Thum v. Wolstenholme

• Decision Date: 30 April 1900
• Parties: C. E. THUM, RECEIVER OF C. BUNTING & CO., BANKERS, A CORPORATION, RESPONDENT, v. DANIEL WOLSTENHOLME, APPELLANT
• Court: Utah Supreme Court

61 P. 537

21 Utah 446

C. E. THUM, RECEIVER OF C. BUNTING & CO., BANKERS, A CORPORATION, RESPONDENT, v. DANIEL WOLSTENHOLME, APPELLANT

Supreme Court of Utah

April 30, 1900

Petition for re-hearing denied May 23, 1900.

Appeal from the Third District Court, Salt Lake County, Hon. Ogden Hiles, Judge.

This was an equitable action brought to recover a fund amounting to $ 50,000 alleged to be held by the defendant; and to have been acquired by him as trustee of C. Bunting, etc., bankers a corporation organized under the laws of Utah. It was claimed in the complaint that this fund was derived from the proceeds of a life insurance policy issued on the life of Charles Bunting, deceased, for the sum of $ 50,000, payable on the death of Bunting to his estate. From a judgment for plaintiff, defendant appealed.

Tindings and conclusions of the court set aside and vacated and that the judgment and decree reversed.

Messrs. Dickson, Ellis, and Ellis, for appellant.

By the unconditional delivery of the policy, as pleaded and proved in the given circumstances, as a completed and executed contract, under the express or implied agreement that a credit had been given for the premium, the company became liable for any loss. Farnnen v. Phoenix Ins. Co., 83 Cal. 246, and many cases cited.

The note having been given for the premium in a negotiable form and afterward negotiated and passed out of the hands of the payee, and treated as payment by the insurance company, it was payment. Hart v. Boller, 15 S. and R., 162; Riverside Iron Works v. Hall, 64 Mich. 168; S.C., 31 N.W. 152; See also, 2d Beach on Ins., Secs. 769, 770, 773, and Sec. 971, and cases there cited.

Under any circumstances the payment of this note, long after the insurance had been purchased, had become operated, had been paid for by the note, and the policy delivered, and the note indorsed and sold, can not be held to be in any just or proper sense a withdrawal of money of the bank for making a purchase of the life insurance in question. It was but a method of obtaining means to pay the note or debt of Bunting, and no trust can therefore arise, and so it has been held. Bosworth, et al., v. Hopkins, et al., 85 Wis. 63.

On the question of the payment of premium by note, and the effect of the delivery of the policy, and waiver of prepayment, see 1st Joyce on Ins. Secs. 76, 80-85, and Vol. 2 Joyce, Sec. 1202; as to Bunting's right of assignment, see 1st Joyce Ins., Secs. 152, 154.

No oral agreements, and no payments before or after the title is taken, will create a resulting trust, or trust by implication of law, unless the transaction is such, at the moment the title passes, that a trust will result from the transaction. Perry on Trusts, Secs. 133, 842, and 126-131; French v. Shopler, 83 Ind. 266; 43 Am. R., 67; Bosworth, et al., v. Hopkins, et al., supra; Buck v. Sweeney, 35 Maine, 41, 50, 51; Pinnock v. Clough, 16 Vt. 500; Woodside v. Herner, 109 Cal. 485, 486; 1st May on Insurance, 108, 117; In re Wood, 5 F. 443; Fulton v. Jonson, 99 Cal. 587, 591; Botsford v. Burr, 2 Johns. Ch., 405; Coles v. Allen, 64 Ala. 95; Rogers v. Murry, 3 Paige, 390, 398; Pomeroy's Eq. Jur., Sec. 1037; 2 Washburn on Real Property, 173.

The presumption is, that when Fritter indorsed the note without recourse to the Pocatello bank, he did it for a valuable consideration, the amount of which is not material, but presumptively was the face value of the note. The law merchant raises this presumption. See Note 1 to Sec. 13, Randolph Commercial Paper; 1st Daniel Negotiable Instruments, Sec. 160, et seq., Chapter VII; 42 Mich. 19.

Again, this life insurance policy, so far as appears, was not an assurance for a single year, with a privilege of renewal from year to year, or to become a contract only upon actual payments of money, as contended by counsel, but it was an entire contract of insurance for life, possibly, and probably subject to a discontinuance and forfeiture for non-payment of any of the stipulated premiums. Mut. L. Ins. Co. v. Pruett, 74 Ala. 487; N.Y. Ins. Co. v. Statham, et al., 93 U.S. 30; Ins. Co. v. French, 30 Ohio St. 240; Thompson v. Ins. Co., 104 U.S. 257.

The authorities are to the effect that the principles decided in the cases which we have cited, apply equally to personal property and to real estate. Perry on Trusts, Secs. 129, 130.

If the transaction was void because ultra vires, or because Bunting was disqualified, as matter of law, from entering into it for want of authority from stockholders, when there were no stockholders except himself, then it is void as to all persons whomsoever, because a transaction that is absolutely void and of no effect, as held by the court below, can not be valid as to some people, and void as to others.

