78 Fla. 611 | Fla. | 1919
Lead Opinion
— In November, 1917, E. P. Williamson exhibited his bill in the Circuit Court for Lake County against Groveland Realty Company, The Florida Development Corporation, both Florida corporations, Henry L. Bressler as administrator o.f the estate of George N. Bressler, deceased; M. A. Bressler, A. M. Bressler, Neva Mae O’Neill and her husband, M. C. O’Neill, H. L. Bressler, J. W. Beach, Geo. T. Cann as Trustee for creditors of F. D. Finsley and D. B. Hull.
The allegations of the bill in substance were that in 1913 the complainant and George N. Bressler and J. W. Beach and others were stockholders of the Florida Development Corporation, which was organized for the purpose of dealing in lands and which held a large acreage of lands in Lake County; that the corporation was without funds to pay the proper demands upon it or to properly conduct its business, and owed large sums of money, about $38,256.00, which, according to Exhibit “E” attached to the bill, it owed to about forty persons, the complainant holding $24,667.47 of the debt; that the stockholders
The bill alleges that pursuant to the agreement a list of the liabilities and contracts of the corporation was delivered to Bressler, deeds were executed and delivered to him conveying all the property of the corporation. Copies of these deeds were attached to the bill and made parts of it as Exhibits B, C and D; that complainant was the president of the corporation at that time, but that he did not reside in Florida; that Bressler and J. W. Beach were directors of the corporation and the active men in charge of its business.
It is alleged that complainant is not informed whether Bressler had paid any of the other debts of the corporation and that the bill was filed in behalf of complainant
It is alleged that this arrangement above recited was urged upon the complainant and the other stockholders by Bressler and Beach, who represented that it was for the best interests of all parties, and upon such representations complainant assented to the agreement. It is alleged that prior to the consummation of this arrangement Bressler and Beach privately entered into a contract dated the same day, May 1st, 1913, of which, however, the complainant was ignorant, in which it was recited that Bressler had acquired certain lands in Lake County from Tinsley and Hull; H. S. Budd and R. F. E. Cooke; E. E. Edge and T. E. O’Keefe, and all the lands of the Florida Development Corporation and all its assets, negotiable instruments and personal property, and' by which it was agreed that Bressler should receive “net to him in cash, less all expenses, commissions, office force and necessary incidental expenses pertaining to the sale of said land contracts, real and personal property acquired (same not to include the liability of the Florida Development Corporation assumed by George N. Bressler, in the sum of thirty-three thousand two hundred- seven and 81/100 ($33,207.81) from the date of this agreement, the sum of one hundred thousand dollars ($100,000.00) from the sale of the lands held by him, by contracts, deed or otherwise, acquired from the Florida Development Corporation, Tinsley & Hull, Budd & Cooke and E. E. Edge as aforesaid, he will pay unto the said ’party, of the second part (Beach) 25% of the gross receipts received thereafter as aforesaid from the sale of said land at retail, less all expenses, commissions, office force and necessary incidental expenses pertaining to the sale of said land (same not to include the liability of the Florida Development Corpora
Another clause of this agreement provides that Bressler was in no event to be liable to Beach for any part of the “25% hereinbefore referred to until” Bressler had'first received his one hundred thousand dollars “as aforesaid from the sale of said lands.” After which Beach “shall be entitled to twenty-five per cent of all property, both personal and real, acquired as herein set forth after reasonable time expires from date.” It was also agreed that if Tinsley & Hull, Budd & Cooke or T. E. O’Keefe should foreclose any of their mortgages on any of the lands and such lands should be.lost to the parties on account of such foreclosure, then Bressler’s one hundred thousand dollars to be received by him before Beach should come into his interest, should be reduced by five dollars per acre for all lands so lost to the parties by foreclosure. Provision was also made in the contract for any loss that Bressler might sustain on account of the contracts made by the Florida Development Corporation which he had assumed, affecting lands conveyed by the corporation, the title to which might fail. It was provided that if Bressler should sell his interests in the property before he received the $100,000.00 he should pay to Beach the sum of three thousand dollars as full payment of all his interest or claim under the contract. Beach agreed to use his influence and good will in the sale and colonization of the lands and was to receive a commission on all sales effected by him. The bill alleges that at the time this contract was made Beach was the manager and secretary of the Florida Development Corporation; that Beach at the time of filing the bill was suing for large amounts under the contract made with
The relief prayed for is in the alternative. An accounting is asked for against the representatives of Bressler’s estate of the amount due by him to the creditors of the Florida Development Corporation whose debts he assumed and agreed to pay, that such representatives be Required to pay the amount found to be due and that all the property conveyed to Bressler by the corporation be deemed and held to be a trust fund for the payment of the debts of the corporation, or that the complainant and those who are mentioned in the list of the corporation’s creditors which was delivered to Bressler be decreed to have a lien upon the property conveyed by the corporation to Bressler as aforesaid; or that the deeds executed by the corporation to Bressler be set aside and cancelled for failure of consideration and that such of the property therein described as may remain unadministered or that was not sold by Bressler, shall be declared to revert to the Florida Development Corporation and be held and administered by the coart and the proceeds thereof applied to the payment of the debts of the Florida Development Corporation and what may remain be turned over to the proper officers of the corporation; that a receiver be appointed to take charge of all the property described
Upon application by complainant the court, on January 15, 1918, appointed a receiver, IT. C. Duncan, to take charge of the assets as prayed for in the bill. A bond was given by him in the sum required by the order and was duly approved by the clerk. It appears that IT. C. Duncan was the attorney for all the defendants who bear the name of Bressler and for the Groveland Realty Company and the defendant McNeill, on the 28th day of November, 1917.
