16 N.J. Eq. 229 | New York Court of Chancery | 1863
On the eleventh of April, 1860, “ The Camden Iron Manufacturing Company ” executed, under their corporate, seal and the signature of their president, to Henry Allen, then being a director of said company, two bonds, with warrants of attorney to confess judgments thereon; one for $2399.75, payable on the day of its date, the other for $10,000, payable in five days thereafter. Judgment in the Camden Circuit Court was entered upon .the one bond on the fourteenth of April, and upon the other on the fifth
1. That the affidavit upon which the judgments were entered, was insufficient.
2. That the board of directors, by whom the order was made for the execution of the bonds and warrants, was not duly organized; a quorum not being present.
3. That Allen, as a director, could not legally vote in favor of an order to execute the bonds to himself.
4. That the order of the directors authorizes the execution of a bond only, and confers no authority to execute a warrant of attorney.
5. That the bonds and warrants are not countersigned by the secretary, as required by the by-laws of the company.
6. That the judgments are fraudulent as against creditors, because they were given to a director of the company, whereby he obtains wrongfully a preference over other creditors equally meritorious.
7. That the judgments were confessed to Allen when the company was insolvent, or in contemplation of insolvency, for the purpose of giving him preference over other creditors.
So far as these objections relate to the regularity of the judgments, or to the validity of the instruments upon which they are founded, they constitute no ground for the interference of this court. The defendant is in possession of the judgments of a court of' common law, having jurisdiction of the subject matter. If the instruments upon which those judgments were entered, were without consideration or invalid, or if the judgments themselves are unauthorized or illegal, the remedy for a party aggrieved would be by ap
Whether the judgments are irregular or erroneous, are exclusively questions of law. So long as they remain in force, they must be received in this court as valid. It was suggested upon the’ argument, that this court would at least give to the complainant an opportunity of having these questions tested at law. This course the complainant may adopt of his own volition, without the assent or direction of equity. And if the judgments are opened or reversed at law, he will not require the further aid or direction of this court.
The only ground upon which equity can interfere by avoiding the judgments is, that the judgments are fraudulent as against the creditors of the corporation.
The alleged ground of fraud is, that the company being insolvent, the judgments were confessed to a director of the company for the purpose of giving him preference over other creditors having equally meritorious claims.
In considering this question, it will be assumed that the entire sum for which the judgments were confessed, was due from the corporation, and that there was no actual fraud in the transaction.
The mere fact that the creditor was a director of the company, does not render the transaction fraudulent. There is nothing tvhich forbids either the members or directors of a corporation to make contracts with it, like any other individual ; an'd when the contract is made, the director stands, as to the contract, in the relation of a stranger to the corporation. The Pres't, M. Co. of the B. & D. Turnpike Road v. Myers, 6 Serg. & R. 12; Gordon v. Preston, 1 Watts 385; Central Railroad v. Claghorn, 1 Speer’s Eq. R. 545; Angell & Ames on Corp., § 233.
The mere fact, therefore, that the security was given and the judgments confessed to a director, cannot destroy its validity. Mor can it be denied that a corporation, as well as an individual, may, independently of the statute, confess judgments in order to prefer creditors.
The objection results from the provisions of the statute. It is obvious that the policy of the statute for the prevention of frauds by incorporated companies, Nix. Dig. 371, is to preserve the entire property of an insolvent debtor for equal distribution among all its creditors. It declares all transfers of property made after insolvency, or in contemplation of insolvency, null and void as against creditors. It requires that in the payment of creditors and distribution of the funds of an insolvent corporation, the creditors shall be paid in proportion to the amount of their respective debts, excepting mortgage and judgment creditors, when the judgment has not been by confession for the purpose of preferring creditors. Its obvious requirement is, that where the judgment is confessed for the purpose of preferring creditors, the claim shall have no priority over other debts.
There is little controversy as to the facts of the case. The bill charges that at the time the bonds and warrants were executed, the company was insolvent, or on the eve of becoming so; and that its condition was well known to the officers of the company, and particularly to Allen, who was a director and the secretary of the company; and that the bonds and warrants were executed with the view of giving Allen a preference over other creditors. The answer does not deny that the company was insolvent, nor the defendant’s knowledge of that fact, nor that the judgments were confessed for the purpose of giving him a preference over other creditors. The answer alleges that the defendant made loans and advances to the company, not knowing or
I think the facts are satisfactorily established, that at the time of the execution of the bonds and warrants, upon which the judgments are confessed, the company was insolvent, or on the eve of insolvency; that its financial condition was well known to Allen, who was a director and the secretary of the company; ami that the judgments were confessed in