121 F. 956 | 8th Cir. | 1903
In this case it appears that Justus G. Richey, one of the appellees, was j'oined as a defendant in a bill of complaint against the Plattsmouth Gas & Electric Light Company and the city of Plattsmouth, which was filed by the New Hampshire Savings Bank and the New Hampshire Banking Company, with a view of foreclosing a mortgage on a gas and electric light plant located in the city of Plattsmouth, Neb. Richey demurred to the bill of complaint so far as relief was sought against himself. His demurrer was sustained, and a decree was entered directing a dismissal of the bill
The mortgage under which the complainants below derive all their rights, and which they seek to have foreclosed, was executed by the Plattsmouth Gas & Electric Light Company, a corporation of Nebraska, on May 8, 1890, to secure bonds to the amount of $30,000, bearing interest at the rate of 6 per cent, per annum, payable semiannually. These bonds were sold to the appellants (the New Hampshire companies) who now own the entire issue. A default occurred in the payment of the interest on these bonds on June 1, 1901, which led to the institution of the present suit to foreclose the mortgage and obtain other relief against the mortgagor company and the city of Plattsmouth, the details of which need not be stated at the present time.
It seems that subsequent to the execution of the aforesaid mortgage, and on October 23, 1896, the Plattsmouth Gas & Electric Light Company leased its entire plant for the manufacture of gas and the production of electricity to the city of Plattsmoüth, where the plant was located; doing so in pursuance of the provisions of a city ordinance. The property was so leased for a period of 4 years and 15 days, the term to begin November 1, 1896, and to end on November 15, 1900, at an annual rental of $2,800, which was payable to the lessor company in monthly installments of $233.33 each. In addition to the sum aforesaid, the city agreed to pay the interest on the outstanding bonds of the lessor company, amounting to $1,800 per annum, until November 15, 1900, and also1 to pay all taxes which might thereafter be assessed against the property so leased to the city The lease contained a further provision whereby the city was entitled to hold and operate the demised property from November 15, 1900, until June 1, 1910, if it desired to do so, on condition that it paid the interest on the outstanding bonds of the lessor company, amounting to $1,800 per annum, during that period. It was further agreed that the city might terminate the lease on 60 days’ notice at any time after November 15, 1900, or buy the property at any time after that date for the sum of $1, by assuming and agreeing to pay the outstanding mortgage indebtedness of $30,000; and that it should have the option to buy the property on the terms last stated, or to continue said lease on the terms heretofore mentioned from November 15, 1900, to June 1, 1910.
The bill of complaint contained other allegations to the following effect: That the lease in question was intended by the lessor company as an out and out sale of all of its property, assets, rights, and-franchises to the city; that the sum of $2,800 agreed to be paid yearly to the lessor company was not intended to be paid or received as rent; that the city, on the delivery of the lease, took possession of •the demised property and all of the materials and supplies then on
The bill contained other allegations of the following character: that Justus G. Richey, C. D. Jones, and S. B. Hovey were officers and directors of the Plattsmouth Gas & Electric Eight Company, and the sole owners of its capital stock; that Richey owned one-half of the stock of said company when the mortgage which the complainants seek to have foreclosed was executed; that he received from the Plattsmouth Gas & Electric Eight Company one-half of the sum of $11,333.33, which was paid by the city to that company in pursuance of the provisions of the aforesaid lease; that the laws of the state of Nebraska made it the duty of the Plattsmouth Gas & Electric Eight Company to give notice annually in some newspaper published in the county of Cass, in the state of Nebraska, of the amount of all of its existing debts, which notice should have been signed by the president of the company and a majority of its directors ; that this notice was not published pursuant to law, and that by reason of its nonpublication the stockholders of the company, under the laws of the state, became individually liable for the indebtedness due to the complainants in proportion to the amount of stock by them respectively held; and that the defendant Richey was likewise liable for one-half of the sum of $11,333.33, which he had received from the aforesaid company. In view of the premises the complainants prayed for a decree of foreclosure, and for certain other relief against the city of Plattsmouth, Neb., and, in addition thereto, they demanded a personal judgment against Richey to the full extent of his liability in both of the respects heretofore explained.
