Union Coal Co. v. Wooley
| Decision Date | 30 November 1915 |
| Docket Number | 4122. |
| Citation | 154 P. 62,54 Okla. 391,1915 OK 992 |
| Parties | UNION COAL CO. ET AL. v. WOOLEY. |
| Court | Oklahoma Supreme Court |
Rehearing Denied Jan. 11, 1916.
Syllabus by the Court.
A motion to make a pleading more definite and certain must point out wherein the pleading is indefinite and uncertain and, if it fails to do so, it is not error to overrule it.
A motion of this kind is addressed largely to the discretion of the trial court, and a ruling thereon will not be reversed except for an abuse of such discretion.
A director of an insolvent corporation is a trustee for the creditors of such corporation, and will not be allowed to prefer an antecedent unsecured debt of other creditors of such corporation who would lose the entire amount due them if such preference is allowed to stand.
Where the directors of an insolvent corporation, upon the sale of its entire property, received a large sum of money, some of which they used to pay debts of the corporation, but paid themselves about $8,000 for sums they claimed to be due them from the corporation, but paid nothing to the plaintiff, a court of equity has jurisdiction of an action to charge such directors as trustees, and this remedy is not abolished by the statute defining the obligations and liabilities of directors.
Where in such case the directors receive the purchase price of the property of the insolvent corporation in cash, and mingle it with their own funds, it is not error to render a personal judgment against them in favor of a creditor of the corporation who has received nothing on his debt.
Where a party has an action for a tort pending against a corporation which is afterwards reduced to judgment, he is a creditor of such corporation before the actual rendition of the judgment. Rev. Laws 1910, § 2893.
Where there is neither a consolidation nor a merger, and one corporation buys all the property of another, for full value and without fraud, the property will pass to the purchasing corporation free from the claims of creditors of the selling corporation.
In such case the money paid for the property of the selling corporation passes to its directors, and they hold it as a trust fund for the payment of creditors, and the residue, if any, for the stockholders, and the purchasing corporation is not bound to see to the proper application of the purchase money by the directors of the selling corporation.
Notice to the purchasing corporation in such case that the selling corporation is insolvent is not notice that the directors intend to misapply the purchase money.
Commissioners' Opinion, Division No. 2. Error to District Court, Pittsburg County; Preslie B. Cole, Judge.
Action by Tom Wooley against the Union Coal Company, a corporation, and others. Judgment for plaintiff, and defendants bring error. Affirmed in part and reversed in part.
Where one corporation buys all the property of another, for full value and without fraud, the purchasing corporation acquires title free from claims of creditors of the selling corporation.
This was an action by the defendant in error, plaintiff below, against the plaintiffs in error, defendants below, to hold the defendants liable to the payment of a judgment for $5,697.12 recovered by him against the Adamson Coal & Mining Company. The findings of fact by the trial court clearly state the questions raised, and are as follows:
"That on May 7, 1909, plaintiff filed suit in the district court in and for Pittsburg county, at McAlester, for the sum of $20,000, against the Adamson Coal & Mining Company; thereafter on or about the 14th day of April, 1910, said plaintiff recovered judgment in said court against the Adamson Coal & Mining Company in the sum of $5,687.12, and that on or about the 4th day of August, 1909, the Adamson Coal & Mining Company sold all its property and assets to the Union Coal Company, and that said Adamson Coal & Mining Company ceased to do business, having disposed of all its property.
That the consideration paid by the Union Coal Company for the property of the Adamson Coal & Mining Company was $28,900. Out of this sum the Union Coal Company retained $12,783.04, and paid the same to various creditors of the Adamson Coal & Mining Company, and said Union Coal Company turned over and paid to the Adamson Coal & Mining Company the sum of $16,116.96. Out of this sum the stockholders of said Adamson Coal & Mining Company, Peter Adamson, Jr., Maudie Adamson, and A. Z. Rudd appropriated to their own use and benefit about $8,000 of said sum.
