Singer v. Salt Lake City Copper Mfg. Co.

• Decision Date: 14 July 1898
• Docket Number: 912
• Parties: EDWARD T. SINGER, PLAINTIFF, v. SALT LAKE COPPER MN'F'G CO. ET AL., DEFENDANTS. ABRAHAM HANAUER AND STEPHEN A. HARRISON, APPELLANTS, v. EDWARD T. SINGER ET AL., RESPONDENTS
• Court: Utah Supreme Court

53 P. 1024

17 Utah 143

EDWARD T. SINGER, PLAINTIFF, v. SALT LAKE COPPER MN'F'G CO. ET AL., DEFENDANTS.

ABRAHAM HANAUER AND STEPHEN A. HARRISON, APPELLANTS, v. EDWARD T. SINGER ET AL., RESPONDENTS

No. 912

Supreme Court of Utah

July 14, 1898

Appeal from district court, Salt Lake county; Ogden Hiles, Judge.

Suit by Edward T. Singer against the Salt Lake City Copper Manufacturing Company, Abraham Hanauer, Stephen A. Harrison and others. From the decree rendered, defendants Hanauer and Harrison appealed.

Affirmed.

Frank Pierce, for appellants:

There are a large number of well-considered cases that hold that a director who is abroad and traveling abroad, or who cannot be readily reached to attend directors' meetings, need not be notified, and that in the absence of notice under such circumstances, the meeting will be upheld. Chase v Tuttle, 55 Conn. 455; 3 A. S. R. 64, 2 Cook on Stock and Stockholders, p. 1060, note 1; National Bank v Shumway, 30 P. 411; Thompson on Corporations, secs. 936 6479; Bank v. Flour Co., 41 Ohio St. 552; Edgerly v. Emerson, 23 N.H. 555; Halifax v. Francklyn, 62 L. T. Rep. 56.

The executed contracts of a corporation must be allowed to stand when the plainest rules of good faith require it. Contracts which, though invalid for want of corporate power, have been fully executed, shall remain as the foundation of rights acquired by the transaction. Hervey v. Railway Co., 28 F. 173; Parish v. Wheeler, 22 N.Y. 494; Gold Mining Co. v. National Bank, 96 U.S. 640; National Bank v. Matthews, 98 U.S. 621; Texas, etc., v. Gentry, 69 Texas 628; 5 Thompson on Corporations, secs. 6159; Galveston Railroad Co. v. Cowdery, 78 U.S. 559 (476.)

There is no question in the case at bar that the directors had a right to give the mortgage. It is intra vires. Many cases even go to the extent of holding that a corporation can be estopped from setting up the defense that the contract is ultra vires. Campbell v. Argenta Gold & Silver Mining Company, 51 F. 1 (p. 8); Beecher v. The Marquette & Pacific Rolling Mills Company, 45 Mich. 103; Hervey v. Illinois Midland Ry. Co., 28 F. 169. (173-4); Thomas v. Citizens Railway Co., 104 Ills. 462; Green Point Sugar Company v. Whitin, 69 N.Y. 329; Rochester Savings Bank v. Averell, 96 N.Y. 467, 476; Welch v. Importers & Traders Bank, 25 N.E. 271 (N.Y.); II Morawetz on Corporations, secs. 635, 675; II Cook on Stock and Stockholders, sec. 779, and note 2, page 1264, and cases cited in the note; Coe v. East & West Railroad Co., 52 F. 531; 5 Thompson on Corporations, sec. 6165; Star Printing Co. v. Andrews, 9 N.Y.S. 731; State of Indiana v. Woram, 40 Am, Dec. 378 (note 381); Whitney Arms Co. v. Barlow, 63 N.Y. 62; Bissell v. Mich. So., etc., 22 N.Y. 258.

A corporation will not be allowed, after receiving the loan secured by the mortgage, to avoid its liability by raising the question of its power to make the mortgage or showing that such power has been deficiently executed. Short on Railway Bonds and Mortgages, sec. 178, and cases cited in note 2 and note 3; The Aurora Society v. Paddock, 80 Ills. 263; Peoria Railroad Co. v. Thompson, 103 Ills. 187.