The complainants rely for a recovery against the defendant Richey mainly upon the allegation contained in their bill that he received from the Plattsmouth Gas & Electric Eight Company one-half of the sum of $11,333.33, which was paid to that company by the city as rent for the demised property during the term beginning November 1, 1896, and ending November 15, 1900. In support of this contention it is insisted that the rents received by the lessor company constituted a trust fund, which could.only be applied lawfully to the payment of •corporate debts; and that, inasmuch as the fund was distributed among stockholders in the form of a dividend, it may be followed into their hands, and recovered from them by the mortgage bondholders. The complainants do not assert that the lien of their mortgage extended to and embraced the rents which they seek to recover from.
We are unable to concur in that view of the law. It is now well settled that no such relation as that of trustee and cestui que trust exists between a corporation and its general creditors. So long as a corporation is solvent, and remains in control of its property and assets, it may deal therewith and dispose of the same like an individual, subject only to such limitations upon its powers as may have been imposed by its charter. The general creditors of a corporation are not, like the beneficiaries in a trust, the equitable owners of the corporate property, nor have they any greater interest therein than the creditors of natural persons have in the property of their debtors. Creditors of both kinds are entitled to insist that their debtors shall not make a voluntary or otherwise fraudulent conveyance of their property; but beyond this, in the absence of an express lien created by contract,.they have no interest, legal or equitable, in their debtor’s property, or right to control that free disposition of the same which is incident to ownership. It is true that when a corporation becomes insolvent such an event places its property ‘ from that time forward in such a condition of quasi trust that it must be applied first to the payment of its corporate debts before there can be any distribution among stockholders; but, as was remarked by the Supreme Court in Hollins v. Brierfield Coal & Iron Co., 150 U. S. 371, 383, 14 Sup. Ct. 127, 130, 37 L. Ed. 1113, the trust which arises in case of insolvency “is rather a trust in the administration of the assets after possession by a court of equity than a trust attaching to the property, as such, for the direct benefit of either creditors or stockholders.” Some general expressions of the following purport are to be found in the books, which have been called to our attention, namely, that the “assets of a corporation are a trust fund for the payment of its debts upon which creditors have an equitable lien both as against the
Now, aside from all other considerations, there is no specific allegation contained in complainants’ bill that when the rents in question were received by the mortgagor company, and paid over to its stockholders, it was at that time insolvent. The allegation on that point is that when the bill was filed, to wit, in October, 1901, the mortgagor company had then become insolvent because during the period of its tenancy the city of Plattsmouth had failed to supply new tools and machinery in place of such tools and machinery, forming a part of the mortgaged plant, as had been worn out by use. The bill does not show that the mortgagor company was insolvent when the lease was executed and the rents were distributed, but, for aught that appears, it had as much property at that time as it ever had, and fully as much as it possessed when the complainants’ mortgage was executed and the bonds in suit were purchased. In view of the fact that the bill fails to disclose a state of insolvency when the rents were distributed in the form of a dividend among stockholders, and in view of the fact that it likewise fails to disclose any want of good faith or a fraudulent purpose on the part of the gas and electric light company in making such distribution, we conclude that it does not appear that when the rents were paid over to the stockholders they had become impressed with a trust in favor of these complainants, or that they passed into the hands of the stockholders cumbered with any lien in their favor. This view of the case is not sustained by any appropriate allegations of fact contained in the bill, and the claim to a decree on that ground must accordingly be overruled.
It must be further borne in mind that this action, so far as the stockholders are concerned, is a suit to enforce a constructive trust, and this cause of action has been joined with one against the mortgagor company and the city of Plattsmouth to obtain the foreclosure of a mortgage. The very gist of the complaint, so far as the stockholders are concerned, is that the payment of these rents to them was a wrongful and fraudulent act on the part of the company, and that the receipt of the same by the stockholders constitutes them trustees of the sums so received for the benefit of corporate creditors. The causes of action which have thus been joined in the same bill
In this court counsel for the appellants do not seem to rely with much confidence on their demand for a judgment against Richey based on the ground that the gas and electric light company failed to publish a notice annually of all existing debts, as it was directed to
It is unnecessary, we think, to consider the second ground upon which a judgment is demanded against the defendant Richey at greater length. It seems clear that’ under the local decisions, which, in a matter of this sort, are binding upon this court, the liability which the complainants seek to impose on the defendant Richey because the requisite notice of all existing liabilities was not published cannot be enforced in this proceeding, because the complainants have not as yet reduced their demands to judgment and exhausted the corporate assets. Upon the whole we conclude that the judgment below was for the right party, and that it should be affirmed. It is so ordered.