Court Opinion

ID: 8185479
Source: CourtListenerOpinion
Date Created: 2022-09-09 23:07:54.501509+00
Date Added: 2024-06-11T16:40:24.019694
License: Public Domain

'M'ARsrrAT.T,, J.
Error is assigned in that the referee excluded evidence offered by the appellant material to the issues. We fail to find that the exceptions to the rulings excluding such evidence, made before the referee, were renewed on the motion to confirm the report, or otherwise; hence the questions raised by such alleged errors are not before us for review. The objections taken before the referee should have been renewed on the motion to confirm or set aside the report, and the exceptions to the rulings on such objections, so renewed, preserved in the bill of exceptions. The rule that in no other way can a review of such rulings be obtained has been long established. McDonnell v. Schricker, 41 Wis. 327; Gilbank v. Stephenson, 30 Wis. 155.
Error is assigned on the refusal of the referee to make findings as requested, but we fail to find that any exceptions were taken to such refusal, though appellant is not prejudiced *507by such failure, as substantially all the questions that would thereby be raised are presented by exceptions to the findings of fact that were made. A large number of such exceptions were filed, all of which have received attention, but, under the well-established rule that findings of fact cannot be disturbed unless against the .clear preponderance of the evidence, no reason appears to justify interference with the conclusions of the trial court in that regard. There appears to be considerable evidence upon which each of such findings could be reasonably made; therefore they must stand. Nicholson v. Coleman, 90 Wis. 639; Bacon v. Bacon, 33 Wis. 147; Tallman v. Fitch, 49 Wis. 197; McDonald v. Kelly's Estate, 70 Wis. 108.
The exceptions to the conclusions of law raise but one question which requires consideration in this opinion, and that is whether, under the circumstances existing on the 20th day of February, 1893, when the proceedings were had whereby O. D. Van Dusen and F. D. Arnold were paid the indebtedness which the corporation owed them, such proceedings were void as to the appellant, who was then liable on the $8,000 note. The appellant’s counsel insists that the conclusion of the trial court should have been in the affirmative, under the rule that the directors of an insolvent corporation cannot prefer themselves over other creditors. The rule itself is questioned by respondents’ counsel; but, while there are authorities of the highest respectability against as Well as in favor of it, that subject is not open to discussion in this court. Such subject has received consideration in several instances, and with the result that the doctrine is well established here that the directors of an insolvent corporation cannot lawfully prefer themselves over its general creditors. Haywood v. Lincoln L. Co. 64 Wis. 639; First Nat. Bank v. Knowles, 67 Wis. 373; Ford v. Plankinton Bank, 87 Wis. 363. While the mere fact of insolvency does *508not have tbe effect to convert the assets of the corporation in the hands of its directors into a trust fund for creditors,, so as to prevent a diligent creditor from proceeding in an adversary way to collect his debt by the ordinary processes, of law, and thereby gain a preference over other creditors (Ballin v. Merchants’ Exch. Bank, 89 Wis. 218; Ford v. Hill, 92 Wis. 188), the directors of the corporation, under such circumstances, cannot, by contracts with themselves, or with others for their benefit, obtain a preference by payment of the claims due them, or due to others, for the payment of which they are responsible as indorsers or guarantors. So-far the contention of appellant’s counsel must be sustained,, but whether the principle involved can be invoked for the-benefit of appellant under the facts of this case is quite another question. The fact of insolvency was not found by the- referee. Though counsel for the appellant present the-appeal upon the theory that such fact appears, it was neither found, nor was the court requested to so find, nor is there any exception to the failure of the court to find on that question. Obviously, the rule for which the counsel contend has no application unless all the facts exist requisite to such application. Insolvency of the corporation is absolutely essential. Without that the directors are trustees for the-stockholders primarily, and may in good faith pay a hona fide indebtedness to themselves, or may secure such indebtedness by a mortgage upon the corporate property or otherwise. It is when a corporation ceases to be a going institution, or its business is in such shape that its directors, know, or ought to know, that suspension is impending, that its assets in the hands of such directors become, by equitable conversion, a trust fund for the benefit of its general creditors, so that, if such directors prefer themselves over such general creditors, such action constitutes a fraud in law, and equity will compel them to make restitution of all property *509“thereby diverted, to their personal benefit to the prejudice ■of such creditors. Beach v. Miller, 130 Ill. 162; Hopkins' Appeal, 90 Pa. St. 69.
It follows from the foregoing that the facts found are not •sufficient to enable appellant in equity to impeach the mortgage given to O. W. Van Dusen to secure the loan whereby O. D. Van Dusen and F. D. Arnold were paid. Moreover, the facts found sufficiently show that the corporation was ■solvent on the 20th day of February, 1893, and that there is no equity in appellant’s bill. The total indebtedness on that day, so far as appears from the evidence and the findings, in ■addition to the indebtedness paid out of the loan covered by the mortgage to G. W. Van Dusen, was the $8,000 note, and interest thereon, for which appellant is responsible, and about $4,000 due to the Price County Bank. There were assets, not affected by the mortgage, of $66,000 unpaid on capital stock, $16,000 of which presumably was due, as it required payment of that amount by appellant, G. 0. Van Dusen, and F. D. Arnold, to make the amount paid upon their stock equal the amount paid upon the stock held by O. D. Van Dusen. Such payment would furnish an ample sum out of which to discharge the $8,000 note and the $4,000 due to the Price County Bank. This situation of affairs leads to the ■conclusion that in a winding up of the affairs of the corporation appellant would be liable on his stock in excess of the liability of O. D. Van Dusen in a sum equal to or in excess of the indebtedness on the $8,000 note, which indebtedness is his sole reliance to give him standing in a court of equity. It follows, therefore, that it does not appear from the findings of fact or the evidence that the corporation was insolvent at the time the debt to O. D. Van Dusen was paid, and that appellant has no ground for complaint in a court of equity; hence the judgment of the circuit court, dismissing the complaint, must be affirmed.
By the Oou/rt.— Judgment affirmed.