179 Wis. 338 | Wis. | 1923
It is contended by plaintiff’s counsel that the execution of the trust deed in question was not duly-authorized by the board of directors or by the stockholders, and that the corporation could not legally execute the trust deed in question; and that in any event, being preferential as to certain creditors, it was void. In its findings of fact the court found:
“1. That the trust deed described in the plaintiff’s complaint was on the 18th day of June, 1919, duly executed on behalf of the plaintiff corporation by F. M. Opitz as president of the plaintiff corporation, and by J. P. Wolf as secretary thereof, and sealed with the corporate seal of said corporation, and was also duly executed by the defendant Julius J. Goetz, and was duly delivered to said Julius J. Goetz as trustee, which said execution and delivery on the part of said corporation, by said officers, were duly áuthorized by the majority of its directors and by the majority of its stockholders at a special meeting of the stockholders of said corporation duly called and held on the 17th day of June, 1919.
“2. That since the time of the execution and delivery of said trust deed said Julius J. Goetz as such trustee has had the charge and management of the property described in said trust deed in the manner provided by the terms thereof, during which time he has paid to its creditors from the proceeds of the property in his hands the first three in-stalments to be paid them by the terms of said trust deed, and a portion of the remaining instalments, including • the payment in full of several creditors having claims for small amounts, and has contracted certain other debts in the operation of said business which have not yet been paid.”
In effect it was found by the court that the execution of the trust deed was duly authorized.
The trust deed in question was not in the usual and ordinary form. It provided for certain preferences, among
The transfer was one primarily designed for. the benefit of creditors, • and any preference provided for therein to one or more creditors over others similarly situated would unquestionably have avoided the transfer at the instigation of a creditor, provided he had not participated in the transfer or in the proceeds of the assignment, or had not legally waived his rights as a creditor, or had been guilty of acts which would have estopped him from taking advantage of the transfer. No creditor, however, has appeared or objected to the trust deed, but on the contrary it appears that they have voluntarily not only accepted the dividends paid them by the trustee, but have expressly by an instrument in writing waived all rights which they might
The plaintiff corporation at the time of the execution of the deed was not a going concern. It was insolvent. It incurred obligations to creditors and others which it was unable to meet, and pursuant to the action of the petitioning creditors was forced into involuntary bankruptcy. All of its property and assets at the time of the execution, of the deed were in the hands of the trustee in bankruptcy, to be administered upon in the course of the bankruptcy proceedings in the federal court. The time for liquidation of the assets had practically arrived, and -it was only by the efforts of those representing the various interests involved that the release of the property was obtained from the bankruptcy court and the property saved from a forced sale. Furthermore, the trustee in bankruptcy held the property primarily for the benefit of creditors. No individual stockholder appeared before th'e court and made complaint with reference to the proceedings had. The very proceedings which finally culminated in the release of the bankruptcy proceedings and the execution of the trust deed were instigated and participated in not only by the representative of the creditors but also by the representative of numerous stockholders and by the duly authorized counsel of the .corporation. There is no evidence in the case which impugns the good faith of the corporation’s counsel. Lawton, an attorney at law, who now claims to be the president of the plaintiff corporation, and who, at least during a portion of the proceedings, was represented by able comise], now
Whether the provisions of the by-laws of the corporation with respect to a five days’ notice to' stockholders for the calling of a special meeting were complied with or not (and plaintiff contends that they were not), it appears clearly from the evidence that upwards of two thirds of the capital stock then outstanding was represented at the meeting in person or by proxy, and that all of sucíi stock so represented was voted in favor of the adoption of the resolutions.
The trust deed itself was drawn by the counsel for the corporation. It is ’ not contended that all of the stockholders did not receive notice of the meeting, but that the full five days’ notice was not given. If this be true, the corporation or the stockholders might have frustrated the entire plan if they had appeared timely and exercised their rights. However,'nothing was done towards challenging the validity of the trust deed until after the expiration of six weeks after the deed had been executed and the property transferred to the trustee and the creditors had consented to the new arrangement which resulted in a waiver-of all rights, to an immediate liquidation in the bankruptcy proceedings, and the distribution of the assets among the creditors, and after a large share of the assets had been distributed by the defendant Goetz, as trustee, to the creditors.
Under these circumstances the question naturally arises whether the corporation is in a position to take any advantage of such alleged irregularities. Under the provisions of sub. 1, sec. 1775, Stats., a corporation may, “by a vote of-the majority of the stock given at any regular meeting or at any special meeting duly called for the purpose, sell or convey or authorize to be conveyed all or any portion of the property owned by it, whether real, personal or mixed.”
