Pyles v. Riverside Furniture Co.

• Decision Date: 29 June 1887
• Citation: 2 S.E. 909,30 W.Va. 123
• Parties: PYLES v. RIVERSIDE FURNITURE CO. and others.
• Court: West Virginia Supreme Court

2 S.E. 909

30 W.Va. 123

PYLES v. RIVERSIDE FURNITURE CO. and others.

Supreme Court of Appeals of West Virginia.

June 29, 1887

Submitted June 2, 1887.

Syllabus by the Court.

A bill will not be held multifarious by reason of an improper charge, which charge itself does not set up an independent cause of action.

A general charge of fraud in a bill will not be sufficient to put the defendant to his answer. The facts which it is alleged constitute the fraud must be set out, and they must if true, make out the charge. ^[1]

An insolvent corporation, having ceased to do business, has the same power as an insolvent individual to prefer a creditor in a general assignment of all its property for the payment of its debts. ^[2]

Where there was a decision in Virginia, 17 years before the formation of this state, holding that an insolvent corporation having ceased to do business, could prefer creditors, and at the time of such decision a statute was in existence in Virginia, but not applicable to the case decided, which denied to a mining or manufacturing corporation the right to make any incumbrance preferring a creditor, and such statute continued until 1863, after the formation of this state, when it was repealed by implication, and there has been no statute in force in this state for 24 years denying such right to a corporation, the law, as thus settled in Virginia, is the law of this state, and it cannot be changed except by the legislature. The decision thus rendered has become a rule governing property, and it is not in the power of the court to change it.

There is nothing in the policy of our statutes that forbids an insolvent corporation to prefer creditors. ^[1]

Where the whole scheme of a bill is to set aside trust deeds executed by a corporation on grounds not recognized in law and to distribute the proceeds of the property among the creditors pro rata, and there is also a charge in the bill that the trustees have unreasonably delayed executing the trusts, and the property is waiting, and no charge that plaintiff ever demanded a sale of the property and the bill alleging the property will not pay the several creditors under the trust, this charge, under the circumstances, is not sufficient to justify taking the property out of the hands of the trustees, and putting it into the hands of a receiver.

Appeal from circuit court, Ohio county.

Ewing Melvin & Riley, for appellant.

W. P Hubbard and A. J. Clarke, for appellees.

JOHNSON, P.

On the twenty-seventh day of February, 1885, the plaintiff instituted his suit in chancery in the circuit court of Ohio county, against the defendants to set aside three several deeds of trust executed by the defendant the Riverside Furniture Company, to secure certain of its creditors, the last of which was a general assignment of all its property for the benefit of all its creditors, but preferring certain creditors. The further object of the bill was to have a receiver appointed, and the property of the corporation sold, and the proceeds distributed among its creditors, ratably. The bill was filed at the March rules, 1885, and is as follows:

"IN THE CIRCUIT COURT OF OHIO Co.

" Jacob B. Pyles vs. Riverside Furniture Company, S. C. Eschstruth, August Gelhring, George Brackman, Henry Wohlert, George Shellhase, Henry Tauple, Albert Metzner, Henry Kilmer, A. C. Sauer, J. P. Heinlein, John Freiber, C. Weilman, William Detering, Louis Wheeler, Philip Veith, Adam Stahl, the Commercial Bank of Wheeling, Heinrich Schrader, Louis Gagner, Catherine Zimmer, Catherine Wheeler, August Rockeband, Henry Bade, J. T. Merschrod, Joseph Wilson, the German Bank of Wheeling, G. Thoenen, the Exchange Bank of Wheeling, George Brakman, the Bank of Wheeling, C. P. Brown, Administrator of the Estate of Philip Metzner, James Wheeler, Trustee, and S. P. Hildreth, Trustee.

"BILL IN CHANCERY.

