R. S. Corson Co. v. Hartman

• Decision Date: 24 November 1959
• Docket Number: No. 11065,11065
• Citation: 111 S.E.2d 346,144 W.Va. 790
• Court: West Virginia Supreme Court
• Parties: R. S. CORSON COMPANY, Inc., a Corporation, v. Raymond HARTMAN and Robert Landin.

Page 346

111 S.E.2d 346

144 W.Va. 790

R. S. CORSON COMPANY, Inc., a Corporation, v. Raymond HARTMAN and Robert Landin.

No. 11065.

Supreme Court of Appeals of West Virginia.

Submitted Sept. 29, 1959.

Decided Nov. 24, 1959.

Syllabus by the Court.

1. A transaction whereby a corporation makes a loan authorized by its board of directors, where all of the stockholders consent to the transaction, is not void for the reason that the directors had an interest in the transaction other than as stockholders in the corporation.

2. A stockholder in a corporation is not precluded from voting on a matter affecting interests of the corporation for the reason that his personal interests conflict with the interests of the corporation.

3. In a proceeding wherein a transaction is alleged to be fraudulent, and fraud is denied, and the finding of the trial court is not clearly wrong or against the plain preponderance of the evidence, the finding will not be disturbed on appeal.

4. Where the lien of an execution has attached to personal property of a judgment debtor, by virtue of Code, 38-4-8, the lien survives the return of the execution unsatisfied.

5. Where the lien of an execution attaches to personal property of a judgment debtor not capable of being levied on, not capable of manual seizure, possession or delivery, and no debt is due or owing from the suggestee defendant, a proceeding on suggestion is not available as an aid in the collection of the execution.

Farmer & Farmer, Geo. R. Farmer, Morgantown, for plaintiff in error.

Milford L. Gibson, Elkins, Neil A. Reed, Kingwood, for defendants in error.

GIVEN, President.

This is a review of a proceeding on suggestion. The summons on suggestion was issued in aid of the collection of an execution issued on a judgment rendered April 10, 1958, in favor of R. S. Corson Company, Inc., a corporation, herein designated Corson, against White Appliance Company, a corporation, for $4,342.86, in the Circuit Court of Preston County. The defendants named in the suggestion, Raymond Hartman and Robert Landin, answered, alleging that they were not indebted, and were not liable in any sum, to the judgment debtor, and that they had no personal property of the judgment debtor in their possession or under their control. Corson then suggested that defendants had not fully disclosed their liabilities, and, the parties having waived a jury, the issue raised was tried by the court, without a jury, pursuant to provisions of Code, 38-5-18. The trial court found in favor of defendants and dismissed the proceeding. A writ of error was granted Corson.

Corson held a contract for the construction of an addition to the Monongalia General Hospital, at Morgantown. White Appliance Company, on May 24, 1956, was awarded a subcontract by Corson, whereby the subcontractor agreed to complete the plumbing, heating, ventilating and air conditioning required by the principal contract, for which it was to receive $86,055. Payment was to be made by Corson to the subcontractor as the work progressed, but Corson was to retain, and did retain, ten per cent of the subcontract price, as security for the performance of the subcontract. White Appliance Company defaulted in its performance and Corson, after completing the work to have been performed by the subcontractor, and after having applied the balance owing the subcontractor, including the ten per cent withheld, to the discharge of the indebtedness chargeable to the subcontractor, obtained the judgment sought to be enforced by the execution and suggestion.

All of the outstanding capital stock of the White Appliance Company, one hundred shares of the par value of one hundred dollars per share, was owned, in equal proportions, by Cecil O. White, Raymond Hartman, Robert Landin and Carl Hilldale. White was president and general manager of the corporation. Landin was its vice president, and Hartman was its secretary-treasurer. The four stockholders constituted its board of directors. White was the only officer receiving any compensation from the corporation.

