Union Trust Co. v. Hendrickson
| Decision Date | 16 April 1918 |
| Docket Number | 8849. |
| Citation | 172 P. 440,69 Okla. 277,1918 OK 227 |
| Parties | UNION TRUST CO. v. HENDRICKSON et al. |
| Court | Oklahoma Supreme Court |
Syllabus by the Court.
The state alone can question as ultra vires the acquiring title to and holding real property by a corporation.
A mortgage executed by a corporation to secure a loan in the absence of fraud is valid, notwithstanding the fact that the corporation at the time of the execution of such mortgage was insolvent.
The records of the office of the state insurance commissioner pertaining to the status of an insurance company are not constructive notice of the contents thereof to one dealing with such insurance company.
Commissioners' Opinion, Division No. 3. Error from District Court, Oklahoma County; W. C. Crow, Judge.
Action by W. B. Hendrickson and others against the Union Trust Company. Judgment for plaintiff Hendrickson, and defendant brings error. Reversed and remanded, with directions to enter judgment for defendant and against plaintiff.
Ames Chambers, Lowe & Richardson, of Oklahoma City, for plaintiff in error.
Embry Crockett & Johnson, of Oklahoma City, for Oklahoma Fire Ins Co. Stuart, Cruce & Cruce, of Oklahoma City, for Occidental Fire Ins. Co. West & Hagan, of Oklahoma City, for Mollie N. Hendrickson, adm'x, etc., M. C. Reddington, L. S. Johnson, General Bonding & Casualty Co., A. L. Welch, Ins. Com'r of Oklahoma, Marie Kimpel, and J. A. Baker.
This action was commenced by W. B. Hendrickson, one of the defendants in error, against the Union Trust Company, a corporation, plaintiff in error, in the district court of Oklahoma county, to cancel a certain mortgage executed by the Oklahoma Fire Insurance Company to the Union Trust Company, to secure the payment of a loan of $56,000.
The facts necessary to determine the questions brought up here are: That on the 12th day of April, 1912, the Oklahoma Fire Insurance Company borrowed $56,000 from the Union Trust Company, and executed 56 negotiable notes in the sum of $1,000 each, and executed the mortgage in controversy on lots 1 and 2, in block No. 20, Oklahoma City, Okl., to secure payment of said sum. The plaintiff Hendrickson is a judgment creditor of the Oklahoma Fire Insurance Company and seeks to have the mortgage canceled and the property covered by said mortgage rendered subject to his judgment claim. The plaintiff urges as grounds for cancellation of the said mortgage that the action of acquiring and holding title to said property by the said Oklahoma Fire Insurance Company was ultra vires; that at the time of the execution of said mortgage the said Oklahoma Fire Insurance Company was insolvent and in process of liquidation; that said mortgage was made for the purpose of defrauding the creditors of said Oklahoma Fire Insurance Company. It also appears that the Union Trust Company had a judgment against the fire insurance company, for the foreclosure of its mortgage, and was proceeding to sell said property. The plaintiff also asks that the sale of said property be enjoined and that a receiver be appointed to take charge of said property. The trial court rendered judgment in favor of the plaintiff Hendrickson, canceling and annulling the mortgage and appointing a receiver to take charge of the property. From this judgment the Union Trust Company appeals.
The questions involved on appeal may be stated, generally, that the judgment of the trial court is not sustained by the law and the evidence.
The principal grounds urged in the trial court by plaintiff to have the mortgage canceled were: (1) That the act of the Oklahoma Fire Insurance Company in acquiring and holding title to said real estate was ultra vires; (2) that the Oklahoma Fire Insurance Company was insolvent, and that the mortgage of said real estate to the Union Trust Company by the Oklahoma Fire Insurance Company was preferred credit; (3) that at the time of the execution of said mortgage said Oklahoma Fire Insurance Company was insolvent and in the process of liquidation; (4) that the records of the office of the insurance commissioner show that the Oklahoma Fire Insurance Company was insolvent and in the process of liquidation, and that such records were constructive notice to the defendant the Union Trust Company.
It is hard to conceive the reason for the plaintiff's interposing the ground that the acts of the corporation the Oklahoma Fire Insurance Company in acquiring title to the real estate involved were ultra vires, and that the fire insurance company acquired no title to said property. To have such acts declared void by the court certainly would not be any benefit to the plaintiff, as it would have the effect of decreasing the assets of the company subject to the payment of the liabilities of said company rather than increasing its assets; but whatever the purpose of the plaintiff might be, or whether or not the acts of the fire insurance company in acquiring and holding the property affects his rights or are ultra vires, it is not necessary to determine, as this question can be disposed of on other grounds.
The law seems to be well established by the great weight of authority that, if a corporation is not authorized to acquire real estate except in a limited amount for prescribed purposes, the acquisition of additional property cannot be questioned by a private individual, but can only be questioned by the state. Thompson on Corporations (2d Ed.) §§ 2840, 2390; Russell et al. v. Tex. & P. Ry. Co., 68 Tex. 646, 5 S.W. 686; Southern P. R. Co. v. Orton (C. C.) 32 F. 457; Natoma Water & Mining Co. v. Clarkin, 14 Cal. 544; Louisville School Board v. King, 127 Ky. 824, 107 S.W. 247, 15 L. R. A. (N. S.) 379; Clark & Marshall on Corporations, § 228.
The next contention is that said mortgage is invalid for the reason that the Oklahoma Fire Insurance Company was insolvent at the time of its execution.
It is undisputed that the Oklahoma Fire Insurance Company negotiated the loan and procured $56,000, secured by mortgage, for the purpose of paying pressing obligations but, giving the acts of the corporation the construction of preferring creditors, it would not render the mortgage invalid. In the absence of an express provision in its charter, or statutory restrictions, an insolvent corporation has the same right to prefer its creditors and to pay its obligations as an...
To continue reading
Request your trial