Pender v. Speight

• Citation: 159 N.C. 612,75 S.E. 851
• Parties: PENDER . v. SPEIGHT et al.
• Decision Date: 25 September 1912
• Court: United States State Supreme Court of North Carolina

75 S.E. 851

(159 N.C. 612)

PENDER .

v.SPEIGHT et al.

Supreme Court of North Carolina.

Sept. 25, 1912.

1. Corporations (§ 542^*)—Sales of Mercantile Stock.

Regardless of the Bulk Sales' Law (Pub. Acts 1907, c. 623), a sale of an insolvent mercantile corporation's stock to one of the directors for 60 per cent, of its actual value is void as in fraud of creditors.

[Ed. Note.—For other cases, see Corporations, Cent. Dig. §§ 2154-2160; Dec Dig. § 542.*]

2. Corporations (§ 307*)—Directors—Trust Relation.

Directors of a corporation are trustees of its property for the benefit of the corporate creditors as well as shareholders; it being their duty to administer the trust for the benefit of all parties interested.

[Ed. Note.—For other cases, see Corporations, Cent. Dig. §§ 1350, 1351; Dec. Dig. § 307.*]

3. Corporations (§, 547*) — Directors — Knowledge of Corporate Matters.

Since the directors of a corporation are presumed to know its financial condition, it is not necessary, in order to defeat a conveyance of an insolvent corporation's property to one of its directors at less than actual value, to show that they knew of such insolvency.

[Ed. Note.—For other cases, see Corporations, Cent. Dig. §§ 2178-2181; Dec. Dig. § 547.*]

4. Corporations (§ 542*) — Insolvency — Right to Buy Own Stock.

An insolvent corporation cannot buy its own stock, and, if it becomes insolvent after such purchase, the stockholder is liable to the corporate creditors for the purchase money received by him; the corporation not being empowered to retire stock until it has first discharged all of its liabilities, and an agreement looking to such retirement being void as to creditors.

[Ed. Note.—For other cases, see Corporations, Cent. Dig. §§ 2154-2160; Dec. Dig. § 542.*]

Appeal from Superior Court, Edgecombe County; Carter, Judge.

Action by James Pender, receiver of the Edgecombe Hardware Company, against W. L. Speight and others. Judgment for plaintiff, and defendants appeal. Affirmed.

The plaintiff moved for judgment upon the admissions in the pleadings. The court gave judgment that the plaintiff recover of the defendants Speight and Murdock all the stock of goods, etc., described in the complaint, and further that the plaintiff recover of the defendant Murdock the sum of one thousand dollars ($1,000) with interest from January 9th, 1912, and that the cause be retained for further orders. The defendant appealed.

G. M. T. Fountain & Son, of Tarboro, for appellants.

W. O. Howard, H. A. Gilliam, and J. M. Norfleet, all of Tarboro, for appellee.

BROWN, J. It appears from the admissions in the complaint and answer that the Edgecombe Hardware Company was a corporation with a capital stock of $6,000; that the defendant Speight was the president, Riddick the vice president, and Murdock secretary, and all were directors; that on January 9, 1912, the said corporation was insolvent; that on the 27th of March, 1912, the next and last meeting of the directors the entire stock of goods, furniture, and fixtures and all the property of the corporation were sold to the defendant Murdock for $4,144.70, purporting to be 60 per cent, of their actual value, and this was done by resolution of the directors; the said Murdock being present and participating. It further appears that the said directors passed a resolution on January 9, 1912, to retire a portion of the capital stock of this insolvent corporation, and, in pursuance thereof, the defendant Speight surrendered 10 shares of the capital stock standing in the name of Ethel Speight, and credited his account with $1,000, he then owing the Hardware Company $1,161; that F. G. Davis on said date surrendered 5 shares of the capital stock held by him, and caused the account of F. G. Davis and wife, Addie, which amounted to over $600, to be credited with the sum of $317.63; and that on said date the defendant Murdock surrendered 10 shares of the capital stock held by him, and received therefor $1,000. These are the salient facts admitted in the pleadings.

We will first consider the judgment of the court for the recovery of the stock of goods. It is not pretended that the defendants made any pretense to comply with the provisions of chapter 623, Acts of 1907, entitled "An act to prohibit the sale of merchandise in bulk in fraud of creditors." The learned counsel for the defendant argued with much earnestness that the said act was unconstitutional and void as an unwarranted limitation of the right to sell and dispose ofproperty. We think this point has been decided adversely to him by the Supreme Court of the United States in Lemieux v. Young, 211 U. S. 489, 29 Sup. Ct. 174, 53 L. Ed. 295, in which a statute very similar to ours was upheld. The states of Mississippi, Michigan, Washington, Indiana, and Nebraska have statutes similar to ours which have been sustained by the highest courts of these states. But it is not necessary to consider the statute in this case. The conduct of the defendants was such as to render the sale to one of the directors of the company absolutely void under the general principles of law. In this case the bargainer and the bargainee were officers and...