From the order appointing the receiver the defendant J. W. Beach appealed on February 15, 1918. The errors assigned are: First, entering the order and decree dated January 15, 1918; second, appointing IT. C. Duncan receiver and authorizing him to take charge of the assets as prayed for in the bill.
It is argued by appellant that the relief asked in the third alternative should not be granted because failure to pay the agreed price for a tract of land or failure to redeem a promise which constituted the consideration for a conveyance furnishes no ground for the cancellation of the conveyance. This doctrine, thus generally stated, we think is sound, and this court has in other cases, as cited by counsel for appellant, approved it.
Tu the case of Harrington v. Rutherford and Keibel, 38 Fla. 321, 21 South. Rep. 283, this court, speaking through Mr. Chief Justice Mabry, said: “The authorities establish the rule that ordinarily a promise to do something in the future, though made by one party as a representative to induce another to enter into a contract, will not amount to a fraud in a legal sense, though the promise subse
In the transaction disclosed by the bill, however, there was something more than a bare promise to pay a debt, the relations of the parties were a little closer than strangers trading at arms length; the relation of the parties Bressler and Beach to the property of the corporation was a fiduciary one considered from the standpoint of the creditors of the corporation. As officers of the corporation it was their duty to manage' the property to the best interests of the creditors of the corporation, to the end that their just claims and demands be paid in full.
Bressler and Beach were not only stockholders, but were officers of the corporation in management of its business in the direction of its affairs, they knew presumably its obligations, the value of its assets and the condition of its properties.
The complainant was both officer and creditor to the corporation. He was by far the largest creditor of them all. He lived out of the State, leaving the management of the corporation’s affairs to Bressler and Beach, trusted to their judgment, believed in their representations, knew little of the true conditions and was guided by their statements to the agreement by which they acquired all the properties of the corporation to be divided between them according to the terms of an agreement which they had privately made between themselves, but did not reveal to their association or to the creditors of the corporation in whose interest they pretended to act and in whose interests they were in law required to act to the end that their just debts and demands be paid and satisfied. Bressler and Beach as directors of the corporation bore somewhat the relation to it* of trustees and while occupying such
When one accepts the position of director of a corporation he contracts to give diligent attention to its concerns and to be faithful and honest in the discharge of the duties which the position imposes. He is not supposed to be infallible and does not stipulate against error, but he will not be permitted to speculate with corporate funds or property to his personal gain nor by suppressing information concerning the value of corporate properties be permitted to acquire them as purchaser at a small price to the consequent injury of the corporation or its creditors. See note 55 L. R. A. 751.
A very general doctrine'of the American courts is: that the properties of a corporation are to be deemed a trust fund for the payment of the debts of the corporation, so that the creditors have a lien upon it or right of priority out of it in preference to any shareholder of the corporation. See 10 Cyc. 653; Crandall v. Lincoln, 52 Conn. 73; Beck v. Henderson, 76 Ga. 360; Union Mutual Life Ins. Co. v. Frear Stone Mfg. Co., 97 Ill. 537; Spear v. Grant, 16 Mass. 9; N. Y. City Nat. Trust Co. v. Miller, 33 N. J. Eq. 155; Tinkham v. Borst, 31 Barb. (N. Y.) 407; Marshall Foundry Co. v. Killian, 99 N. C. 501, 6 S. E. Rep. 680; Morgan Co. v. Allen, 103 U. S. 498, 26 L. Ed. 498; Sawyer v. Hoag, 17 Wall. 610, 21 L. Ed. 731.
