Alexander v. Relfe
74 Mo. 495
Mo.
1881
Check Treatment

I.

Sherwood, C. J.

The right of the receiver to maim tain this proceeding in his own name, is established by the recent case of Gill v. Balis, 72 Mo. 424, and the decree-made under the authority of section 41 of the insurance-act is sufficiently comprehensive for th,e present purpose. The receiver, in instances such as this, represents both the creditors and stockholders, and is to be regarded as the trustee for them. High on Rec., § 314. He cannot, it is true, overthrow any valid act of the corporation which he represents; but when acts have been done in fraud of the rights of creditors, he may litigate for their benefit, though the act in question be valid as to the corporation itself; in which case he holds adversely to the corporation. High on Rec., § 315, and cases cited.

The liability of the defendant corporation is the chief point demanding discussion. No hesitancy can be felt, here, that the acts charged and proven ; acts which resulted. *517in despoiling the Columbia Life Insurance Company of its assets, and thus depriving its creditors of opportunity to resort to that trust fund for satisfaction of their claims, were acts which never could have been done, but through and by means of the corporate action of the defendant. If such acts had been those of individuals, of their liability hut one opinion would be entertained. Shall it he said that such a wrong as this record discloses, a wrong which would be promptly redressed if perpetrated by individuals, 'is to go unredressed because it takes shelter behind chartered formalities ?

II.

If this question is to be answered affirmatively, it would cast a lasting reproach on the administration of public justice. But no such response will be returned, since it is now well settled that a corporation is equally responsible as an individual for the wrongs it commits, and will not be heard to deny, or allowed to evade its liability on the ground that those wrongs resulted from the exercise of powers not granted by the law of its organization. Thus it is said in N. Y. & N. H. R. R. Co. v. Schuyler, 34 N. Y. 49 : “Another important legal proposition in the case is so clear upon principle, and so distinctly settled by authority, that nothing but confusion can flow from its discussion. It will bear no more than plain enunciation. A corporation is liable to the same extent and under the same circumstances as a natural person for the consequences of its wrongful acts, and will be held to respond in a civil action at the-suit of an injured party, for every grade and description of forcible, malicious or negligent tort or wrong which it commits, however foreign to its nature, or beyond its granted powers, the wrongful transaction or act may be. * * No court would hear the corporation assert that its wrongful act was beyond its chartered powers, and, therefore, ineffective to charge it with the injurious consequences of the fraud.” Other authorities, equally explicit *518in the enunciation of the same doctrine, are .cited by counsel for plaintiff. And some of those authorities point out the marked distinction between tortious and contractual liability, for acts ultra vires; (Cooley on Torts, 119; Field on Corp., § 333;) the corporation being answerable in the. former, but not generally in the latter case.

III.

The circuit court has found that “the managers of the Association, at the outset, entertained no purpose to wrong the creditors or policy holders of the Columbia Life Insurance Company.” But this finding does not alter the responsibility of the defendant, through whose corporate action, a wrongful act, intentionally committed, has occasioned the damage of which the plaintiff' complains. For in such cases, it is the injury done which constitutes the gravamen of the relief sought, and not the motive which prompted that injury. Cooley on Torts, 98. And though the proof may not establish that defendant, or those who. represented it, its directors, who are regarded as identical with it, (Lee v. Sandy Hill, 40 N. Y. 442,) committed an actual fraud, in doing the wrong for which redress is asked, yet it is clearly shown that the wrong committed was a constructive fraud, because done in contravention of that public policy of this State, which forbids the assets of corporations to be wasted, cancelled or in any manner withdrawn from the reach of creditors. Fraud of this description — constructive fraud — though not originating in any actual evil design, having for its purpose the perpetration of injury on others, is yet equally reprehensible with positive fraud, and equally prohibited by law, as within the same reason and mischief as acts and contracts done malo animo. 1 Story Eq. Jur., §§ 258, 259, 260, 261; Cooley on Torts, 473. “ On the foot of the fraud,” therefore, equity can afford relief asked in the name of the receiver, as well as upon the ground of avoiding a multiplicity of suits, whicff *519would have to be brought, if each creditor were compelled to seek a several redress for his own injury.

In consequence of these considerations, it is altogether immaterial whether the acts in question are to be held as falling within the category of actual or constructive fraud. It is sufficient to stty that those acts were a fraud on the law, the settled policy of which is to sedulously protect the capital stock of corporations, and to steadily annul all arrangements or devices whereby that policy can be thwarted. Thompson on Stock., § 201. In the forcible language of Mr. Justice Hunt: “ The capital stock of a moneyed corporation is a fund for the payment of its debts. It is a trust fund, of which the directors are the trustees. It is a trust fund to be managed for the benefit of its shareholders during its life, and for the benefit of its creditors in the event of its dissolution. This duty is a sacred one and cannot be disregarded. Its violation will not be undertaken by any just minded man, and will not be permitted by the courts. The idea that the capital of a corporation is a foot-ball to be thrown into the market for the purposes of speculation, that its value may be elevated or depressed to advance the interests of its managers, is a modern and wicked invention. Equally unsound is the opinion that the obligation of a subscriber to pay his subscription may be released or surrendered to him by the trustees of the company. This has been often attempted, but never successfully. The capital paid in, and promised to be paid in, is a fund which the trustees cannot squander or give away. They are bound to call in what is unpaid, and carefully to husband it when received.” Upton v. Tribilcock, 91 U. S. 47.

Viewing the acts complained of as a fraud on the law, because a fraud on the rights of creditors, we cannot yield assent to the idea advanced that those acts were “ simply business transactions, such as daily occur in the world of trade.” If such transactions, by which creditors are deprived of that trust fund on which the law has told them *520to rely, are indeed of frequent occurrence, the sooner the courts of the country set the seal of their condemnation upon such“ simple business transactions,” the better. And it must be apparent that if the acts of the two corporations which resulted in the cancellation and retirement of the capital stock, are to be regarded as lawful, then no liability could attach in consequence thereof, either to the corporations or to their agents or directors. So that the affirmance of the legality of those acts on the part of the corporations, of necessity, closes any “ rational avenue of redress,” even against those individuals “ by whom the spoliation was effected or promoted.” We are not prepared to accept as sound, either the premises or its palpably obvious conclusion.

IV.

The next point for consideration is the measure of the damage which has been sustained. Upon full considera- • tion of the matter, we fully concur with the circuit court, that- the draft for $900,000, which at one time constituted a part of the assets of the Columbia Life Insurance Company, and was withdrawn by the defendant corporation, is, with legal interest, the proper measure of damages in this case.

V.

But even if the damages adjudged by the circuit court were excessive, no such point was made in the motion for new trial j no opportunity was given that court to correct the erroneous excess, if any there was, and it is too late to raise the point in this court for the first time. Sweet v. Maupin, 65 Mo. 68, and cases cited.

VI.

And finally, equitable jurisdiction waé not ousted because either a judgment in money was asked or rendered. Equity frequently allows of such recoveries in order to avoid circuity of action. Post v. Ætna Ins. Co., 43 Barb. 351; *521May on Ins., § 565; Carpenter v. Mutual Safety Ins. Co., 4 Sand. Chy. 408. The judgment of the court of appeals is reversed, and that of the circuit court affirmed.

All •concur, except Ray. J., not sitting.

Motion for Rehearing Overruled.