shepherd and John S. Bishop for appellants.

E. E Brown, R. D. Stearns, W. Q. Bell and Halleck F. Rose, contra.

OPINION

NORVAL, C. J.

The Clason & Fletcher Company, a corporation engaged in the mercantile business in the city of Lincoln, became indebted to various creditors, including the Columbia National Bank of Lincoln, to which institution the Clason & Fletcher Company owed over $ 10,000 on promissory notes given by it as principal, and executed by the officers and directors as sureties. On November 16, 1893, the corporation was insolvent; and on said day, by its officers, it executed a bill of sale to said bank, covering all its stock of goods and practically all its assets, and delivered immediate possession thereof to the bank. At the time there were numerous creditors of the insolvent corporation. The bill of sale was made to give the bank a preference, and resulted in the exclusion of other creditors of said Clason & Fletcher Company from sharing in the assets or the proceeds thereof. This suit was brought by the National Wall Paper Company, a creditor of the insolvent corporation, against Clason & Fletcher Company, the bank, and one Burlingim, to have declared fraudulent and void the said bill of sale, and that the bank and Burlingim be required to account for the value of the property described therein. Various other creditors of Clason & Fletcher Company intervened, praying for like relief as did the plaintiff. The district court held that the preference given to the bank was valid, sustained the bill of sale, and entered a decree against plaintiff and the interveners, from which this appeal is prosecuted.

It is insisted at the outset that this appeal is of no avail, because no bill of exceptions is contained in the record before us. This objection is untenable. All suits in equity are appealable to the supreme court. Code of Civil Procedure, sec. 675. The transcript for this court should contain only so much of the record as is essential to a correct understanding of the points involved. Moores v. State, 54 Neb. 486, 74 N.W. 823. It must include the decree sought to be reviewed. Bohman v. Chase, 58 Neb. 712, 79 N.W. 707. But it is not essential to jurisdiction that it should contain the bill of exceptions. Schuyler v. Hanna, 28 Neb. 601, 44 N.W. 731; Arnold v. Baker, 6 Neb. 134; Hines v. Cochran, 35 Neb. 828, 53 N.W. 1118.

The record before us raises the right of an insolvent corporation to prefer a creditor on a debt which the officers and directors were liable as sureties. This court has frequently considered the power of a corporation to prefer creditors and it is claimed that there is a want of harmony in our decisions upon the subject. An examination of the cases convinces us that the contention is not well founded, although there are expressions in some of the opinions that are somewhat misleading. In our view, the question now before us has been previously passed upon by this court by an unbroken line of decisions to the effect that an insolvent corporation may not give preference to a debt on which an officer or director of the corporation is liable as surety. A brief reference to the cases at this time is pertinent. In Ingwersen v. Edgecombe, 42 Neb. 740, 60 N.W. 1032, it is disclosed that the Farmers' & Drovers' Bank of Battle Creek, an insolvent corporation, executed a mortgage to one Teidgen, its vice president, to secure an indebtedness of the bank to him. The court, through POST, J. in the course of the opinion, observed: "The vital question in this record is the character of the relation which the directors and managing officers of an insolvent corporation bears toward its creditors. That such officers are not trustees in the technical sense of the term is apparent, and yet it is well settled, both by authority and on principle, that they are within the rule which guards and regulates dealings between trustee and cestui que trust. But the application of that rule has resulted in a diversity of opinion. It is maintained by some courts that, unless prevented by charter or the operation of statute in the nature of bankrupt laws, insolvent corporations possess the same power to make preference among their creditors as natural persons. But the view which may be said to rest upon the soundest reasons and is sanctioned by the decided weight of authority is that, when a corporation becomes insolvent, its property and assets constitute a trust fund for the benefit of its creditors, and that the directors and officers in possession thereof, being trustees for all the creditors, can not take advantage of their position to secure a preference for themselves, but must share ratably with the other creditors." The writer of that opinion cites numerous authorities to sustain the doctrine laid down. In Tillson v. Downing, 45 Neb. 549, 63 N.W. 836, the holding of the court is stated in the syllabus thus: "(1.) Directors of an insolvent corporation can not take advantage of their position to obtain a preference of debts owing by the corporation to themselves. Ingwersen v. Edgecombe, 42 Neb. 740, 60 N.W. 1032, followed. (2.) Neither can they prefer debts to third persons for which they are obligated as sureties. (3.) These rules do not apply to a solvent corporation. On the contrary, such corporations have the same dominion over their property as individuals." These two cases were cited with...