That the verity of the minutes as written in the minute book may be relied on see: Whiting v. Wellington, 10 F. 810; Cook on Stock and Stockholders, sec. 714; Commissioners v. Aspinwall, 21 How. 539; Beach on Corporations, sec. 295.

The idea that the same persons constitute different identities of themselves by being called directors or officers of a corporation, so that as directors or officers they can convey, or mortgage to, or contract with themselves as private persons, is in violation of common sense. Haywood v. Lumber Co., 64 Wisconsin 647; 3 Thompson on Corporations, secs. 3929, 4059; Miner v. Ice Company, 93 Mich. 97 (100, 109); Oil Company v. Marbury, 91 U.S. 587.

Shepard & Sanford, for respondent Kimball:

The following authorities support the general proposition that notice must be given: Farwell v. The Houghton Copper Works, 8 F. 66; Morawetz Private Cor., sec. 532; Corn Exch. Bank v. Cumberland Coal Co., 1 Bosw. 436; Spelling on Private Cor., sec. 424; Thompson v. Williams, 76 Cal. 153; Waterman on Cor., sec. 62; Angell & Ames on Cor., sec. 291; Wiggin v. Baptist Soc., 8 Met. 301; Stowe v. Wise, 7 Conn. 219; Taylor Private Cor., secs 260 and 261; In re Homer, etc., 24 Am. & Eng. Corp. Cases 28; Note 19 Am. & Eng. Corp. Cases 128; Jackson v. Hampden, 20 Me. 37; San Buenaventura, etc., v. Vassult, 50 Cal. 534; Gashwiler v. Willis, 33 Cal. 11; Harding v. Van de Water, 40 Cal. 81.

It is decided in this state that a corporation cannot prefer its directors as principal or surety. For authorities supporting the proposition, see: Lowry Banking Co. v. Empire Lumber Co., 17 S.E. 968 (Ga.); Lippincott v. Shaw Carriage Co., 25 F. 577; Ingversen v. Edgcomb, 60 N.W. 1032; Howe v. Sanford Fork, etc., 44 F. 231; Tillson v. Downing, 63 N.W. 836; Love, etc. v. Queen, etc., 20 S. R. 146; Consolidated Tank Line Co. v. Kansas City Varnish Co., 45 F. 7; Bosworth v. Jacksonville, 12 C. C. A. 334; Williams v. Jackson Co. Patrons, 23 Mo.App. 132; Gottleib v. Miller, 39 N.E. 992 (Ill.); Goodyear Rubber Co. v. Scott Co., 96 Ala. 439; Gibson v. Trowbridge Furn. Co., 96 Ala. 357; Haywood v. Lincoln Lumber Co., 64 Wis. 639; Smith v. Putnam, 61 N.H. 632; Beech v. Miller, 130 Ill. 162; 17 Am. St. Rep. 291; reversing same case, 23 Ill.App. 151; Roseboom v. Whittaker, 132 Ill. 81; s. c. sub nom; Roseboom v. Warner, 23 N.E. 339; Richards v. New Hampshire Ins. Co., 48 N.H. 263; Carey v. Wadesworth (Ala.), 11 So. Rep. 350; Sicardi v. Keystone Oil Co., 149 Pa. St. 148, upon appeal of Kerstetter; Kanakee Woolen Mill Co. v. Kampe, 38 Mo.App. 229; State v. Brockman, 39 Mo.App. 131; Olney C. Conanicut Land Co., 16 R. I. 597; 6 Rail. & Corp. L. J. 414; 40 Alb. L. J. 325; 29 Cent. L. J. 333; 5 L. R. A. 361.

In many of the above cases the preference was attempted by means of a mortgage, but they were subjected to the same test as if they were deeds of assignment.

It is now settled in this State that a preference to adirector is fraudulent. Coblentz v. Driver Mer. Co., 10 Utah 96; Mercantile Co. v. Mt. Pleasant Co-op., 12 Utah 213; Wyeth, etc., v. James, etc., 47 P. 604; Colo. Fuel & Iron Co., v. Western Hardware Co., 50 P. 628.

