Fargason v. Oxford Mercantile Co.

Calhoon, J., delivered the opinion of the court. We will not disturb the numerous decisions of this court holding that insolvent corporations may, in good faith, prefer creditors as individuals may. No bad faith is shown in this-record. It shows merely a prefernce of the bank as creditor,, and every stockholder either expressly authorized, or ratified and approved, the sale to the bank in satisfaction of the debt to it. Sells v. Grocery Co., 72 Miss., 590. If the bank transcended its charter and loaned a larger percentage of its capital to the mercantile company than its charter authorized it to lend to any one person, that was a matter between it and the state. This could in no way prevent the collection of the debt. The evidence shows that the debt to the bank was for loans made boda fide and the money used by the company to pay its mercantile debts. If fraud was practiced by the company in the use of the money borrowed, of which the proof does not show any, it could not affect the bank, which clearly was not a party to any fraud. Section 5 of the charter of the company [73] authorizes it to commence business “ when as much as forty per cent, of the authorized capital has been actually paid in.” It is shown that goods of the value of fifty per cent, of it were put in. This is enough, and, in any case, this was a matter for the state, and could not affect the rights of creditors in good faith. Nor could the fact of operation with an insufficient number of directors invalidate the claims of innocent creditors. Even if a concern should be carried on apparently as a corporation, without any charter at all, it cannot be that its creditors would be powerless to collect from it, or that it could not pay its debts. It was the business of the bank to look after its own debt, and it is not chargeable with any duty to warn others against extending credit. Because the debts of the company were largely in excess of its capital stock is no reason that the debts should be thereby avoided. Such action is the concern of the state, and cannot affect creditors except to give them the statutory right, in season, to pursue the officers and stockholders to the statutory limit. Nor can we hold if the bank did induce the stockholders to fill the vacancies in the directory in order that the board of directors might authorize a ■sale to it for the purpose of paying its debt, that, therefore, the sale was void. The bank, by reason of its being at the scene of action, seems to have had an advantage over' the other creditors. It also seems to have used this advantage as it had the legal right to do, and, no doubt, the other creditors would have made the same use of the same advantage m collecting. Affirmed.