State National Bank v. John Moran Packing Co.

Mr. Justice Waterman delivered the opinion of the Court. Section 20 of chapter 32 of the Bevised Statutes, is as follows: “ The by-laws of every corporation shall provide for the calling of meetings of the directors, trustees or other officers corresponding to trustees; and when all such officers shall be present at any meeting, however called or notified, or shall sign a written consent thereto on the record of such meeting, the acts of such meeting shall be as valid as if legally called and notified; provided, that the action of any meeting held beyond the limits of this State shall be void, unless such meeting was authorized or its acts ratified by a vote of two-thirds of the directors, trustees or offiéers corresponding to trustees, at a regular meeting.” It is urged by appellants that the foregoing statute was enacted for the protection of stockholders exclusively, and is a matter.in which the creditors of corporations and the public generally have no interest, and therefore that appellees, as creditors of the John Moran Packing Company, can not be heard to say that the meeting of the board of directors of said company, held outside of the State, was void or irregular. In determining whether the mortgage sought to be foreclosed in this case is valid and binding, not only as regards the company, but with reference to appellees and all the creditors of said Packing company, it is well to consider separately and in chronological order the proceedings by virtue of which complainant’s mortgage has validity, if at all. The statute under consideration plainly and explicitly pronounces the action of the directors of the Packing company at the meeting held outside the limits of the State of Illinois, at St. Joseph, Missouri, on the 18th day of February, 1895, void, unless such meeting was authorized or its acts ratified by a vote of two-thirds of the directors', trustees or officers corresponding to trustees, at a regular meeting. It is not claimed that such meeting had previously been authorized.- The action taken thereat was therefore void, unless it has since been ratified at a regular meeting by a vote of two-thirds of the directors. It is unnecessary now to discuss whether such action was void as regards the public or the creditors of said company, as it unquestionably was void so far as the company itself was concerned. There can be no doubt that had the directors of the company returned to Chicago on the day following the action had in Missouri, and in the State of Illinois held a regular meeting properly called, that the company, no ratification of the St. Joseph action having been previously made, might have proceeded to rescind and revoke the action of the 18th of February, and to make conveyances in repudiation and annullment of the same, save that perhaps the company might have been bound to restore whatever benefit it had received from the St. Joseph action. It is beyond question that the mere action of the board of directors in St. Joseph, Mo., was, as regards the packing company, entirely void. If, therefore, the complainant’s mortgage has any validity, it is by virtue of something that has taken place subsequent to the St. Joseph meeting. In obedience to the instructions given at the St. Joseph meeting to the president and secretary, they immediately proceeded to execute to the complainant the mortgage which it is sought in this proceeding to foreclose. It is urged that such action upon their part was within their powers and binding upon the company. There is some contrariety of opinion as to what the powers of the president of such a company are. Thompson’s Commentaries on the Law of Corporations, Secs. 4618-4619; Morawetz on Private Corporations, Secs. 537-539. In this State it has long been the rule that the president of a corporation is presumed to have authority to transact for the corporation business of an ordinary nature, arising in the routine of affairs, such as custom or necessity has imposed upon the office. Chicago, Burlington & Quincy Ry. Co. v. Coleman, 18 Ill. 297; Smith v. Smith, 62 Ill. 493; Mitchell v. Deeds, 49 Ill. 416. The instructions given at the St. Joseph meeting were in effect to convey by way of mortgage, substantially all its property, which consisted of a packing house plant in Missouri, and real property in the State of Illinois, amounting in value to many thousand dollars. We are of the opinion that the president and secretary of such a company as was this, have not, by mere virtue of their offices, authority to transfer substantially all the property of the corporation to certain creditors by way of preference to them, and that the company was not bound by and might avoid such conveyances. The transaction was not one within the ordinary or usual course of the business of the company; neither was it such as custom has sanctioned, or the ordinary carrying on of business made necessary. Winsor v. Bank, 18 Mo. App. 665; Hyde v. Larkin, 35 Mo. App. 366; McKeag v. Collins, 87 Mo. 164; Hoyt v. Thompson, 5 N. T. (1st Selden), 320; Bank v. Asheville Furniture Co., 116 N. C. 827; Coke v. National Association, 35 Ill. App. 465. Up to the time of the attempted ratification of the acts of the St. Joseph meeting and the conveyances made thereunder, the Packing company was not bound by such transfers. The company not being bound by the mortgage to complainant, its attaching creditor secured whatever rights it had in and to the property so seized. In this State the rights of attaching and judgment creditors are equal to those of tona fide purchasers. The meeting of the board of directors, held in Chicago, on Harch 25, 1895, at which an attempt was made to ratify the action of the St. Joseph meeting and the conveyances thereunder made, could not divest the Union National Bank of the lien which it had theretofore secured by virtue of its attachment. But there is another objection to such attempted ratification. The statute provides that the acts of a meeting held outside of the limits of this State may be ratified by a vote of two-thirds of the directors at a regular meeting. The meeting at which the attempt at ratification was made, seems to have been regularly called and held, but there was not thereat, in support of such attempt, a vote of two-thirds of the directors. Four out of the five directors were present; three voted for and one against the attempted ratification. So