" To the Honorable, the Judge of the Circuit Court of Ohio County: Humbly complaining, Jacob B. Pyles brings this suit in his own behalf, and in behalf of all others, the creditors of the Riverside Furniture Company, who may contribute to the costs of and aid in prosecuting the same against the de fendants above set out and named, and complains and says and charges in his bill of complaint that the Riverside Furniture Company is a corporation, created and existing under the laws of the state of West Virginia, having its principal place of business at the city of Wheeling, in Ohio county, in said state; that its certificate of incorporation is dated on the twelfth day of December, 1881, and is printed, pursuant to law, in the Acts of the Legislature of 1881, on pages two hundred and sixty-four and two hundred and sixty-five; that the said corporation was formed for the purpose of manufacturing and dealing in furniture of all kinds, and such articles as enter into its manufacture, and of dealing in such patents as were then, or might be thereafter, issued for any machinery for making such furniture, for the purpose of purchasing and selling (after such purchase) such timber as may be necessary for the purpose of carrying on the proposed business; that the said corporation organized and carried on business until about the beginning of the year 1884, since which time complainant is informed and believes, and charges the fact to be, that the said corporation has done no business or transacted any affairs contemplated by the objects set forth in their certificate of incorporation; that the last board of directors for said corporation elected by the stockholders were Philip Metzner, (now deceased,) S. C. Eschstruth, August Gehring, George Brackman, and Henry Wohlert--the four last named being still directors; that in January, 1882, Philip Metzner, as president, and William Detering, as secretary, and S. P. Hildreth, as trustee, executed a deed purporting to have been authorized by the board of directors of said corporation, conveying to said Hildreth lots numbered 18, 19, 20, and 21, situated on the east side of Water street, in the Fifth ward of the city of Wheeling in the addition to said city laid off by John Eoff and William Chapline. Said deed purports on its face to be in trust to secure the holder or holders thereof the payment of sixty bonds of the amount and denomination of five hundred dollars each, issued by the said corporation, all bearing date the first day of February, 1882, and payable to S. P. Hildreth, trustee, or bearer, on the first day of February, 1897, with interest at the rate of six per cent. per annum until maturity, payable semi-annually. An authenticated copy of said deed of trust is marked 'A,' herewith filed, and prayed to be taken as a part of this bill, and to be read therewith.

"Your orator here charges that this is fraudulent and void as to his judgment and lien hereinafter stated, and as to other creditors of said company; that said deed was not made for any corporate purpose specified in the certificate creating said corporation; that the bonds thereby secured to be paid were not lawful debts incurred by the corporation, or authorized by law, or the certificate of incorporation of said company; that they were not issued for any lawful purpose authorized by law; that the powers of said corporation were and are limited, by the second section of chapter fifty-two of the Code of West Virginia, to the purpose for which it was incorporated, and it had no right to engage in borrowing money, and giving its bonds, in the manner set out in said deed; that the issuing of said bonds was a manifest evasion of the statute requiring the stock of the company to be sold at not less than par; that no adequate consideration was ever received by the company for these bonds; that its means have been misapplied in the payment of interest on and in negotiating them; that said corporation again, on the eleventh day of August, 1882, made another deed of trust to S. P. Hildreth, trustee, to secure the payment of a note therein described as being a note for money loaned. This trust covered certain lumber therein described. An authentic copy of this last deed is marked 'B,' herewith filed, and prayed to be taken as part of this bill of complaint. Your orator avers that this last-named deed is unauthorized and fraudulent and void as to the claim of your orator hereinafter named.

"Your orator further shows that the Commercial Bank of the city of Wheeling is a corporation existing under the laws of this state, and has been in existence and carried on business ever since the incorporation of the Riverside Furniture Company; that, during all this time, the said S. P. Hildreth has been its agent and cashier, and has at all times known of the debts claimed and deeds of trust hereinbefore referred to, and he and his bank knew well that the indebtedness of the Riverside Furniture Company could not be paid out of the property included in these deeds of trust, and that they carried all the assets of value belonging to the company; that your orator was, for at least ten years past, a customer of this bank, doing business in it, and implicitly relying on the statements of its cashier, the said Hildreth; that your orator was and is a county merchant and dealer in lumber; that on or near the ___ day of ___, 1883, the Riverside Furniture Company applied to your orator, and desired to buy lumber on credit; that thereupon your orator applied at said Commercial Bank for information concerning the financial standing, ability, and credit of the said Riverside Furniture Company, and was informed by said S. P. Hildreth, its agent and cashier, that the said Riverside Furniture Company was in good credit, solvent, and secure. Relying on this statement, several times afterwards repeated, your orator was induced

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