The following cases hold that under the circumstances of this case the creditors may attack because of the fact notice was not given. Wiggins v. Free Will Baptist Society, 49 Mass. 301; Thompson on Corporations, sec. 6478 et seq., sec. 6200; Richardson's Exrs. v. Greene, 133 U.S. 30; 1 Beach Corp., sec. 241; Waite Insolvent Corporations, sec. 156; National Trust Co. v. Miller, 33 N. J. Eq. 155; Morawetz Corp., secs. 787 and 788.

"Subrogation by operation of law exists in favor, not of all who pay the debt of another, but only in favor of those who, being bound for it, had therefore discharged it." Sheldon on Subrogation, sec. 241 and cases cited, 1st Ed.; see, also, sec. 240; Harris on Subrogation, secs. 795 and 796; Receivers of New Jersey Midland R'y Co. v. Wortendyke, 27 N. J. Eq. 661; Good v. Golden, 19 So. 100; Mellen v. Morristown & Co., 35 S.W. 468; Kleiman v. Geiselman, 21 S.W. 796; Wentworth v. Tubbs, 55 N. W, 543.

The utmost good faith was exercised in procuring this loan, and Singer and May were competent to act. Leavett v. Oxford, 3 Utah 272; Clement Bane & Co. v. Michigan Clothing Co. 68 N.W. 224 (Mich.); Rolling Stock Co. v. Railroad Co., 34 Ohio St. 450; Duncomb v. New York, etc., 88 N.Y. 1.

Williams, Van Colt & Sutherland, George A. Smith and Marshall & Royle, John W. Burton, Dickson, Ellis & Ellis, C. F. Loofbourow, Alton T. Sanford, for the several respondents:

The presumption of law is that directors' meetings are regularly called and held, and the burden of proof is on the one alleging the contrary. Leavitt v. Oxford, etc. Co., 3 Utah 265; 3 Thomp. Cor. 3926-27, 3934; 1 Cook Stock, sec. 600; Chouteau Ins. Co. v. Holmes, 30 A. R. 807; Hardin v. Ia., etc. Co., 43 N.W. 543; 1 Mor. Cor., sec. 532.

The Hanauer trust deed is void under the circumstances. 1 Mor. Cor. sec. 532. 1 Beach Priv. Cor. sec. 279, note 7; Angell & Ames Corp. sec. 492; Stowe v. Wyse, 18 A. D. 99 (7 Conn. 214); Farwell v. Houghton Copper Wks., 8 F. 66; Harding v. Vandewater, 40 Cal. 77; Wiggin v. The Elder & Deacons, etc., 49 Mass. 301; Doernbecher v. Columbia, etc., Co., 28 P. 899; 5 Thomp. Cor., sec. 6176; Simon v. Sevier, etc., Asso., 14 S.W. 1101; Bank of Little Rock v. McCarthy, 29 A. S. R. 60 (55 Ark. 473).

The Hanauer trust deed is void, because the company was insolvent when it was executed. Mercantile Co. v. Mt. Pleasant, etc., 12 Utah 233; 17 A. S R. 291 and note; Thompson v. Huron Lumber Co., 30 P. 742; Rouse v. Mercs. National Bank, 46 Ohio St. 493; Sayler v. Simpson, 24 N.E. 596.

Therefore the Hanauer trust deed was invalid as to every one, both because unauthorized and because of the fraud and unconscientious advantage sought to be obtained; being void in part it is void in toto. Coblentz v. Driver Mer. Co., 10 Utah 96; Mercantile Co. v. Mt. Pleasant Co-op., 12 Utah 236; Hard. Co. v. Hardware Co., 47 P. R 604.

A single fraudulent preference shows the fraudulent intent and will vitiate the instrument entirely. Coblentz v. Driver Mer. Co., 10 Ut. 96; Mer. v. Mt. Pleasant Co-op. 12 Ut. 236; Goddrick v. Downe, 6 Hill 438; Vernon v. Upson, 60 Wis. 418; Cunningham v. Freeborn, 11 Wend., 240; Burt v. McKinstry, 4 Minn, 204; Gere v. Murrray, 6 Minn. 305.

The plaintiff brought this suit to foreclose a trust deed on certain property of the defendant the Salt Lake City Copper Manufacturing Company, situate in Salt Lake county, Utah, to have declared void another trust deed affecting the same property, and to have a receiver appointed for...