In Witter v. Grand Rapids F. M. Co. 78 Wis. 543, 546, 47 N. W. 729, it was held:'
“That a corporation cannot repudiate its contract when it has received the benefit thereof, when such contract is not expressly prohibited by law, is well settled by the authorities, and it is equally well settled that when the stockholders assent to such contract and the avails of the contract are used for their benefit, they cannot avoid such contract. This has been so often held by the courts that it is almost unnecessary to cite authorities to sustain the proposition.” See, also, North Hudson M. B. & L. Asso. v. First Nat. Bank, 79 Wis. 31, 47 N. W. 300, and Eastman v. Parkinson, 133 Wis. 375, 113 N. W. 649.
In Eastman v. Parkinson, supra, in the opinion by the court rendered by the late Mr. Justice Marshall, it is said:
“In case of a statute or organic act of incorporation regulating the manner of giving corporate mortgages, which does not prohibit the making ■ thereof without complying therewith, and expressly or by necessary implication declare one made in violation thereof void and a mortgage being given without such compliance, the mortgagee acting in good faith and the corporation receiving and enjoying and retaining the benefit of the same, neither it nor its creditors nor stockholders, nor any one representing them or any of them, in the absence of some statutory authorization, can successfully impeach the transaction. A mere statutory regulation as to consent of the stockholders of a corpora*350 tion, as a condition of its mortgaging its property, is solely for the benefit of the stockholders. . . . This court and most courts hold that an ultra vires contract, one not within the scope of the corporate authority to make under any circumstances, which is no longer executory and is not tainted by fraud or clearly prohibited by statute, or condemned by sound public policy, cannot be impeached by the corporation or any one representing it; that the only remedy is one on behalf of the state to punish the corporation for violating the law.”
The trust deed in question has been executed in good faith; at least there is no evidence which would authorize a conclusion to the contrary. The property has been fully transferred and valuable rights of creditors have been surrendered. The contract is no longer executory, and the rights of an innocent third party, namely, the trustee under the trust deed, have attached, and the trustee, under, the powers duly granted to him, has acted in good faith, has incurred obligations, and has distributed a large portion of the assets. The deed itself is not in violation of an express statute, nor is it contrary to any express public policy, and the deed, even if ultra vires, can be attacked only by the state. Therefore it would appear clearly that the corporation is estopped from asserting any rights whatsoever on account of the execution of said deed.
But plaintiff’s counsel further contend that Opitz at the time of the execution of the deed was no longer the president of the corporation and that Wolf was not its secretary, and-that for that reason the trust deed is void. We have carefully examined the evidence on this point and are of the opinion that when the trust deed was executed both Opitz and Wolf were de jure officers of the corporation; but whether they were de jure officers or not, in any event they were de facto officers, and the deed was executed under such circumstances as to estop the corporation from denying their authority. 3 Fletcher, Corp. §§ 1846, 1838;
The most serious objection to the trust deed in question involves the contention made by plaintiff’s counsel that in the execution of this instrument the property and business of the corporation have passed beyond the control of the board of directors into the hands of a trustee acting under the advice and direction of a committee of three representing the creditors, and that the assumption of the power and control and disposition on the part of such trustee and com-' mittee amounts to an illegal delegation of the power of the board of directors. That it is ordinarily illegal for a board of directors to delegate the powers vested in them either by statute or the articles of organization is too plain for argument, and such delegation ordinarily is as illegal as is the delegation of power of a legislative body unless expressly authorized by law.
In Ames v. Goldfield M. M. Co. 227 Fed. 292, it was held (see syllabus):
“The stockholders of a corporation have a right to expect from their directors a conscientious consideration of every proposition which is presented, and which involves any interest of the company, . . . and the directors have no power to act as such individually nor can they delegate the • powers vested in them to act for the corporation to ány officers or men, even though they are the majority stockholders.”
This rule is fundamental and elementary; however,’it is not applicable to a situation such as is presented in the instant case. At the time of the execution of the trust deed the corporation, while still in existence, had no property whatever in its possession or under its control, and the officers and directors continued to function only in a nominal capacity. The corporate rights, including the rights of stockholders as to the assets, were merged in the bankruptcy proceedings, designed primarily for the benefit of creditors,
This case in all its aspects presents a situation where the
The relief prayed for in the complaint, under the facts and circumstances in this cáse, cannot be granted by a court of equity. The judgment of the circuit court must therefore be affirmed.-
By the Court. — Judgment affirmed.