On March 16, 1957, at a meeting of the board of directors, a motion was made, seconded and carried unanimously, whereby the corporation was authorized to lend to Cecil O. White the sum of $9,000, for the sole purpose of purchasing the entire stock owned by the other three stockholders, Hartman, Landin and Hilldale. The transaction was consummated by the delivery of a check of the corporation to White, endorsement of the check by White to Hartman, who accounted to Landin and Hilldale for their proportionate parts thereof, $3,000 each, and by assignment and delivery of the stock certificates to White. White agreed to execute to the White Appliance Company his promissory note for the $9,000 loan, which was not done, but the account books of the corporation reflected the indebtedness owing the corporation from White. The amount received through the transaction by each of the three stockholders who transferred their stock represented approximately the original cost of the stock, plus legal interest.

The minutes of the meeting of March 16, 1957, disclosed that 'All of the outstanding stock in the Corporation was also represented in person'; that 'each of said stockholders agreed to sell their stock to the said Cecil O. White for said sum'; that the 'stock of said three (3) stockholders was assigned and transferred to Cecil O. White'; and that 'it was unanimously agreed that the said Cecil O. White, Raymond Hartman, Robert F. Landin and Carl Hilldale all sign these minutes, and by their signatures signify their consent and approval of the business transacted at said meeting and these minutes which set out the business transacted at said meeting'. The minutes were signed by each of the four stockholders. Each of the stockholders testified to the effect that the minutes correctly described the business transacted.

It is contended by Corson that the transaction whereby the stock was transferred to Cecil O. White was void, for the reason that it was authorized by interested directors; that the transaction was fraudulent; that it hindered or delayed creditors of the White Appliance Company, especially Corson, in the collection of their claims; that the transaction was, as to White Appliance Company, voluntary; that the liability of Hartman and Landin, defendants named in the suggestion, to the White Appliance Company, as to the sums received by them, respectively, for their stock sold to White, is subject to the lien of the execution; and that such sums or liabilities are reachable by way of a proceeding on suggestion.

The amount of the indebtedness of White Appliance Company owing or due at the time of the transfer of the stock is not clearly shown, though it seems clear that debts in the approximate amount of $3,100. were more than 60 days past due, one of which, in the amount of $1,636.33, long in dispute, had been reduced to judgment. The judgment was later satisfied. After the payment of the $9,000 check, the White Appliance Company had in a bacnk account approximately $5,000, and a financial statement, prepared for it by a reputable public accountant, disclosed that, as of April 30, 1957, the assets of the corporation were more than sufficient to discharge all outstanding obligations of the corporation.

Though the capital stock of the White Appliance Company had become somewhat impaired prior to April 30, 1956, its book value increased between that date and April 30, 1957, the date of the financial report. There can be no doubt, however, that the three stockholders who transferred their stock to White were, and had been for some time, dissatisfied with the management of the affairs of the corporation by Cecil O. White, and that dissolution of the corporation was contemplated, in the event Cecil O. White refused to purchase the stock of the other three stockholders. The corporation had never paid any dividends to the stockholders.

Subsequent to the time of the transfer of the stock Corson paid to White Appliance Company, on the subcontract price, the sum of $9,924.30. In addition to that sum, at the time of the transfer Corson held in its hands the ten per cent of the amounts theretofore paid White, $8,105.50. The financial statement mentioned disclosed that, as of April 30, 1957, the amount of 'accounts receivable' was $23,713.50, and that the amount of 'accounts payable' was $23,922.06.

The testimony of the stockholders is to the effect that, before the transaction, advice from the counsel of the corporation had been received to the effect that the transaction whereby the stock would be transferred would be recognized as valid only in the event the corporation at the time was solvent and that, from their own knowledge of the affairs of the corporation, and from an examination of its books and accounts, they believed the corporation to be solvent. White testified to the effect that he believed 'the company would continue to go ahead and would prosper and be successful'. Each of the stockholders testified to the effect that no intention to defraud any creditor existed. The corporate attorney was present at the meeting when the transfer of the stock was authorized. He testified in behalf of the defendants.

At the time of default of the White Appliance Company, performance had been completed under the subcontract except as to 'about one per cent of the complete contract'. The amount expended by Corson for such completion was $709.50, but the outstanding indebtedness chargeable to White Appliance Company under the subcontract amounted to $14,205.41, the major portion of which, at least, was included in 'bills payable' in the financial statement of April 30, 1957. It was not until about July, 1957, that Corson became aware that White Appliance Company would probably not fully perform the requirements of the subcontract, and the last payment made to White Appliance Company for work thereunder was on June...