T. A. Shaw & Co. v. Robinson & Stokes Co.

• Court: Nebraska Supreme Court
• Writing for the Court: RYAN, C. J.
• Citation: T. A. Shaw & Co. v. Robinson & Stokes Co., 69 N.W. 947, 50 Neb. 403 (Neb. 1897)
• Decision Date: 19 January 1897
• Docket Number: 6997
• Parties: T. A. SHAW & COMPANY v. ROBINSON & STOKES COMPANY ET AL

69 N.W. 947

50 Neb. 403

T. A. SHAW & COMPANY v. ROBINSON & STOKES COMPANY ET AL

No. 6997

Supreme Court of Nebraska

January 19, 1897

ERROR from the district court of Douglas county. Tried below before FERGUSON, J. Affirmed.

AFFIRMED.

Duffie & Van Dusen, for plaintiff in error:

The assignments made and the attachment suits commenced by the assignees and levied upon the property of the company followed by placing the company in the hands of a receiver upon its own application, constituted a general assignment for the benefit of the creditors. It was one transaction in the eyes of the law, and the company having attempted to prefer certain creditors, the assignment is void. (Burrows v. Lehndorff, 8 Iowa 96; Van Patten v Burr, 52 Iowa 518; Perry v. Holden, 22 Pick. [Mass.], 269; Kellogg v. Root, 23 F. 525; Berry v. Cutts, 42 Me. 445; Doggett v. Herman, 5 McCrary [U S.], 269.)

The directors of an insolvent corporation are trustees for the creditors. (Bliss v. Matteson, 45 N.Y. 22; Butts v. Wood, 37 N.Y. 317; Robinson v. Smith, 3 Paige Ch [N.Y.], 222; Aberdeen R. Co. v. Blaike, 1 McQueen [Scotch], 461; Horbach v. Marsh, 37 Neb. 22; Bradley v. Farwell, 1 Holmes [U. S.], 433.)

The directors of an insolvent corporation cannot give preference to one of its creditors over another. (Wood v. Dummer, 3 Mason [U. S.], 308; Rouse v. Merchants Nat. Bank, 46 O. St. 493; Beach v. Miller, 130 Ill. 162; Drury v. Cross, 7 Wall. [U. S.], 299; Curran v. State, 15 How. [U. S.], 307; Richards v. New Hampshire Ins. Co. 43 N.H. 263; Haywood v. Lincoln Lumber Co. 64 Wis. 639; Port v. Russell, 36 Ind. 60; Lippincott v. Shaw Carriage Co. 21 F. 577; Martin v. Zellerbach, 38 Cal. 300; Holder v. Lafayette, B. & M. R. Co. 71 Ill. 106; Pyles v. Riverside Furniture Co. 30 W.Va. 134; Lamb v. Laughlin, 25 W.Va. 300; Burr v. McDonald, 3 Gratt. [Va.], 206; Briggs v. Penniman, 8 Cow. [N.Y.], 390; Carey v. Cincinnati & C. R. Co. 5 Iowa 357; Philips v. Whickham, 1 Paige Ch. [N.Y.], 595; Bank of Poughkeepsie v. Ibbotsen, 24 Wend. [N.Y.], 478; Moore v. Whitcomb, 48 Mo. 543; State Savings Ass'n v. Kellogg, 52 Mo. 588.)

The fact that the company is an Iowa corporation gives it no additional right to prefer creditors. (Guillander v. Howell, 35 N.Y. 657; Delahaye v. Heitkemper, 16 Neb. 475; Ford v. Plankinton Bank, 58 N.W. [Wis.], 766; Conover v. Hull, 10 Wash. 673; Orr v. Thompson, 35 S.W. [Tex.], 473; Lyons v. Perry, 27 S.W. [Tex.], 100.)

References as to rights which plaintiff in error acquired by garnishment: Brooks v. Greathead, 1 J. & W. [Eng.], 176; Angel v. Smith, 9 Ves. [Eng.], 335; Vermont & C. R. Co. v. Vermont Central R. Co. 46 Vt. 798; Riggs v. Whitney, 15 Abb. Pr. [N.Y.], 390; In re Day, 34 Wis. 643; Brown v. Rauch, 1 Wash. 497; Moore v. Mercer Wire Co. 15 A. [N.J.], 737; Reed v. Richmond & A. R. Co. 4 S.E. [Va.], 587; Lyman v. Central V. R. Co. 10 A. [Vt.], 346; Jones v. Browse, 9 S.E. [W. Va.], 873; Melendy v. Barbour, 78 Va. 544; Conwell v. Lowrance, 26 P. [Kan.], 462; Webster v. Lawrence, 47 Hun [N.Y.], 565; Adams v. Woods, 8 Cal. 153, 9 Cal. 24; Meara v. Holbrook, 20 O. St. 143; Hawkins v. Gathercole, 1 Drew. [Eng.], 17; Randfield v. Randfield, 4 Drew. [Eng.], 314; Adams v. Hackett, 7 Cal. 187.

