Court Opinion

ID: 6240814
Source: CourtListenerOpinion
Date Created: 2022-02-17 20:44:14.332857+00
Date Added: 2024-06-11T08:58:11.531115
License: Public Domain

Opinion by
Mb. Justice McCollum,
In the appeal of the Imperial Refining Co., Limited, from the decree complained of in this case, we held, at this term, that the auditor appointed to distribute the fund arising from the sale of the property described in the mechanics’ claims, on which judgments were recovered, could not restrict the lien of such judgments to a portion of that property, on the ground that the curtilage designated by the claimants was more than sufficient for the necessary uses of the oil refinery. We need not repeat here what was said there, respecting the powers of the auditor, the effect of the judgments, or the proceedings authorized by the act of 1836 for the ascertainment of the curtilage on the failure of the owner to define it before the commencement of the building. It is obvious that, if the owner and lien creditors acquiesce in the claimants’ designation of it, the auditor must accept it, and their neglect to employ the remedies provided bjr *153statute for a modification of it is, in its legal consequences, the same as acquiescence. The decision referred to is conclusive against the appellant on all questions raised by the specifications of error founded on the refusal of the auditor to disregard the designation of the curtilage contained in the record of the judgments, and such specifications are therefore overruled. The remaining specifications relate to the auditor’s denial of the appellant’s claim that certain bonds held by him are entitled to participate in the distribution of the fund above mentioned, to the exclusion of the general creditors. In view of the conclusion we have reached on the preceding questions, the amount involved in this contention is comparatively small, as the balance of the fund is less than $1,400, and the claims upon it, exclusive of the demands of such creditors, exceed $20,000.
It appears that, on Oct. 12,1887, the Keystone Oil Co., then insolvent, executed a mortgage in the sum $75,000 upon its property, known as the oil refinery, to secure the payment of 75 bonds of $1,000 each, which the company proposed to issue, professedly for the purpose of raising money to pay its debts. Twenty-five bonds were issued to W. H. Wise, trustee, or bearer, 22 of which were distributed in the month of October, 1887, as follows: 15 on the 13th to J. B. Smithman, a director and president of the Keystone Co.; 3 on the 15th to the Oil City Savings Bank; 2 on the 17th to the Manufacturers’ Gas Co., and 2 on the 24th to the Imperial Refining Co., Limited. For these bonds the insolvent corporation received in money $1,000 from Smithman, and $135 from the Gas Co., and credits to the amount of $20,865 on the claims which the respective purchasers held against it. Before this distribution of the bonds was completed a bill for the dissolution of the corporation was filed, and, on Nov. 3, 1887, a receiver of its effects was appointed. The appellant received the Smithman bonds on Dec. 30, 1890, under circumstances which justify the conclusion that he has no greater equity than the party to .whom they were originally delivered, if, indeed, he is now anything more than the mere representative of that party in this contest. The balance of the fund arising from the sale of the oil refinery was awarded to 8 bonds, but 14 of the Smithman bonds now held by the appellant were denied any participation in it. All the bonds issued and distributed as aforesaid were allowed a dividend from the other *154assets with the claims of the general creditors. In the opinion of the learned auditor the president of the insolvent corporation cannot, by accepting its bonds on account of his claims against it, acquire a preference over its unsecured creditors, and it seems to us that this is a correct view of the law applicable to the facts of this case, that it is promotive of justice, and well sustained by reason and authority. It is in harmony with the principle stated in § 787 of Morawetz on Corporations, as follows : “ Directors of an insolvent corporation, who have claims against the company as creditors, must share ratably with the other creditors, in a distribution of the company’s assets. They cannot secure to themselves any advantage or preference over other creditors by using their power as directors for that purpose. Their powers are held by them in trust for all the creditors, and cannot be used for their own benefit.” It is a principle which is recognized in our own decisions, and is not in conflict with any of them. If, on the discovery of the insolvency of the corporation, its officers were at liberty to appropriate its entire assets in satisfaction of their demands against it, outside parties dealing with it would be utterly devoid of protection. The law does not intend or allow such an appropriation by persons intrusted with the management of the corporation, and yet it would logically follow the concession that they might lawfully give a preference to their own claims in the distribution of its effects. In this case, Smithinan, as director and president of the Keystone Oil Co., is chargeable with knowledge of its condition at the time of the execution of the mortgage; the evidence is ample to show that it was then hopelessly insolvent, and is sufficient, we think to sustain a finding that he was actually as well as constructively informed of the fact. With this knowledge, he sought, by means of the mortgage, to obtain a preference for his own claim, which preference the appellant is striving to enforce, when it is apparent, from the undisputed testimony, that his right is no higher than Smithman’s. We think he has no valid ground to complain of the decision of the court below.
Decree affirmed, and appeal dismissed at the costs of the appellant.