Court Opinion

ID: 8634816
Source: CourtListenerOpinion
Date Created: 2022-11-24 19:43:29.509474+00
Date Added: 2024-06-11T16:55:53.680079
License: Public Domain

BLATCHFORD, District Judge.
In this case I have arrived at the following conclusions:
(1.) The petition in bankruptcy having been filed March 19th, 1869, the title of the as-signee relates back to that date, and the decree of foreclosure made on the 20th of March, 1869, in a suit to which he was not a party, is of no effect to prejudice his rights.
(2.) If the mortgage was unauthorized and void, as being ultra vires, it was such a fraud on the general creditors of the corporation, that the plaintiff can impeach it.
(3.) The holders of two-thirds of the stock consented to the mortgage. The 75 disputed shares belonged to Pirsson. as surviving trustee. They had been originally lawfully issued as full paid stock, and passed from the parties to whom they were issued, and went into the hands of Pirsson and Freeman, as trustees, as working capital, for the benefit of the stockholders, to be disposed of under the direction of the board of trustees, in such manner as they should deem for the best interests of the company. Freeman had died. A sale of the 75 shares, on credit, to H. O. Freeman, was a lawful sale. It was approved by the board. It was made in good faith, according to the testimony. Even if the 75 shares could not be represented by H. O. Freeman, the consent of Pirsson, and of the other four members of the board of trustees was given to the mortgage, and so the 75 shares, as represented by Pirsson, or by the individuals composing the board, must be counted among the consenting shares.
(4.) The defendants, at the time the mortgage was given, owned only 28 shares, not enough to make the two-thirds, if the 75 shares be excluded.
(5.) The consideration of the mortgage, so far as appears, was advanced by the defendants in good faith, and went to the uses of the corporation.
(6.) The mortgage is not impeached as being in violation of the bankruptcy act [of 1867 (14 Stat. 517)].
(7.) Construing the consent as applying only to a mortgage of the real estate, no consent was necessary to enable the' corporation to mortgage the personal property, or to assign the patents. The mortgage did not cover the patents. They were assigned by a separate instrument, and, even though it be taken that they were really assigned only as security, yet the corporation had power by law to convey its personal, ¡property, which power includes the power to mortgage, or to transfer as security. A mortgage is none the less a conveyance because it is defeasible. The greater includes the less, unless the less ^expressly excluded.
(8.) The suit to set aside the mortgage wholly cannot be maintained, but it must be regarded as, together with the letters patent assigned, a security for such moneys, if any, as the corporation owed the defendants when the mortgage was given, and such moneys as the defendants paid for or advanced to the corporation on the faith of the mortgaged property and the patents. If it be doubtful whether such moneys, with interest, exceed the proceeds of the mortgaged property and of the patents, the amount due to the defendants must be ascertained on proof.
[See Case No. 3,039.]