Court Opinion

ID: 8187060
Source: CourtListenerOpinion
Date Created: 2022-09-09 23:09:39.308653+00
Date Added: 2024-06-11T16:40:23.710729
License: Public Domain

Maeshall, J.
If the Badger Cycle Company was solvent at the time of the transaction in question, the main contention by counsel for appellant, that the judgment appealed from is wrong, fails. The trial court decided that question in the affirmative because the property of the corporation, at a fair valuation, exceeded to a considerable extent its debts. Appellant’s counsel say that was not the proper rule to be applied. The conclusive answer thereto is that the trial court followed the law as it has been laid down by this court. Hamilton v. Menominee Falls Q. Co. 106 Wis. 352; Shaw v. Gilbert, ante, p. 165. Counsel makes the common mistake of failing to distinguish between the meaning of the term “ insolvent,” as the subject of insolvency is dealt with by insolvent and bankrupt laws, and the general meaning thereof. The former is inability of a person to pay his debts as they mature in the ordinary course of business; the latter is a substantial excess of a person’s liabilities over the fair cash value of his property. The former does not militate against a debtor corporation dealing with its property as it sees fit; while the latter, in case of a corporation, if it is on the verge of collapse or has suspended payment— is in a‘condition, as the books say, to be rightfully considered, so far as capacity to do business is concerned, civilly dead — is held to impress upon its property a trust for the benefit of its creditors. Hinz v. Van Dusen, 95 Wis. 503; Shoemaker v. Washburn L. Co. 97 Wis. 585; Graham v. Railroad Co. 102 U. S. 148; Slack v. N. W. Nat. Bank, 103 Wis. 57; Hamilton v. Menominee Falls Q. Co., supra.
*391The further question is presented of whether the corporation was justified, as to its creditors or stockholders, in purchasing its own stock and parting with corporate property in- payment therefor. There is no impediment in the way of a solvent corporation, having power to purchase and sell and convey property and not prohibited by its constitution or any statute, from buying in its own stock. This court has several times passed upon that question. Shoemaker v. Washburn L. Co., supra; Calteaux v. Mueller, 102 Wis. 525. It was held in the last case cited that such rule cotfld not be invoked to justify an officer of a corporation, without special authority, in buying in its capital stock in its name, but that situation does not apply in this case, since all the stockholders of the cycle company knew of and individually considered and approved the transaction in question before it occurred, and thereafter, so long as the corporation existed as a business institution, a period of some two years, acquiesced in it.
If under any circumstances the sale of land to respondent could be impeached on the ground of fraud or wantof power in the corporation to make the sale, appellant has no standing in court to do so, since all the stockholders are estopped by their conduct from complaining, and the receiver, as the representative of the corporation, has no better right in their behalf. Further, there is no indebtedness to any nonstock-holder of the corporation which existed at the time the transaction took place. Shoemaker v. Washburn L. Co., supra; Graham v. Railroad Co., supra. Here again counsel seem to have fallen into a common error, that of not keeping in mind that the rule under which, in any case, the property of a corporation is deemed a trust fund for creditors and stockholders,-or either, is wholly a creation of courts of equity, and that only those-have equitable rights in a fund at the time of its depletion who have then a right to resort to such fund to satisfy their claims. Creditors of a corporation are *392not presumed to have relied upon property of their debtor which it did not possess when the indebtedness accrued, and therefore are not held to have any equitable claim thereon.
The last suggestion made by counsel for appellant is that the title to the property did not pass because the acknowledgment was defective, and further because the stockholders did not, by a majority vote, authorize it. To that, sec. 1775, Stats. 1898, is cited, which provides that a corporation may, “ by a majority vote of the stock given at any regular meeting or at any special meeting duly called for that purpose, sell and convey or authorize to be conveyed all or^any portion of the property owned by it, whether real, personal or mixed.” This court has never held, as counsel seem to think, that a majority vote of stockholders of a corporation is necessary to every transfer of real estate made by it in the regular course of its authorized business. Galloway v.' Hamilton, 68 Wis. 651, cited by counsel to sustain their view, merely holds that a corporate deed, to be valid, must be executed in the manner required by statute, that is, must be signed by the president or other authorized officer of the corporation, sealed with the corporate seal, and countersigned by the secretary or clerk. That was done in this case. Whether the acknowledgment was defective is immaterial. That has nothijig to do with the effectiveness of the instrument between the parties to convey title. True, as a general rule and by statute it is necessary that corporate officers should have authority from the corporation to execute deeds, but one executed in the manner above indicated raises a strong presumption that they were so authorized. Herman, Estoppel, § 1176; Elliott, Priv. Corp. § 495; Ford v. Hill, 92 Wis. 188; New England W. & C. Co. v. Farmington E. L. & P. Co. 84 Me. 284; National S. Bank v. Vigo Co. Nat. Bank, 141 Ind. 352; Patterson v. Robinson, 116 N. Y. 193; Eureka I. & S. Works v. Bresnahan, 60 Mich. 332; Blackshire v. Iowa H. Co. 39 Iowa, 624; Murphy v. Welch, 128 Mass. *393489; National L. & I. Co. v. Rockland Co. 94 Fed. Rep. 335; Gorder v. Plattsmouth C. Co. 36 Neb. 548; 4 Thompson, Corp. § 5029.
¥e should hesitate in any case to give to seo. 1775, Stats. 1898, the meaning contended for by appellant’s counsel. To say that the legislature intended to require corporate action by a majority vote of stockholders at some general meeting, or special meeting called for the specific purpose, as a condition precedent to every sale of corporate property, real or personal, so that every dealer with a corporation would be bound to inform himself as to whether such condition had been fulfilled, would convict the legislature of such an absurd piece of lawmaking that no court would venture to do it without first seeking diligently for some construction of the law within the reasonable scope of the language used that would- avoid such meaning. Corporations, in the very nature of things, as to their ordinary affairs, must be permitted to conduct business the same, substantially, as individuals. The confusion that would result from a law that would invalidate every transfer of corporate property, real or personal, unless the act of the corporate officers in the transaction could be referred for authority to some specific vote of a majority of the stockholders formally authorizing it, would be incalculable. The whole trend of modern decisions is against impeachment of executed corporate transactions except by punishment of the corporation at the suit of the state.
"Waiving the question of whether a vote of stockholders was necessary in this case in order to strictly comply with the law, the presumption of due authority, arising from the acts of the corporate officers and the consent individually given .by all the stockholders, is so strong that it cannot be overcome by mere proof that formal action was not taken as to the particular transaction. General authority, regularly given by stockholders of a corporation to its officers, *394to act in the sale of property and convey the same accordingly in the transaction of corporate business, would satisfy the statute.
By the Court.— The judgment of the circuit court is affirmed.