Sweeny v. Sugar Reeining Co.
| Decision Date | 19 November 1887 |
| Citation | 30 W.Va. 443 |
| Parties | Sweeny v. Sugar Reeining Co. |
| Court | West Virginia Supreme Court |
The directors of a corporation occupy the relation of trustees to such corporation and its property. (p. 451.)
Where the board of directors of an insolvent corporation ordered the conveyance of all the property, real and personal, of the corporation, to secure a large debt due from it to another corporation, at a meeting in which one or more of such directors who participated and voted for the resolution authorizing the conveyance were also directors of the corporatian for whose benefit the conveyance was made, held, the conveyance made by virtue of such order is prima facie fradulent and void, not only as to the grantor and its stockholders, but also as to its creditors, and will be so declared unless it is shown on behalf of the corporation thus secured, by clear and convincing proof, that such conveyance was fair and reasonable, and absolutely free from fraud. (p. 453.)
Fraudulent Conveyances Effect of Setting Aside Lien of Creditors.
General creditors who, by bill, answers, or petition, assail a deed of their debtor conveying land as fraudulent, and succeed, have a lien on the land for their respective debts from the filing of such bill, answer or petition. (p. 455.)
W. P. Hubbard and H. M. Russet for appellants.
I). Lamb and Caldwell & Caldwell for Bank of Ohio Valley, appellee.
The Wheeling Grape Sugar & Refining Company was, in July, 1881, created and organized as a corporation, under the provisions of chapter 54 of the Code of the State, for the purpose of manufacturing glucose or grape sugar. At the first meeting the stockholders elected O.E. Dwight, W. Leighton, F. P. Jepson, A. M. Adams, and Victor Rosenberg directors of the company. The directors elected C. E. Dwight presi- dent, and F. P. Jepson secretary and treasurer. Afterwards the board of directors elected A. C. Egerter secretary. In January, 1882, the same persons were re-elected directors, and the board elected the following officers: C. E. Dwight, president; F. P. Jepson, treasurer; and A. C. Egerter, secretary; and these same persons acted and continued to be the directors and officers of the company until January, 1888. At the time the directors were first elected, the said Adams and Rosenberg were stockholders and directors of the Ohio Valley Bank, and said Jepson was the cashier of said bank; and they each continued to be such officers of the bank during the whole time they were directors of the Grape Sugar Company. The principal offices and places of business of both said company and bank were in the city of Wheeling in this State. The business of said company seems to have been experimental, and proved to be unsuccessful, if not a complete failure. Prior to September 2, 1882, the company had become largely indebted to said Ohio Valley Bank and others, and at that time its embarrassments and financial condition were such that it was known to the directors that, unless additional capital stock could be sold, or a large amount of money raised upon bonds to be issued, the business of the company could not be continued, and that it would have to cease its operations for the want of funds and credit, and that it would be sued and closed up by the creditors. The company was, in fact, then wholly insolvent, and unable to meet its obligations or pay its existing indebtedness. In these circumstances the board of directors held a meeting, August 31, 1882, at which there were present Dwight, Leighton, Rosenberg, and Jepson, as directors, and passed a resolution authorizing Dwight, the president of the company," to execute a deed of trust on all the real estate, buildings, and machinery owned by the company to secure the payment of $20,000.00 borrowed of the Bank of the Ohio Valley; and also to execute such deed of assignment of all personal property of said company, including corn, blackstrap, all manufactured syrup on hand, all barrels, and all book-accounts due the company, as will properly secure the Bards: of the Ohio Valley upon overdraft due from the company to said bank." The said Rosenberg and Jepson were present, acting as directors, when said resolution was passed, and they as well as the two other directors then present, voted for it. Afterwards, on September 2, 1882, C. E. Dwight, as president, on behalf of said company, executed two trust deeds, known in the record as " Exhibits 22 and 23." The first, Exhibit 22, conveys to W. A. Isett, trustee, a number of lots of land, which are fully described, situate in the city of Wheeling, and designated as the property of the company;" and also all the buildings, real estate, and machinery belonging to the grantor in Ohio county, West Virginia," in trust to secure to the Bank of the Ohio Valley, a corporation existing under the laws of the State of West Virginia, the payment of four promissory notes of $5,000.00 each, and