Winfield S. Strawn, appearing by permission of the court and courtesy of counsel in the case, argued the following propositions:

An insolvent corporation cannot prefer a creditor or creditors. Such a preference by an insolvent corporation is a use of its property for a purpose other than "to accomplish the legitimate object of its creation." (Compiled Statutes, ch. 16, sec. 55, ch. 15, sec. 1; Graham v. La Crosse & M. R. Co. 102 U.S. 148; Head v. Providence Ins. Co. 2 Cranch [U. S.], 169; Lyons v. Perry Stove Co. 86 Tex. 143; Orr v. Thompson, 35 S.W. [Tex.], 473; Thomas v. West Jersey R. Co. 101 U.S. 81; Richie v. Ashbury Iron Co. L. R. 7 H. L. [Eng.], 633; Sutton Mfg. Co. v. Hutchinson, 63 F. 496.)

The property, when the corporation is actually insolvent, is a trust fund to which all creditors have a right to resort for the payment of the claims ratably. (State v. Commercial State Bank, 28 Neb. 677; Ingwersen v. Edgecombe, 42 Neb. 744; Sutton Mfg. Co. v. Hutchinson, 63 F. 496; Bosworth v. Jacksonville Nat. Bank, 64 F. 621; Tillson v. Downing, 45 Neb. 549; Upton v. Tribilcock, 91 U.S. 47; Conover v. Hull, 10 Wash. 673; Ford v. Plankinton Bank, 87 Wis. 363; Ballin v. Merchants Exchange Bank, 61 N.W. [Wis.], 1118.)

It is not the policy of the law to extend the privileges of corporate bodies beyond the express powers granted them by the legislature.

Abbott, Selleck & Lane, amici curioe:

An insolvent corporation that has ceased to be a going concern has no power, in the distribution of its assets, to prefer one or more of its creditors to the exclusion of others. The relation of the directors toward the property and assets of the insolvent corporation is that of trustees for all the creditors. (Adams v. Deyette, 59 N.W. [S.D.], 215; Atwater v. American Exchange Bank, 38 N.E. [Ill.], 1019; Marr v. Bank of West Tennessee, 4 Cold. [Tenn.], 471; Swyer v. Hoag, 17 Wall. [U. S.], 620; Sanger v. Upton, 91 U.S. 60; Adler v. Milwaukee Patent Brick Mfg. Co. 13 Wis. 63; Messersmith v. Sharon Savings Bank, 96 Pa. St. 443; Consolidated Tank Line Co. v. Kansas City Varnish Co. 45 F. 7; Turnbull v. Prentis Lumber Co. 21 N.W. [Mich.], 379; Hastings v. Drew, 76 N.Y. 9; Tompson v. Huron Lumber Co. 30 P. [Wash.], 741; Holbrook v. Peters, 8 Wash. 344; Harrigan v. Quay, 26 S.W. [Tex.], 512.)

Montgomery & Hall, for defendants in error:

A private corporation, in failing circumstances, may prefer certain creditors. (La Grange Butter-Tub Co. v. Nat. Bank of Commerce, 26 S.W. [Mo.], 710; Roseboom v. Whittaker, 132 Ill. 81; Moon Bros. v. Waxahachie Grain & Improvement Co. 35 S.W. [Tex.], 337; Ballin v. Merchants Exchange Bank, 61 N.W. [Wis.], 1118; Buchanan v. Barnes, 34 S.W. [Tenn.], 425; Buell v. Buckingham, 16 Iowa 284; Hallam v. Indianola Hotel Co. 56 Iowa 178; Garrett v. Burlington Plow Co. 70 Iowa 697; Warfield v. Marshall County Canning Co. 72 Iowa 666; Rollins v. Shaver Wagon & Carriage Co. 80 Iowa 380; Gould v. Little Rock, M. R. & T. R. Co. 52 F. 680; Allis v. Jones, 45 F. 148; Britton v. Boyer, 27 Neb. 522; Davis v. Scott, 27 Neb. 642; Brown v. Furniture Co. 58 F. 286; Fogg v. Blair, 133 U.S. 534; Smith v. McGroarty, 136 U.S. 237; Hollins v. Brierfield Coal & Iron Co. 150 U.S. 371; Lininger v. Raymond, 12 Neb. 19; Deitrich v. Hutchinson, 20 Neb. 52; Duncomb v. New York H. & N. R. Co. 84 N.Y. 190; Coats v. Donnell, 94 N.Y. 168; Dabney v. Bank of South Carolina, 3 S.C. 156; Stratton v. Allen, 16 N.J.Eq. 229; Wilkinson v. Bauerle, 41 N.J.Eq. 635; Covert v. Rogers, 38 Mich. 363; Bank of Montreal v. Potts, 51 N.W. [Mich.], 512; State v. Bank of Maryland, 6 Gill & J. [Md.], 205; Catlin v. Eagle Bank, 6 Conn. 233; Smith v. Skeary, 47 Conn. 47; Foster v. Mullanphy Planing Mill Co. 92 Mo. 79; Alberger v. National Bank of Commerce, 27 S.W. [Mo.], 657; Meyer v. American Chair Co. 32 S.W. [Mo.], 300; Dana v. United States Bank, 5 W. & S. [Pa.], 245; Ashhurst's Appeal, 60 Pa. St. 314; Ringo v. Bisco, 13 Ark. 563; Warthen v. Griffith, 28 S.W. [Ark.], 286; Planter's Bank v. Whittle, 78 Va. 737; Warner v. Mower, 11 Vt. 390; Arthur v. Commercial & B. Bank, 17 Miss. 430; Palmer v. Hutchinson, 11 So. [Miss.], 789; O'Bear Jewelry Co. v. Volfer, 17 So. [Ala.], 525; Hospes v. Northwestern Mfg. Co. 50 N.W. [Minn.], 1117; Reichwald v. Hotel Co. 106 Ill. 439; Illinois Steel Co. v. O'Donnell, 41 N.E. [Ill.], 185; Blair v. Illinois Steel Co. 42 N.E. [Ill.], 895.)

