Court Opinion

ID: 6696510
Source: CourtListenerOpinion
Date Created: 2022-07-20 21:53:04.697409+00
Date Added: 2024-06-11T16:01:15.940392
License: Public Domain

Clare;, C. J.
Tbougb tbe assignments were absolute in form, tbe judge finds as a fact from tbe evidence tbat tbey were made as a security for debts for legal services'and other indebtedness. H. L. Taylor testified tbat tbe assignment to himself and to Mr. Oansler was as security for tbe payment of fees due them as counsel, and tbat at bis suggestion a further assignment was made of an interest in judgment to secure an indebtedness due bis client, Mrs. Kavanaugh. She was not at tbe time aware of tbis provision for her benefit, but has since then accepted it, and has filed her pleas in tbis Court, as well as Oansler and Taylor, claiming tbeir beneficial interests in tbe proceeds of tbe judgment.
“Tbe Court finds as a fact tbat plaintiffs bave such an interest in said judgment, as gives them tbe right' to prosecute tbis action in tbeir own. name, in behalf of themselves and all other creditors having an interest.” Tbe above assignees of a beneficial interest in said judgment bave been made parties and filed pleadings in behalf of such beneficial interests. Thus all parties interested in tbe judgment are before tbe court. Tbe original owners of tbe judgment could thus maintain tbe action in tbeir own behalf, and for tbe benefit of tbeir assignees as trustees of an express trust under tbe terms of said assignments, and can prosecute tbis action. “An executor or administrator, a trustee of an express trust, or a person expressly authorized by statute, may sue without joining with him tbe person for whose benefit tbe action is prosecuted. A trustee of an express trust, within tbe meaning of tbis section, shall be construed to include a person with whom or in whose name a contract is made for tbe benefit of another.” C. S., 449.
It was proper, tbougb not necessary, tbat such assignees' should be made parties, which has been done, and tbey bave filed tbeir supplemental pleadings. Tbe exception tbat tbe owners and plaintiffs in tbe judgment could not bring tbis action was properly overruled.
Tbe proceedings to recover tbe assets and capital which has been distributed among tbe shareholders and against tbe officers and directors was in tbe equitable jurisdiction of tbis Court. Tbe statute is simply a cumulative legal remedy. Barnawell v. Threadgill, 40 N. C., 89; Oliveira v. University of N. C., 62 N. C., 70; Humphrey v. Wade, 70 N. C., 281.
*503In Settle v. Settle, 141 N. C., 563, tbe Court affirmed tbe above principle from wbicb it is clear tbat tbe statute declaring tbe liability of directors and stockholders to> creditors, upon tbe admitted facts of tbis case, merely extended tbe equitable powers of tbe court to- obtain possession of tbe assets of'tbe corporation and administer tbem in accordance witb tbe principles of equity, and does not substitute tbe statutory remedy to tbe exclusion of tbe equitable remedy heretofore existing. Tbe intent of tbe Legislature was to make tbe remedy of creditors swifter and more efficacious, and tbe statutory remedy does not restrict tbe right of tbe creditors by shortening tbe time within which those rights could have been enforced in an equitable proceeding.-
A creditor who has obtained a judgment - against a corporation can maintain such action when tbe execution has been returned nulla bona. In Guilford v. Georgia Co., 112 N. C., 36, tbe Court said: “There being no distinction between actions at law and suits in equity in tbis State, any proper relief can be granted in a civil action. A creditor’s suit is of itself a very comprehensive and liberal action. It is not demurrable, because tbe remedy might have been bad by supplemental proceedings. Bronson v. Ins. Co., 85 N. C., 411; Hughes v. Whitaker, 84 N. C., 640. It is not demurrable because tbe cause of action is dormant. Bacon v. Berry, 85 N. C., 124; Bank v. Harris, 84 N. C., 206; Mebane v. Layton, 86 N. C., 571. It is an old and well settled mode of procedure, fully adequate to settle all conflicting interests.”
This right of action existed prior to tbe statute, and is not penal in its nature, and tbe statute governing penal actions has no application. Tbe summons in tbe action in wbicb tbe judgment was recovered was served upon tbe Mecklenburg Realty Company 12 August, 1914. Tbe judgment was obtained at February Term, 1917, and is conclusive as to tbe indebtedness. Tbe officers and stockholders of tbe realty company, in December, 1916, evidently seeing beforehand tbat judgment would be obtained in February following, attempted to evade payment by their voluntary proceeding for dissolution in December, 1916, and tbe distribution of tbe capital and assets of tbe corporation among tbe stockholders. Tbis was an attempted fraud, and as was held in McIver v. Hardware Co., 144 N. C., 484: “When tbe property has been divided among tbe shareholders, a judgment creditor, after a return of an execution against a corporation unsatisfied, may maintain a creditor’s bill against a single shareholder or against as many shareholders as be can find within-the jurisdiction, to charge him or tbem to tbe extent of tbe assets thus diverted, it is immaterial whether be got tbem by fair agreement witb bis associates, or by an act wrongful as against tbem.”
