64 F. 497 | U.S. Circuit Court for the Northern District of Illnois | 1894
Treating the intervening petition as amended as proposed,--which I do not understand to be opposed, —the case stands thus: On the 17th of April, 1893, the Lehigh & Franklin Coal Company was wholly and entirely insolvent, bad ceased to do business, and its property in the state of Wisconsin had during the preceding week been attached by creditors, of all of which the complainant had knowledge. The company was indebted to I he complainant at that time; and on that date the president of the coal company executed a note, payable on demand, without grace, for $(>6,336.25, for an indebtedness not then matured. For the indebtedness to the bank one A. C. Tates, a director of the coal company, was personally and individually liable, the indebtedness being in the form of notes and drafts upon which Yates was maker, indorser, or guarantor, and was covered by a, general guaranty running from Tates to the bank. The president, of the coat company delivered the note to the solicitors of the coal company, who placed the same in the hands of an attorney, Mr. Mon1, connected in business and occupying the same office with said solicitors. On the 18th of April, Air. More commenced suit in this court upon such note in favor of the bank against the coal company. Contemporaneously therewith the coal company tiled its appearance, pleaded the general issue, filed a stipulation waiving a trial by jury and consenting to an immediate hearing, and thereupon judgment was immediately en
I am of opinion that tbis case is ruled by Manufacturing Co. v. Hutchinson (lately decided by tbe court of appeals in this circuit) 63 Fed. 496. I cannot but regard tbe proceedings resulting in the judgment in favor of tbe bank, complainant, as an attempt to give a preference to its debt over tbe debts of tbe other creditors of tbe coal company, as surely so as if tbe president of tbe coal compbny bad executed to tbe bank a mortgage of tbe property of tbe coal company. At that time tbe coal company was no longer a going concern. It bad ceased to do business. Its tangible property was largely, if not wholly, in the custody of tbe officers of tbe law. Tbe note to tbe bank, complainant, was given for a debt not then matured,- and was made presently payable. It was given without authority of tbe board of directors. While the president of a going concern may have authority to execute obligations in behalf of bis company in tbe usual conduct of its business while it is a going concern, when it ceases to do business, and has become bankrupt, such function of its president ceases, and be has no right, without authority of the board of directors, to usurp their function, and to grant preference at bis pleasure to tbe creditors of bis company. In such case his occupation is gone, except in respect to tbe care of tbe property in the interest of all the creditors of tbe company. Tbe debt to tbe bank, complainant, according to tbe allegations of tbe intervening petition, was secured by tbe personal responsibility of one of the directors of tbe coal company. In Manufacturing Co. v. Hutchinson it was ruled that it was incompetent for tbe directors, tbe corporation being insolvent, to secure or to give preference to such a debt with a view to absolve one of its directors. Certainly tbe president of an insolvent corporation, without authority of tbe board of directors, cannot exercise any such function. I am therefore clear in opinion that tbe demurrer must be overruled.