Charles B. Keller, also for defendants in error:

A receiver cannot be garnished. (Field v. Jones, 11 Ga. 413; Columbia Book Co. v. De Golyer, 115 Mass. 67; Richards v. People, 81 Ill. 551; Taylor v. Gillelan, 23 Tex. 508; Blake Crusher Co. v. Town of New Haven, 46 Conn. 472; Atlas Bank v. Nahant Bank, 23 Pick. [Mass.], 480; Hubbard v. Hamilton Bank, 7 Met. [Mass.], 346; McGowan v. Myers, 66 Iowa 103; Noe v. Gibson, 7 Paige Ch. [N.Y.], 513; Hills v. Parker, 111 Mass. 508; Northfield Knife Co. v. Sharpleigh, 24 Neb. 635; Rogers v. Corning, 44 Barb. [N.Y.], 229.)

The overwhelming array of decisions supports the right of an insolvent corporation to prefer one or more creditors to the exclusion of others. (Pondville Co. v. Clark, 25 Conn. 97; New Haven Savings Bank v. Bates, 8 Conn 505; Hopson v. AEtna Axle & S. Co. 50 Conn. 597; Southern White Lead Co. v. Haas, 73 Iowa 404; Warren v. First Nat. Bank, 149 Ill. 10; Ragland v. McFall, 27 N.E. [Ill.], 75; Glover v. Lee, 140 Ill. 102; Peterson v. Brabrook Tailoring Co. 37 N.E. [Ill.], 42; Brabrook v. Belden Bros. 40 Ill.App. 326; Warren v. First Nat. Bank, 38 N.E. [Ill.], 122; Beach v. Miller, 22 N.E. [Ill.], 464; Mullanphy Bank v. Schott, 26 N.E. [Ill.], 640; Atwater v. American Exchange Bank, 38 N.E. [Ill.], 1017; Paulding v. Chrome Steel Co. 94 N.Y. 334; Varnon v. Hart, 119 N.Y. 101; Town v. Bank of River Raisin, 2 Doug. [Mich.], 530; Vail v. Jameson, 7 A. [N.J.], 520; Bergen v. Porpoise Fishing Co. 8 A. [N.J.], 23; Burr v. McDonald, 3 Grat. [Va.], 216; Pyles v. Riverside Furniture Co. 2 S.E. [W. Va.], 909; Hulings v. Hulings Lumber Co. 18 S.E. [W. Va.], 620; Union Bank v. Ellicott, 6 Gill & J. [Md.], 363; Ex parte Conway, 4 Ark. 303; Whitwell v. Wareur, 20 Vt. 425; Sargent v. Webster, 13 Met. [Mass.], 497; Pond v. Framingham & T. R. Co. 130 Mass. 194; Hospes v. Northwestern Mfg. Co. 48 Minn. 174; Weihl v. Atlanta Furniture Co. 15 S.E. [Ga.], 282; Ardesco Oil Co. v. North American Oil & Mfg. Co. 66 Pa. St. 375; United States v. Bank of United States, 8 Rob. [La.], 262; Bank of United States v. Huth, 4 B. Mon. [Ky.], 429; Gibson v. Goldthwait, 7 Ala. 281; Corey v. Wadsworth, 11 So. [Ala.], 350; ...