far, therefore, as the action of the St. Joseph meéting, instructing the president and secretary to make the deeds under consideration is concerned, such action was not ratified in accordance with the statute. As to whether the action of the meeting of March 25th was not a ratification of the act of the president and secretary in making the deeds, is, so far as the rights of the Union National Bank are concerned, immaterial, because its rights were secured long before March 25th. Undoubtedly, the act of the president and secretary of a company, in executing deeds of its property, may be ratified by mere acquiescence therein for a sufficient length of. time, but as the attachment of the Union National Bank was not made after, but on the same day that the mortgage to complainant was recorded, there was no acquiescence by mere inaction. A distinction has sometimes been drawn between statutes said to have been enacted for the benefit and protection of stockholders only, and those which are enacted as a matter of public policy. This is commented upon in Beecher v. Marquette Rolling Mill Co., 45 Mich. 103. If, under the circumstances of this case, such distinction was to be considered, it would seem that the statute before mentioned was created for public purposes, and as a declaration of the policy of this State in respect to corporations. It is manifest that it could make but little difference to stockholders whether a meeting of its directors was held Avithin the limits of this State, or just beyond its border; Avhile public policy might dictate that no action had at any meeting held outside of the limits of this State should be binding unless authorized or ratified by a meeting held within reach of the judicial process of this State. The John Moran Company can not be said to have been”, at the time the attachment of the Union ^National Bank was made, the recipient of such benefits under the mortgage sought to be foreclosed, that it Avas then estopped to deny the validity of the same. The mortgage Avas given, not for anything by the Packing company then received, or any detriment suffered by the complainant; the consideration Avas a debt that had long existed, and the mortgage Avas consequent upon the demand of appellant that such debt should be paid or secured. We have no question of the right of an Illinois corporation to prefer Iona fide- creditors, but when a creditor comes into court, claiming a preference, the burden is upon him to establish the validity of the acts under which such claim is made; which principle appellant insists upon in the present case, by urging that owing to the action of the Packing company in withdrawing the plea it had filed to test the merits of the attachment proceeding, and thus consented to a deault, and judgment against it upon the attachment issue, there was such irregularity that it, appellant, is not in this proceeding entitled to contest the truth of the attachment affidavit. As the attachment was upon property which appellant claimed only to have a valid mortgage upon, we are not prepared to hold that it was ever entitled to contest in the attachment proceeding, the truth of the matters set up in the attachment affidavit. ' The Supreme Court in the case of Juillard & Co. v. May, 130 Ill. 87, said : “ The statute giving the remedy by interpleader, is applicable alike to lands and personal property. The issue, and only issue, there can be upon the interpleader, is upon the affirmative claim of property therein, and when that is decided in favor of the claimant, the court has ample power to see that its own process is not abused by making it the means of selling his property to pay the indebtedness of another for which he is not legally liable. It is fundamental that no person shall be deprived of property without due process of law, and the court can protect the claimant in the rights of property guaranteed him, without assuming to vacate or change the judgment rendered at a prior term against the defendant in attachment.” As appellant knew of, and could have intervened in, the attachment proceeding, it would seem that if at any time entitled to be heard as to the truth of the alleged grounds for attachment, it should, prior to judgment, have made its contest in the court in which that issue was presented. • • The Moran Packing Company was not bound to contest the truth of the affidavit setting forth statutory grounds for an attachment. On the contrary, it might, before or after the issue of the writ, have voluntarily .mortgaged the attachment property to the Union ¡National Bank as security for its claim. ¡Nor do we think that the lien of the Union National Bank was lost by the withdrawal by the Packing company of its plea and the entry of judgment against it by default. There was no unreasonable departure from the law, if any, by the attaching creditor. Waples on Attachment, Sec. 811 (Second Ed.). As to the attachment by the Atlas National Bank, made April 26, 1895, a month previous thereto, the Backing company, by its president and secretary, in accordance with directions given by the directors of said company, at a meeting held in the city of Chicago on March 25, 1895, had executed another mortgage to appellant, securing the indebtedness to it, which mortgage was on the same day recorded, and which the bill filed in this case seeks to foreclose. Whatever may be the rule in other States, it is in this well established that a corporation, although insolvent, may, by a conveyance of its property, prefer one of its creditors, subject to the same restrictions that apply to individual debtors. Gottlieb v. Miller, 47 Ill. App. 588; same case in Supreme Court, 154 Ill. 44; Blair v. Illinois Steel Company, 159 Ill. 350. The decree of the Circuit Court holding that the lien acquired by the Atlas National Bank under its attachment, i's superior to the lien acquired by appellant under its mortgage executed March 25, 1895, is reversed. The decree of the Circuit Court holding that the attachment of the Union National Bank has precedence over each of the mortgages executed to appellant, is affirmed, and the decree of the Circuit Court as to all the parties to said foreclosure proceeding, save the Atlas National Bank, is affirmed. The costs of this court in this case will be taxed, one-half of the same against appellant, and one-half against the Atlas National Bank. Reversed as to the Atlas National Bank. Affirmed as to all other appellees.