While the statement that the directors of a corporation are trustees for its creditors may be technically inexact, it is at least correct in the sense that they are bound to exercise diligence and good faith in dealing with the properties of the corporation to the end that the creditors ’
In the case of Sanger v. Upton, 91 U. S. 56, text 60, 23 L. Ed. 220, the Supreme Court of the United States, through Mr. Justice Swayne, said: “The capital stock of an incorporated company is a fund set apart for the payment of its debts. When debts are incurred a contract arises with the creditors that it shall not be withdrawn or applied otherwise than upon their demands until such demands are satisfied. The creditors have a lien upon it in equity. If divested they may follow it as far as it can be traced and subject it to the payment of their claims except as against holders who have taken it bona fide for a valuable consideration and without notice. It is publicly pledged to those who deal with the corporation for their security." As regards creditors, there is no distinction between money due for shares of stock in a corporation and any other assets which may form a part of the property and effects of the corporation.
No argument' is necessary to apply these principles to the ease at bar. Bressl'er and Beach as directors of the corporation represented to the President and other stockholders that the corporation had no funds with which to .conduct its business or to pay its obligations, that it was to all intents and purposes insolvent, and induced the president and stockholders to agree to the proposition which meant the sacrifice of the corporation’s assets that the creditors might be paid. This was the one and only purpose of the transaction, which purpose was perfectly consistent with the interests of creditors and met the requirements of law and equity, but Bressler and Beach sought profit out of the transaction. Their knowledge of
The complainant was entitled to the relief prayed for to cancel the deeds and declare a lien upon the corporation’s lands for the payment of its debts.
The appointment of the receiver we think was within the discretion of the court under the case made. The selection of Mr. H. C. Duncan, who was attorney of record for the Bresslers, was not in accordance with the rule announced in the case of Lehman et al. v. Trust Co. of America, 57 Fla. 473, 49 South. Rep. 502, in that Mr. Duncan’s relations to the Bresslers as their attorney left
The order or decree is affirmed.
Rehearing
On Petition for Rehearing.
— In the petition for rehearing it is asserted by counsel that the court in its opinion made a statement of fact that is not sustained, by the allegations of the bill.
This rather stringent review is not supported by the . record.
In the first place, the record shows that the bill had been one file for more than three, months and a half before the' order appointing a receiver was made. That a notice was given by complainant’s counsel to the parties defendant or their counsel by letter posted on November 28, 1917, two months after the bill was filed, of the intention to apply to the chancellor for the appointment of a receiver.
So far as the record discloses there was no demurrer to the bill, no answer interposed, nor is there evidence in the record that a pto confesso order was taken against the defendants, but the court appointed a receiver.
In making this order the court below considered that the bill contained equity. Now the petitioner through his counsel appealed from the order appointing a receiver
We announced in the opinion a proposition with which counsel seem to have no quarrel. It is one which appears to us to be perfectly consonant with the principles of right dealing between man and man, and that is, “where one accepts- the position of director of a corporation he contracts to give diligent attention to its concerns and to be faithful and honest in the discharge of the duties which the position imposes.” Now what does the record disclose? Williamson, the complainant, .although president of the Florida Development Company, did not reside in Florida, but Bressler and Beach “were directors and the active men in charge of the business and operations” of the corporation.
The chancellor was also mindful of the allegation that Williamson was not as well posted about the affairs (business and operation.) of the corporation as Bressler and Beach, the active men in charge. The bill definitely alleges that Bressler and Beach w~ged the complainant to enter into the agreement with Bressler, and that they represented to your orator and the other stockholders of said corporation” that it was for “the best interests of all parties concerned,” and that Williamson was “moved and induced by the representations.” It is definitely alleged that at this very time the “corporation was then without sufficient funds with which to pay the proper demands- made upon it, and without necessary funds to properly conduct its business, and owed large sums of money.” The chancellor assumed, and we think correctly,
Now Avhat does the record disclose as to the conduct of Bressler and Beach in this connection? They had entered into an agreement as referred to in the bill, which agreement had for its object the exploitation of the corporation’s assets, and other properties which were added to them, for the personal profit and advantage of the two directors of the corporation, which agreement so the bill alleges the complainant had no knowledge of,, and did not learn of its existence until long subsequent thereto. In the petition for rehearing counsel state: “It is of course probable that both Beach and Bressler thought
A mere casual reading of the contract shows, we think, that Bressler and Beach contemplated making a large profit from- the sale of the lands. The only difference between this court and counsel upon this point seems to be in the use of the adjective. We did not overlook the fact that the “contract between Beach and Bressler embraced lands in addition to those which Bressler derived from the Florida Development Corporation.” The opinion specifically refers to the fact and mentions the names of the persons from whom Bressler acquired such lands. But we did not mention how many acres were so acquired nor what was paid for them; indeed neither the bill nor the contract gives that information; the contract merely recites that the lands so acquired lay in certain sections, and no mention is made of their cost. There