The court further finds that at the time said sale was made by the Adamson Coal & Mining Company of its assets and property to the Union Coal Company, and for about three years prior thereto, said Adamson Coal & Mining Company was insolvent and in a failing condition, and the same was known to the Union Coal Company at the time it bought the assets and property of the Adamson Coal & Mining Company.
The court further finds that the Union Coal Company knew of the claim of plaintiff against the Adamson Coal & Mining Company at the time it bought the property of said Adamson Coal & Mining Company, and that it knew said suit was pending and knew of the claims and demands of the plaintiff against the Adamson Coal & Mining Company."
There was judgment for the plaintiff below against both defendants, and from this judgment the defendants below bring the case to this court by petition in error and case-made.
Hurley, Mason & Senior, Fred A. Fulghum, W. J. Gregg, and Carl C. Magee, all of Tulsa, for plaintiffs in error Adamson and Rudd.
Wright & Boyd, of McAlester, for plaintiff in error Union Coal Co. Geo. W. Sutton, of Muskogee, and W. N. Redwine, of McAlester, for defendant in error.
DEVEREUX, C. (after stating the facts as above).
Separate petitions in error and assignments of error are filed on behalf of the Adamsons and Rudd and the Union Coal Company, and, as they present different questions, we will first consider those filed on behalf of the Adamsons and Rudd.
Their first assignment of error is that the court erred in overruling a motion to make the petition more definite and certain. This motion is as follows:
"To require the plaintiff to make his allegations of fact which constitute his cause of action against these defendants more definite and certain."
It was not error to overrule this motion, because it did not point out wherein the petition was indefinite and uncertain ( Grimes v. Cullison, 3 Okl. 268, 41 P. 355, Cockrell v. Schmitt, 20 Okl. 207, 94 P. 521, 129 Am. St. Rep. 737, and Kuchler v. Weaver, 23 Okl. 420, 100 P. 915, 18 Ann. Cas. 462), and also a motion of this character is largely addressed to the discretion of the court, and a ruling thereon will not be reversed, except for an abuse of such discretion (Ft. Smith & Western R. Co. v. Ketis, 26 Okl. 696, 110 P. 661).
These plaintiffs in error also filed a demurrer on the grounds: (1) That the petition does not state facts sufficient to constitute a cause of action; (2) that the joinder of parties defendant is defective; and (3) because several causes of action are improperly joined. The questions raised by the demurrer are disposed of in our decision on the main question presented, which is whether a director of an insolvent corporation can prefer his debts to the prejudice of other creditors, and this depends on whether a director is a trustee for creditors. This question has never been expressly decided in this state, and, looking to other jurisdictions, the authorities are hopelessly in conflict.
In Curran v. Arkansas, 15 How. 304, 14 L.Ed. 705, it is held that the assets of an insolvent corporation are a fund for the payment of its debts, and, if they have gone into the hands of other than bona fide purchasers, leaving corporate debts unpaid, such persons take the property charged with a trust in favor of creditors, which a court of equity will enforce.
In Drury v. Cross, 7 Wall, 299, 19 L.Ed. 40, it appeared that a corporation had conveyed its property so as to protect its directors against liability as indorsers for it, and in condemning the transaction the court says:
In Sutton Mfg. Co. v. Hutchinson, 63 F. 496, 11 C. C. A. 320, in which the decision was rendered by Circuit Justice Harlan, it is held that, when a private corporation is dissolved or becomes insolvent, and determines to discontinue the prosecution of its business, its property is thereafter affected by an equitable lien or trust for the benefit of creditors, and that the duty in such case of preserving it for creditors rests upon the directors or officers to whom has been committed the authority to control or manage its affairs, who, if not technically trustees, hold the corporate assets in a fiduciary relation to creditors.
In 10 Cyc. 803, it is said:
"The assets of an insolvent corporation being a trust fund for creditors, which necessarily means for all creditors, the directors in charge of such assets stand in the position of trustees for the creditors, and cannot so deal with them as to prefer themselves as creditors, for any past indebtedness of the corporation in favor of such directors, unless at the time when such past indebtedness was created it was agreed that they should be so preferred."
On page 805 it is said:
"In two or three American...
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