Tbe judgment is an estoppel upon tbe officers and stockholders of tbe corporation, and cannot be collaterally attacked by tbem. ’ Heggie v. *504Loan Asso., 107 N. C., 581; Clark v. Marsh Corp., 10 Cyc., 733, and cases there cited; Hawkins v. Glenn, 131 U. S., 319, in wbicb last the facts are almost identical with those in this case.
C. S., 1197,- provides: “In the case of the dissolution of a corporation, the debts due to and from it are not thereby extinguished, nor do actions against a corporation which is dissolved before final judgment abate by reason thereof, but no judgment shall be entered therein without notice to the trustees or receivers of the corporation.” The action was pending at the time the dissolution proceedings were taken out, and the directors and trustees were fixed with notice thereof, and at the rendition of judgment they not only appeared by counsel, but appealed to this Court, and after the affirmation of the judgment -here applied for, and were refused a rehearing. C. S., 1193, continued the existence of the corporation for three years for the purpose of prosecuting and defending actions, and section 1194 constitutes the directors trustees to wind up the affairs of the corporation, collect debts due it, sell and convey the property, and, "after paying ils debts, divide any surplus money and other property among the stockholders.” And section 1198 provides for the distribution of funds, and section 1199, supra, provides that the debts due to and by such corporations shall not be extinguished nor actions abated by dissolution before final judgment.
There is no statute of limitation which protects either stockholders or the directors who receive the capital and assets of the corporation with notice by the pending suit of a claim of the plaintiff. In Long v. Miller, 93 N. C., 233, it was held that even though a contract sued upon was barred by the statute, yet the creditor could follow the funds placed in the hand of the trustee to secure such indebtedness. To the same purport are Faison v. Stewart, 112 N. C., 334; Baker v. Brown, 151 N. C., 15, and many other cases. Both the directors and the stockholders of the company received and held the capital distributed among them in trust and for benefit of the creditors.
The cause of action in this case for the recovery of assets of the corporation from the stockholders and the directors did not accrue until judgment was obtained against the corporation upon the indebtedness and the return on the execution issued thereon “milla bona.” Until that time they could not have taken proceedings to compel the return of the assets distributed among the stockholders, and the application thereof to the plaintiff’s judgment. Hughes v. Whitaker, 84 N. C., 640, in which it was said that the plaintiff’s remedy “is open, and is not obstructed by the lapse of time, since until he recovers judgment his claim as a creditor is not established.” In that case the judgment creditor was seeking to pursue the funds of the estate which had been fraudulently alienated. “No cause' of action accrues against the shareholder until the creditor *505bas failed to make tbe amount of bis judgment or ascertained claim from tbe assets of tbe company, or unless, perhaps, in certain cases it appears to be useless to proceed against tbe corporation.” Hawkins v. Glenn, 131 U. S., 319; Scoville v. Thayer, 105 U. S., 143.
In Taylor v. Bowker, 110 U. S., 113, it was beld tbat in a proceeding “to enforce judgment against tbe property of a corporation whose charter bad been surrendered, tbe cause of action does not accrue until tbe execution bas been returned against tbe corporation.”
If there were any statutes of limitation which began to run against tbe plaintiff’s cause of action prior to tbe judgment and return of tbe execution, it was tbe 10-year statute “for relief not herein provided for,” C. S., 445; Lynch v. Johnson, 171 N. C., 615, and cases there cited: Allen v. Gooding, 173 N. C., 95; Barnes v. McCullers, 108 N. C., 55; Ross v. Henderson, 77 N. C., 170, and numerous other cases.
It is true tbat C. S., 441 (9), provides tbat “An action for relief on tbe ground of fraud or mistake must be brought in three years.” If tbat section applied, it is further provided in tbat section tbat “tbe cause of action shall not be deemed to have accrued until tbe discovery by tbe aggrieved party of tbe facts constituting such fraud or mistake.” It does not appear here tbat tbe plaintiffs made such discovery before tbe rendition of tbe judgment and tbe return of tbe execution unsatisfied, and indeed, until tbat was done they bad no cause of action to recover tbe misapplied assets of tbe corporations. Besides, tbe distribution of such assets did not take place until within less than 3 years before tbe beginning of this action. In no aspect are tbe plaintiffs barred by tbe statute of limitation.
We are of opinion tbat tbe plaintiffs were entitled to proceed directly against tbe stockholders and directors who received tbe assets of tbe Mecklenburg Eealty Company without tbe appointment of a receiver, and tbat tbe plaintiffs’ cause of action against the stockholders and directors of said company is not barred by tbe statute of limitation.
In tbe plaintiffs’ appeal tbe judgment is modified, in accordance with tbe above opinion. In tbe defendants’ appeal,
No error.