any renewals thereof, with the interest thereon. The notes are copied into the deed. The first is dated May 3, 1882, the second May 11, 1882, the third July 26, 1882, and the fourth August 29, 1882, aggregating $20,-000.00, all payable to the order of the company at the said bank, four months after their respective da: es. The second deed, Exhibit 23, conveys to the same trustee "all the corn, blackstrap, manufactured syrup, barrels, book-accounts, evidences of debt, and all the personal property of every kind whatsoever, wheresoever situated, now belonging to the said company; and also all the corn, blackstrap, manufactured syrup, barrels, book-accounts, evidences of debt, and all the personal property of every kind and description, wherever situated, of which the said company may hereafter become possessed, or to which it may hereafter become entitled; in trust to secure to the Bank of the Ohio Valley the payment of $14,909.14 money now [then] due said bank, and the interest thereon, till paid, and also to secure to said bank the payment of any sums of money that it may in future permit to become due to it from said company in the way of drafts or overdrafts, or in any other manner." After empowering the trustee to sell the property thus conveyed upon being directed so to do by the bank, the deed provides that the trustees shall collect the evidences of debt and book-accounts " upon being directed to do so by said bank," and apply the proceeds of such sales and collections to the payment of expenses and the debt secured. Both of these deeds were acknowledged on September 4, 1882, before a notary of Ohio county, and the first was recorded in said county on December 6, 1882, and the second on December 11, 1882. The board of directors held another meeting, September 11, 1882, at which four directors were present, to-wit, Dwight, Adams, Rosenberg, and Jepson, and passed the following resolution:" Resolved, that the president of the Wheeling Grape Sugar & Relining Company be, and he is hereby, ordered to execute an additional deed of trust on the real estate, buildings, machinery, and fixtures of the company, to secure the Bank of the Ohio Valley for overdraft due said bank from said company this day, and also to secure any future overdrafts." All said directors acted in said meeting, and voted for said resolution. By deed dated on said eleventh day of September, 1882, known in the record as " Exhibit 24," said company, by C. E. Dwight, its president, conveyed to W. A. Isett, the same person named as trustee in the two deeds before mentioned, all the real estate, buildings, and machinery of the company described in the aforesaid deed, Exhibit 22; "in trust to secure to the Bank of the Ohio Valley $14,602.08, money now [then] due said bank and its interest; and also any money that the bank may in future permit to become due to it from said company, in the way of drafts, overdrafts, or in any other manner." This deed, and also the other two deeds, provide that the trustee may act by agent or attorney in the execution of his trust. This deed was acknowledged in Ohio county on September 12, 1882, and was recorded in said county on December 6, 1882.
Thompson & Hibberd, as partners, on September 2, 1882, the day the first two deeds aforesaid were executed, caused to be tiled in the clerk's office of said county a mechanic's lien upon the property of said Grape Sugar Company for labor done and materials furnished to it upon contract prior to that date, amounting to $4,999.84; and subsequently other mechanics and laborers filed similar liens for materials and labor furnished said company, and other creditors brought suits and recovered judgments against said company, some of whom recovered judgments before and others after said deeds had been recorded. Several of these creditors sued out attachments and had them levied on the property of the company conveyed by the deeds, after the deeds had been recorded, and a number of them, after they recovered judgments, had executions issued thereon and levied upon the personal property of the company conveyed in said deed, Exhibit 23. On January 18, 1883, A. J. Sweeney & Son, the Exchange Bank of Wheeling, and other creditors who had thus recovered judgments, issued attachments and sued out executions against the said Grape Sugar Company, filed their bill in the Circuit Court of Ohio county, against the said company, the Bank of the Ohio Valley, W. A. Isett, trustee, and others, to have the aforesaid deeds (Exhibits 22, 23, and 24) set aside and annulled, upon the grounds that each of them had been executed without legal authority, that they were fraudulent per se as well as fraudulent in fact, and therefore inoperative and void as to their debts against the company. On the day said bill was filed the court, on the motion of the plaintiffs, awarded an injunction inhibiting the defendants, the said company, the Bank of the Ohio...
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