But the holding is not the law, and Bunting did have the power and authority, as manager and stockholder, to enter into the transaction and to make the sale and entries, and so it is held. See G. V. B. Mining Co. v. First N. Bank, pp. 33 and 34; U.S. Court of Appeals, 9th Circuit; 95 F. 1, Aug. 8, 1899.

The transaction itself operates as a ratification by all the stockholders, and nobody else has a right to complain. See also, Mc Cracker v. Robinson, 6 C.C.A., 400; 57 F. 375-377; Barr v. Railroad Co., 125 N.Y. 263-273; Wood v. Water Works Co., 44 F. 146-151.

This court can render a judgment on the merits in favor of the defendant, but can not render a judgment in favor of the plaintiff, because an indispensable party has not been made a party defendant on the record; namely, the administrator of the deceased, Bunting. Shields v. Barrow, 17 How. (U.S.), 130; Swan Land Co. v. Frank, 148 U.S. 611.

Lyttleton Price, Esq., and Messrs. Brown and Henderson, for respondent.

The capital stock and assets of a corporation is a trust fund for the security of the creditors of the corporation. The corporate creditors are to be paid first out of the assets, including the capital stock of a corporation, and they have a first lien upon it, and whenever a corporation becomes insolvent, this trust attaches. 3 Thompson on Corporations, Secs. 2951, 2952, and cases cited in note; 5 Thompson on Corporation, Sec. 6555; Story's Eq. Jur., Sec. 1252; Wood v. Dummer, 3 Mason (U.S.), 308.

This trust which is declared and enforced, amounts, during solvency of the corporation, and in fact during all the time that it continues active business under the direction of its board of trustees or directors, as a mere trust. It is not an active trust, which attaches to the property. The managing board of directors remain and continue to be the administrators of the fund; they may buy and sell, they may mortgage, and do anything within the powers of the corporation, which is done in good faith and for legitimate purposes. So long as they do nothing that is illegal, ultra vires, or dishonest, the courts will not disturb their action. The trust only attaches to the property, and becomes an actual, active, and existing lien upon the property, when the corporation and its assets have passed into the jurisdiction of a court of equity, and then any improper disposition of the property will be set aside and vacated, and this trust enforced. Weyeth H. M. Co. v. James Spencer B. Co., 15 Utah 110, 130-135; Hollins v. Iron Co., 130 U.S. 371; Bank of Montreal v. J. E. Potts S. and L. Co., 90 Mich. 345; Wood v. Dummer, 3 Mason, 308; S.C. F. Cas., 17944.

Note: This last case is the one in which Judge Story first announced the doctrine. Fogg v. Blair, 133 U.S. 534.

It is a universal and elementary rule of agency that an agent can not act both for himself and his principal in a transaction in which he is interested, that is, he can not deal with the principal through himself. And this principle applies to officers and agents of a corporation. A transaction made by an agent or officer of a corporation where the corporation is an interested party on one side and the agent on the other, is void. Victor M. Co. v. Nat. Bank, 49 P. (Utah), 828; Bank v. Gifford, 47 Iowa 575; Bear R. V. Orchard Co. v. Hawley, 50 P. (U. T.), 614; People v. Township Board, 11 Mich. 222; Clafin v. Farmers' Bank, 25 N.Y. 294; N.Y. Iron Mine v. Nat. Bank, 39 Mich. 645; San Diego v. San Diego R. Co., 44 Cal. 113; Andrews v. Pratt. 44 Cal. 317.

Where the agent of a corporation acting solely for the corporation in a transaction in which he is personally interested, the transaction itself is void; it lacks the elements of a contract; the minds of the contracting parties have not met upon any proposition. People v. Township Board, supra; Clafin v. Farmers' Bank, supra.

A corporation is a distinct entity, a thing apart and separate from any of its members. A corporation with one stockholder -- not being a corporation sole -- is, while an anomaly, nevertheless a thing which sometimes exists, and the fact that the corporation has but one stockholder is in no sense and under no circumstances different from any other corporation in character or attributes, and the owner of all the stock does not therefore own its property or any of it, and does not himself become the corporation as a natural person. Cook on Corporations (2d ed.), Sec. 709; Burton v. Hoffman, 61 Wis. 20; S.C., 20 N.W. 668; 1 Morawetz on Corporations, Sec. 232; Harrington, Rec. v. Connor, 51 Neb. 241; S.C.; 70 N.W. 911; England v. Dearborn, 141 Mass. 591; Winona, etc., R. v. St. Paul R. Co., 23 Minn. 379.

The rule that the identity of a corporation is not lost by the fact that a single individual becomes the owner of all its stock, is a rule of substance, and serves a proper legitimate purpose. The creditors of a corporation, upon insolvency or dissolution, have the right to resort to its assets, including its capital stock, for the payment of their debts, and...