Court Opinion

ID: 6518994
Source: CourtListenerOpinion
Date Created: 2022-07-19 18:29:20.739537+00
Date Added: 2024-06-11T15:55:06.060632
License: Public Domain

DOWDELL, j.
The purpose of the bill in this case is to hold the director® individually liable for the debt of the corporation. 'Charles H. Crawford, as administrator of the estate of Arthur Owen Wilson, deceased, loaned five thousand dollars, money belonging to the estate of his said intestate, to the North Alabama Improvement Company, a corporation, taking that company’s note for the amount of the loan, secured by a mortgage of the company on certain real estate. Crawford having resigned a® administrator, the appellant, Elizabeth Owen Wilson, was appointed administratrix de bonis non, and as such administratrix recovered judgment against said company on the note, and foreclosed the mortgage, herself becoming the purchaser at the lhortgage sale. The amount of the debt not being realized from said company, the present bill was filed", seek*636ing to 'charge the individual defendants, who were directors of the North Alabama Improvement Company, with said indebtedness of said company. On a hearing on the pleading’s and proof, the bill was dismissed by the chancellor.
The frame .of the bill is that of a common creditors’ bill filed on behalf of the complainant and such other ■creditors as might come in and make themselves parties. And as such, it is wholly inconsistent with the other9 theory insisted on by the complainant, that is, of holding the defendants liable as trustees in invitum, for dealing with trust funds of the estate of complainant’s intestate, in participating in the transaction of the alleged unauthorized loan by the administrator in chief to the corporation. It is too plain to admit of controversy, that other creditors having no interest in such trust fund, cannot base any claim for relief on this' theory of the bill.
When considered .as a common creditors’ bill, preter-mi'tting consideration of the sufficiency of the allegations, the great weight of the testimony repels the theory of fraud, and in this respect we concur in the finding and conclusion of the chancellor that the proof fails to sustain the charges of fraud and collusion. Most of the transactions complained of in the bill, were had and done before the debt to 'Wilson’s administrator in chief was contracted. A subsequent creditor cannot complain of-a disposition of its property by a corporation, unless such disposition was made with intent to hinder, delay, or defraud subsequent creditors, and actually had that operation and effect.—Graham v. LaCrosse & M. R. Co., 102 U. S. 148; Porter v. Pittsburgh Bessemer Steel Co., 120 U. S. 649; Dickson v. McLarney, 97 Ala. 388; Rollins v. Shaver Wagon Co., 20 Am. St. Rep. 434; Shreyer v. Scott, 134 U. S. 405; 2 Morawetz on Corp., §§ 795-800. And the burden is upon the complainant to allege and prove 'such, fraud. Yeend v. Weeks, 104 Ala.339. Nor does a creditor, existing or subsequent, occupy such relation to a corporation’s directors as its. 'stockholders. Directors may be liable to stockholders for mismanagement of the busi*637ness of the corporation, or waste of its assets. Not so as to its 'creditors. A creditor must show actual fraud, in order to hold directors liable.—O’Connor Mining & Mfg. Co. v. Coosa Fur. Co., 95 Ala. 618. And as to grounds upon which directors may he charged personally, with the 'debts of the corporation, see also 3 Thompson on Corp., §§ 4137, 4138, 4144, 4145, 4092. They are not so chargeable merely because they have mismanaged and wasted assets, but only on some such ground as deceit or fraudulent misrepresentations practiced upon persons dealing with the corporation. It does not appear from either allegations or proof in this case that any fraud was committed b3 either of the defendant directors on the administration in chief. There was no concealment or misrepresentation, and it appears that Crawford was as fully informed of the situation as any of the defendants.—Cleveland v. Smith, 132 U. S. 318.
It was decided by this court in the case of Corey v. Wadsworth et al., 118 Ala. 488, that an insolvent corporation may dispose of its property just as an insolvent individual could, and consequently a preference,' which would not be illegal in case of an individual, would not be illegal in case of a corporation. See also O’Boar Jewelry Co. v. Volfer, 106 Ala. 205.
In the absence of fraud and collusion, one who borrows from an administrator money belonging to the estate of his intestate, although such loan be made without an order of court, will not be treated as a trustee in invitum and held to an accounting at the instance of the cestui que trustent. In such a case the cestui que trust may adopt the contract, or he may repudiate the same and hold the administrator liable. The proof in the present case failed to show any fraud and collusion on the part of the defendants in connection with said loan.
Even if the complainant as administratrix de horns n on had the right to repudiate the loan made by Crawford, yet, with full knowledge of all the facts, she elected to adopt the contract, and having made that election she is bound by it. She could not accept the investment, and also treat the loan 'as a devclstavit.—Warring v. *638Lewis, 53 Ala. 632, 633. This principle was recognized in the opinion on application for rehearing’ in Lee v. Lee, 67 Ala. 424. See also, Elliot v. Branch Bank, 20 Ala. 346; Firemen’s Ins. Co. v. Cochran, 27 Ala. 236.
.The chancellor, committed no error in the final decree rendered, and the same must be affirmed.
Affirmed.