232 F. 895 | W.D.N.Y. | 1916
The bill of complaint filed herein by a creditor firm, suing in its own behalf and in behalf of all other creditors similarly situated, substantially avers that the defendant, Bickford Bros. Company, though solvent, owes large amounts of money, now due and payable, to many creditors scattered throughout the United States, which it is unable to pay; that a multiplicity of suits are threatened; that its assets will he dissipated; that two certain creditors, in violation of an agreement between other creditors and stockholders, have caused to be appointed a liquidating agent, who threatens to sell the real and personal property at a sacrifice, to the detriment of the stockholders and other creditors; and that preferences are likely to be secured unless receivers are appointed by this court to- administer the assets, wind up the business of the defendant, and distribute the
Thereupon solicitor for complainant, solicitor for defendant being present, moved the appointment of receivers. Such appointment being made, the assets and property of the defendant went into the possession of the receivers who have since by order of this court conducted the business. Subsequently an order was applied for and granted to show cause why the said appointment of receivers should not be vacated, and why the answer interposed by the president should not be stricken out and the proposed answer be permitted to stand in its place as requested by a majority of the directors.
It now appears that the verification of the answer by the president of the defendant company was without the authority or knowledge of a majority of the directors, and that the appearance by counsel for defendant, at the time of the appointment of the receivers, and the filing by him of an answer in the name-of the company, joining in the prayer of the bill, was voluntary and unauthorized by the directors, two of whom are the creditors mentioned in the bill as having procured the appointment of a liquidating agent to dispose of the assets of the corporation.
The affidavits disclose that on March 4, 1915, the defendant, though having assets largely in excess of its liabilities, was indebted in the amount of $34,000 to numerous creditors, among them the Traders’ National Bank of Rochester to the extent of $11,000, and John Boyle & Co., Incorporated, to the extent of $10,000, and in this situation the then board of directors procured from a majority of the creditors a one year’s extension of time for payment in writing. In consideration of such extension by the Traders’ National Bank and John Boyle & Co., Incorporated, and advances to be made by the bank, the stockholders transferred to them a majority of the capital stock, and, as three members of the board of directors resigned, one Marks, vice president of the Traders’ National Bank, Fredericks, a director thereof, and one Randall, treasurer of John Boyle & Co., - Incorporated, were elected in their places. According to the terms of- the agreement the stock was to be transferred to permit the transferees as trustees “to support and maintain the business of said company in the interest of all parties interested in said corporation as creditors, stockholders, or otherwise,” and at its termination was to be reassigned to the owners. On February 10, 1916, the said directors determined to liquidate the affairs of the defendant company, and pending such liquidation efforts were at once made, with fair success, to procure from the creditors further extensions of time for payment. The affidavits submitted on behalf of the directors deny, that suits are threatened by creditors, that the extension agreement has been violated by them, that preferences have been given, or that the sale of real estate at a sacrifice is impending, and assert that the company in the year 1915 lost in its business nearly $8,500, and the directors, a majority being present and voting, at a meeting presided over by the president of the
This action was not brought to abrogate the trust agreement by which the directors acquired their stock, or to enjoin them from threatened acts of mismanagement, but was brought to conserve the assets of the defendant for the benefit of contract -creditors who had not reduced their claims to judgment; and receivers should not be appointed herein merely upon the consent of the president or other officer of the corporation regardless of the wishes of the stockholders or directors of the corporation.
The latter case though in bankruptcy is not inapt, Judge Ray therein holding that the president of a corporation has no inherent power to take the requisite steps to have the corporation declared a bankrupt; tiiat a voluntary petition in bankruptcy filed on behalf of a corporation failing to show any corporate action by the board of directors authorizing the president to file such petition or to- execute it in the name of the corporation was not enough to warrant adjudging the corporation bankrupt. The fact that in the case at bar the president for many years had personal charge of the business does not suffice to empower him to take the steps he did, for his control and management were plainly curtailed by the present directors immediately following
It is true that in Walters v. Anglo-American Mortgage Co., supra, and in Nesbit v. North Georgia Electric Co., supra, the facts were differentiable. Indeed, the court held in the one case that the bill was entirely without merit, and that the action was instituted for the purpose of wrecking the company and obtaining control of its business, and in the other that the president, with whose consent the receiver was appointed, had an interest adverse to the corporation; but nevertheless the broader rule controlled the-decisions, namely, that the admission of the averments of the bill by the president of a corporation, accompanied by his consent to the appointment of a receiver to wind up its affairs, was not notice to the corporation, since it did not appear that the president, had authority to do so, or that the stockholders of the corporation acquiesced therein or affirmed his action.
The answer interposed by the president of the defendant corporation is stricken out, the order of February 23, 1916, appointing receivers, is vacated, and leave is given the directors to intervene for the purpose of answering the bill. Provision for the payment of the fees and other expenses of the receivership may be included in the order of vacation.