Hutchinson v. Green
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Opinion of the Court
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Black, J.
This case is an outgrowth of Ward v. Davidson, 89 Mo. 445 . By the decree rendered in that case, certain directors of the Keokuk Northern Line-Packet Company were removed from office. Thereafter, and at a special election held on the seventeenth of November, 1880, pursuant to the order of the circuit court, four directors were elected to fill the unexpired term of the removed directors. There had been a disagreement of long standing between the officers and stockholders-as to the management of- the affairs of the company, which resulted in two parties, one known as the Davidson, or majority, party, and the other as the Cray, or minority, party; the removed directors were, of the former. By cumulative voting at the special election the minority party elected a sufficient number of directors to give them a majority in the board for the time being. On the fifteenth of January, 1881, and four days before the annual election of directors, notice of which had been given, the board resolved to, and did, make a voluntary assignment of all of the property of the company for the benefit of all of the creditors. At the annual election the majority party again acquired the ascendency in the boad, and the plaintiffs then, for themselves and other stockholders, brought this suit *373 against the directors who voted for the assignment. They allege that the defendants combined to destroy the property and business of the corporation, and in furtherance thereof made the assignment, and pray that the deed of assignment be set Aside for the alleged fraud, for other equitable relief, and for damages.
The defendants, in making the assignment, acted in part, at least, upon a report made by a committee appointed to examine into the affairs of the company. That report clearly enough shows that the company was unable to pay its debts in the usual course of business. But the correctness of that report was then, and is now, denied. The new board caused another report to be made, by a new committee, in which the debts are placed at §161,944.07, and in this respect the two reports are not materially different. In the last, the. effects are valued at §234,229.35; thus leaving a surplus over liabil-. iti.es of §72,285.62. No account is taken of capital stock, amounting to seven hundred and fifty one thousand dollars, paid in full. The evidence as to the value of the assets is conflicting and unsatisfactory; many of the witnesses having but little knowledge of the property about which they testified. In the last report warehouses are placed at §47,197.87, and cash and bills receivable appear to be estimated at nine or ten thousand dollars. The evidence shows that the warehouses were poor affairs, scattered along the river from St. Louis to St. Paul, on property not owned by the company, and were of no greater value than eighteen thousand dollars. The bills receivable were of little value, and the company had no money on hand worthy of mention. The best steamboats, barges, and wharfboats were mortgaged to at least forty-seven thousand dollars. Some of the boats and barges were wrecks, all were out of repair, and to put them in repair would require an outlay of! forty thousand dollars. New boats and barges were required to carry on the former business of the company. *374 The loss in business for 1880 bad been sixty thousand dollars. Suits were pending against the company for large amounts. These plaintiffs and those acting in concert with them had, at the date of the assignment, suits against the company amounting to ninety thousand dollars, ' some commenced in foreign jurisdictions by attachment. Prom the evidence, as a whole, we conclude the entire property of the company was not worth more than one hundred and ninety thousand dollars under the most favorable circumstances, and as a means of raising ready money, it was not equal to the debts. In short, it is clear the corporation was insolvent, and wholly unprepared to enter the spring trade.
On the other hand, the defendants, as directors, voted^for and caused the assignment to be made in opposition to the known and expressed will of a majority of the stockholders. They knew their power to control the affairs of the corporation must cease at the coming election, only four days'distant. They also agreed among themselves to make the assignment before presenting the matter openly at a meeting of the directors, and then they had a deed previously prepared, with a notary public at hand to take the acknowledgment as soon as the resolution should be passed. Any, inference of fraud which might be drawn from these circumstances, if they stood alone, is overcome by the other facts in the case; for the defendants knew that the affairs of the corporation were growing from bad to worse. They saw the efforts of the plaintiffs, and those acting with them, to appropriate the property of the company to the payment of their debts, in disregard of the other creditors. Enough has been said to show that the Packet Company was in no condition to prosecute its business — was insolvent. Under these circumstances, the directors, having a due regard for the creditors in general, could not do otherwise than make an assignment. *375 The alleged fraud, we conclude, is not proved, but clearly disproved.
It is further insisted that the board of directors had no power to make the assignment without the consent of the stockholders. A corporation may, like an individual, make an assignment under the statute of this state relating to voluntary assignments. Shockley v. Fisher, 75 Mo. 498. By whom, then, is the power to be exercised ? By the directors, the stockholders, or by both % Where the powers of a corporation are vested in a board of directors, they may, unless restricted, do whatever the corporation might. Field on Corp., secs. 146 and 152. Now, while, by express statute, a vote of the stockholders of these corporations is essential to enable them to increase or diminish the stock, to change the business, to issue preferred stock, and to convert bonds into stocks, still, in general, article 8, of chapter 21, Revised Statutes, contemplates that the business will be conducted by a board of directors. Section 930, among other things, provides that “ the property or business of the corporation shall be conducted and managed by directors.” Certain it is there is nothing in the statute under which this corporation was created, and by which it is governed, or in its articles of association, or. bylaws, which limits or restricts the powers of the directors in the disposition of the property. The corporation then has the power to make an assignment, and that power being vested in the directors without restriction, it must follow that they, and they alone, are authorized to make it. It is the duty of the directors to care for the creditors, and when the corporation becomes crippled and unable to meet its obligations in the usual course of business, it is competent for the directors to make an assignment, and this they may do without the consent of the stockholders. This conclusion has the support of adjudications of this and other courts. Chew v. Ellingwood, 86 Mo. 260 ; Dana v. The Bank of the *376 United States, 5 W. & S. (Pa.) 223; DeCamp v. Alward, 52 Ind. 473 . The directors may, with propriety, consult with the stockholders, but under the circumstances just stated, and in the exercise of their best judgment, they may make the assignment even against the expressed will of the stockholders. Of the cases relied upon by the appellants, that of Abbott v. American Hard Rubber Co., 33 Barb, 580, was not an assignment for the benefit of creditors. There the trustees attempted, through the form of a sale, to secure to themselves the property of the corporation at the expense of the other stockholders. The sale was voidable, as to the stockholders nqt consenting, though a majority agreed to the transaction.
No question of the validity of a voluntary assignment of an insolvent corporation, made for the benefit of the creditors, was involved in the case. The same may be said of Northern Railroad v. Concord Railroad, 50 N. H. 175, for there the purpose of the contract, brought in question, was to transfer the management of the affairs of one company to the other for a period of five years. The assignment was upheld in Eppright v. Nickerson, 78 Mo. 482 , though the stockholders did not authorize or assent to it. In that case the assignment was not assailed by any stockholder, and the court, by way of concession, made some remarks which seem to imply that consent, on the part of the stockholders, is essential to give validity to an assignment as against them, but as to these remarks, enough was said in Chew v. Ellingwood, supra.
The judgment in this case is, therefore, affirmed.
Henry, C. J., absent; the other judges concur.
How later courts describe this case
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(“[W]hen the corporation becomes crippled, and unable to meet its obligations in the usual course of business, it is competent for the directors to make an assignment, and this they may do without the consent of the stockholders.”)
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