140 Mich. 589 | Mich. | 1905
Complainants, in April, 1900, filed a judgment creditors’ bill, in which, aside from formal averments, it is stated that prior to March 31,1900, defendant Detroit, Lake Shore & Mt. Clemens Railway was operating a suburban street railway through the city of Detroit and various townships to the city of Mt. Clemens, and possessed of a large amount of personal property, and that defendant Mills was “principal stockholder of the same, and president of the corporation;” that on the day last
The facts do not appear to be in dispute. The capital stock of the selling company was $300,000, of which defendant Mills held $125,000, and he was a director and president of the company. There were $350,000 of bonds secured by mortgage upon the assets of the company. These assets were worth not more than $341,000. The total indebtedness of the company to Mr. Mills, who had made large cash advances to the company, and to others, including the bonded debt, at the time of the sale of the road, was upwards of $450,000. It did not pay operating expenses, had been unsuccessful in securing certain terminals, and was in losing competition with another railway company. Mr. Mills negotiated a sale of property, excepting certain items of personalty, for $340,000, payable $50,000 cash, and $290,000 in bonds of the buying company. He submitted to the company the proposition to sell, and, as a part of it, a list of the debts of the company which he would pay and discharge. This included the debt which the company owed to himself, and debts to others, to pay which he was personally liable as surety for the company. The total was in excess of the selling price. At a meeting of stockholders at which every share of stock (3,000) was represented, 2,298 shares were voted in favor of'accepting the proposal. The directors, with a single exception, ratified and sanctioned the action of the stockholders. Mr. Mills took the proceeds of the sale, and discharged not only the scheduled debts, but all the debts of the company, excepting about $16,000. Complainants are among those who were not paid. None of the stockholders received a penny. It is conceded that Mr. Mills actually paid, for the selling company, much more than $340,000 of its actual obligations, including all of those
It is contended in this court that Mr. Mills should be held to be trustee of the proceeds of the sale for the benefit of all creditors of the judgment debtor. This contention is based upon the facts: (1) The insolvency of the selling company at the time sale was made; (2) the position occupied by Mr. Mills as officer of the company; (3) the actual receipt by Mr. Mills of the proceeds of the sale. The argument which is made proceeds upon the premise, also, that Mr. Mills made a sale to himself. That, plainly, he did not do. The company made the sale, and, as has been stated, it directed the disposition of the purchase price. The proceeds of the sale were not sufficient to pay all of the debts. Unless it was bound, under the circumstances, to apportion this sum to all of its creditors, the disposition which it did make cannot be questioned by these judgment creditors. Complainants claim that the company, or Mr. Mills for it, was bound to so apportion the proceeds of the sale. They rely also upon Miner v. Ice Co., 93 Mich. 97 (17 L. R. A. 412). In that case, proceedings were instituted by a stockholder who asserted fraud, abuse of trust, and misappropriation of corporate funds, and whose complaint was held to sustain equitable jurisdiction to reform the abuses complained about, even to the extent of winding up, if necessary, the affairs of the corporation. The case at bar, however, requires, in our opinion, the application of the principles discussed and applied in Bank of Montreal v. Lumber Co., 90 Mich. 345, and this view denies to complainants the relief they ask for.
The decree is affirmed, with costs to appellee.
