133 Iowa 57 | Iowa | 1907
The Garrison Canning Company was incorporated in 1893, with articles providing that “ the general nature of the business to be done by this corporation shall be that of canning corn,_ vegetables, and anything that is canned or preserved as food,” and that “ the regular meeting of the stockholders shall be held on the second Tuesday of January in each year following this one, at which time there shall be elected from among the stockholders a board of directors consisting of five members, who shall have the general management of the business of the corporation.” In January, 1897, J. B. Beeve, defendant’s testator, was one of the board of directors and treasurer of the company. At a director’s meeting held in that month Beeve offered to borrow the balance in the treasury of the corporation until July 1st at 5 per cent, interest, to be credited to the company each month on the balance in his hands as shown by the books, paying out in the meantime such amounts as should be drawn by checks upon him for current bills. This proposition was accepted by the company and a passbook was kept by Beeve in which the company was credited with the amounts received from it and debited with the amounts paid out on its checks, and at the end of each month interest was entered up to its credit at the rate of 5 per cent, per annum on the balance as shown by such book. It appears that this arrangement was entered into because the canning company had no use for the funds on hand until the beginning of the canning season in July, and Beeve, who owned and operated a private bank in which the money was being kept on deposit, wished to make use of it in his business. Beeve died in June, 1897, having in his hands at that time under the arrangement above described nearly $8,000 of the company’s money. Soon after the death of Beeve the remaining directors of the company
In accordance with this order, the funds of the company were paid to it in full soon after the death of testator, and at a time when it was assumed by all parties that the estate was entirely solvent. Subsequently, however, it developed that testator was insolvent at the time of his death, and had been insolvent at the time the funds of the company were loaned to him, and it is now shown that, if the claim of the company is to be treated as a claim of the third class, not more than 60 per cent, thereof would have been paid on the final settlement of the estate had not the arrangement already described been made, and that, therefore, the directors who joined in the application for the order under which the company’s money was paid in advance will be liable to the estate
The grounds on which relief is asked are, first, that the claim of the company was, in fact, a preferred claim, payable in full out of the estate, without regard to other creditors, because the act of the directors in loaning the money to Reeve was ultra vires, and was also entered into as the result of a fraudulent concealment on Reeve’s part of his insolvent condition; and, second, that the arrangement by which the directors received the money in advance and agreed to make good any deficiency in the amount which should be found payable by the estate was entered into through mistake. The consideration of the questions thus raised involves the determination of a few questions of law which may be very briefly disposed of.
IY. As we find that the claim of the corporation against the estate of Reeve was in fact a claim for indebtedness incurred under the contract of loan, we have no occasion to discuss the question whether any mistake on the part of the directors in assuming the claim to be of the third class only, instead of a preferred claim, was sufficient to require the setting aside of this arrangement, and relief to the directors from their obligations to make good any shortage in the amount which should be found payable to the corporation out of the funds of the estate.
We reach the conclusion that plaintiffs were not entitled to any equitable relief, and the judgment of the trial court is affirmed.