Swift v. Smith
| Decision Date | 23 June 1886 |
| Citation | 5 A. 534,65 Md. 428 |
| Parties | SWIFT v. SMITH AND OTHERS. |
| Court | Maryland Court of Appeals |
Appeal from circuit court, Baltimore city.
E Otis Hinkley, for appellant.
S.D. Schmucker and Geo. Whitelock, for appellee.
On the tenth of January, 1885, the Baltimore Gazette Publishing Company made a deed of trust of all its assets to I. Parker Veazey for the benefit of its creditors. The circuit court of Baltimore city, upon application of the trustee, took the trust under its jurisdiction, that the same might be administered under its direction. The auditor having made report to the court distributing the assets in the hands of the trustee among the creditors, the appellant and appellees respectively excepted to certain allowances to each other. The court sustained the exceptions to the appellant's claim, and, the same being disallowed, he appealed, and the only question before us is whether the circuit court properly rejected his claim.
The claim of the appellant is based on a mortgage executed by the Gazette Publishing Company, and by George W. Cruikshank, to him, on the twenty-fifth day of February, 1885, by which the Day, a newspaper published in the city of Baltimore, with the right to publish the same, and the circulation and good-will of the same, "the Associated Press franchise," and various machinery and chattels of the concern, were conveyed to the appellant to secure the sum of $17,000, payable three years after date, with interest, and evidenced by the note of George W. Cruikshank, and by notes for the interest to accrue and be paid annually. The history of this mortgage, and the considerations moving to it, are thus recited in its preamble:
"Whereas, by an agreement dated the eleventh day of February, 1884, between the said William H. Swift, one William T. Croasdale, and the said George W. Cruikshank, the said Swift agreed to transfer to said Cruikshank all his said Swift's, estate and interest in and to ninety-four shares of the stock of the said body corporate, and to release the said company and the said Cruikshank and said Croasdale, and all other stockholders of the said company, of and from all claims and demands of every kind for money loaned, and for all other claims on account of said company in publishing the newspaper called 'The Day,' it being thereby intended to convey, or agree so to do, by means of the transfer of said stock of said company, all interest which said Swift has in the publication called 'The Day;' and whereas, the said Swift thereby further agreed to purchase from W. J. Barndollar one share of said stock held by him, and from H. S. Morrow one share of said stock held by him, and to transfer the same to said Cruikshank, or cause them to be so transferred; and whereas, by said agreement, the said Cruikshank, in consideration of the execution thereof, did thereby agree, simultaneously with the transfer of said stock and other interest by said Swift to him, to execute a proper bill of sale by way of mortgage," etc.
Another clause recites that said agreement provided for the assignment and transfer to the said Cruikshank, by said Croasdale, of all his stock and interest in the company, and to release all his claims against it. The next two clauses recite full compliance by Swift and Croasdale with their agreement, and their respective assignment of their stock, and the release of their respective claims against the company, and the stockholders thereof, and also the assignment by Barndollar and Morrow of their stock to said Cruikshank. The next clause recites the execution of the notes, for principal and interest, of the $17,000 agreed upon, and that the mortgage was in consideration of the premises. This mortgage was signed by George W. Cruikshank under his own seal, and by William T. Croasdale as president of the Gazette Publishing Company, who affixed the seal of the corporation. It was acknowledged before a justice of the peace for Baltimore city by Cruikshank on his own behalf, and C. Augustus E. Spamer on behalf of the corporation, he having been named in the deed for that purpose. The mortgagee made the affidavit that the consideration was true and bona fide as set forth, and the mortgage was duly recorded as a chattel mortgage in the proper office.
In the distribution of the proceeds of sale by the trustee, and of all the assets of the Gazette Publishing Company, the auditor allowed the appellant for his mortgage claim so much of the assets as were left after deducting expenses, and gave claims supposed to have priority; and by that allowance, if sustained, he will receive but little more than two-thirds of his claim. To this allowance the appellees, who are creditors of the company for dealings had with them by the company since the execution of the mortgage, except on the ground that the mortgage, as an act of the company, was ultra vires, and sundry technical reasons supposed to render the execution of the mortgage ineffectual and fatally defective on the part of the company, even if the company had the power under the facts to make it.
The making and delivery of the mortgage by the president on the behalf of the company, it is contended, was in violation of articles 11 and 12 of the by-laws of the corporation; and that the signature of the president is not countersigned by the secretary as required by section 3 of article 7 of the by-laws. Article 11 limits the power of the directors in incurring obligations other than for materials and labor, and forbids their doing so without a majority vote of the directors. Article 12, which is especially relied on, reads as follows:
"The moneys or effects of the company shall never be loaned to or used for the benefit of any person, nor shall the name of the company be used as drawer, acceptor, or indorser except in the legitimate and proper course of the business of the company."
These objections, and others which need not be named, were pressed with much ability and learning, and were fortified with many authorities, which would be conclusive if the facts and nature of the transaction warranted their application. We think the mortgage to Swift was good, and operative to charge the property conveyed by it, irrespective of the attempted execution by the company. At the time of its execution, Cruikshank had become the drawer of all the stock of the company, and of all its...
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