Title: Equitable Life & Cas. Ins. Co. v. Inland Printing Co.

State: utah

Issuer: Utah Supreme Court

Document:

484 P.2d 162 (1971) 26 Utah 2d 19 EQUITABLE LIFE & CASUALTY INSURANCE COMPANY, a Utah corporation, Plaintiff and Appellant, v. INLAND PRINTING COMPANY, a Utah corporation et al., Defendants and Respondents. No. 12255. Supreme Court of Utah. April 22, 1971. Walker E. Anderson, Salt Lake City, for plaintiff-appellant. *163 J. Duffy Palmer, Felshaw King, of King & King, Clearfield, F. Robert Reeder, of Parsons, Behle, Evans & Latimer, Bruce G. Cohne, Salt Lake City, for defendants-respondents. ELLETT, Justice: The appellant herein held a note signed by the defendant corporation and secured by a chattel mortgage and also a mortgage on realty. The present action is to foreclose the mortgages and to recover the amount of the deficiency, if any there be, from the officers and directors of the corporation because of alleged negligent mismanagement of the corporate business. The question to be determined on this appeal is what rights, if any, does a creditor of a corporation have against officers and directors for negligent mismanagement of its affairs. The appellant does not claim that there was any fraudulent or deceitful acts committed by any of the respondents. It does allege in its second amended complaint that the individual defendants "did cause or allow Inland to be conveyed, sold or transferred to Taggart in violation of the Utah Bulk Sales Act" and that later, after Taggart conveyed Inland back to these defendants (corporate officers and directors), said defendants sold to defendant Mulvay in violation of the Bulk Sales Act. The Bulk Sales Act was repealed by Chapter 154, Article 10, Section 10-102, Laws of Utah 1965. The dates of these alleged sales are not given; but even if the sales were prior to the repeal of the statute, we do not see how the appellant is affected by a violation thereof, for as to it the sales would be void, and it could enforce its remedies against the purchaser the same as it could against the seller to the extent of the goods transferred. If the sales were subsequent to the repeal of the Bulk Sales Act and in violation of Chapter 6 of the Uniform Commercial Code, known as Bulk Transfers, the appellant is not hurt because Section 70A-6-105, U.C.A. 1953 (Replacement Vol. 7B), makes the sale ineffective against a creditor who is not paid or given 10 days' notice of the transfer. The complaint alleges that "Inland" was transferred. It does not state that the assets of Inland Printing Company were transferred, and we are at a loss to know whether the appellant was alleging a transfer of stock of the corporation from the defendants to Taggart and Mulvay or a sale of the assets of the corporation to them. The law relative to mismanagement by, and negligence on the part of, officers and directors of a corporation is set out in 19 Am.Jur.2d, Corporations § 1350, as follows: We think the trial court correctly held that the second amended complaint did not state a cause of action against the individual defendants, the judgment is affirmed with costs to the respondents. CALLISTER, C.J., and TUCKETT, HENRIOD and CROCKETT, JJ., concur.