McMurray v. St. Louis Oil Manufacturing Co.

Dryden, Judge, delivered the opinion of the court. The statute under which the Oil Company was formed for [385] bids corporations organized under it from “ mortgaging” tlieir property or “ giving any lien thereon,” (ch. 37, § 2, R. C. 1855, p. 385,) and it is insisted by the defendants, Humphreys, Tutt & Terry, that the reservation in the deed from McMurray to the Oil Company is a mortgage or lien within the prohibition, and therefore inoperative and void. We cannot assent to this proposition. The provision was obviously intended to deprive those having the direction of the affairs of corporations of this kind of the power of using the corporate property so as to give preference to favorite creditors. The prohibitory words do not establish a rule to govern the acquisition of property, but intend a restraint in the use of property which the corporation already owns. The law does not design to exempt corporate property from all liens, but from such only as are created affirmatively by act of the corporation. The lien reserved in the deed from McMurray comes within neither the letter nor the spirit of the prohibition. As to the point that the plaintiff’s case is without equity. This is based upon the ground that the defendants purchased the property in question supposing the plaintiff’s judgment at law for the debt now sought to be enforced was a valid judgment, and that the sum they bid at the execution sale would, pro tanto, be applied to the extinguishment of the judgment debt; whereas the judgment was null and void, and all of the excess of the sum bid over and above what was requisite to satisfy the execution on which the sale was made was applied to junior judgments. Admitting, what is true, that the plaintiff’s common law judgment was utterly void, and that the money bid did not take the direction intended and desired by the defendants, yet no responsibility can, on this account, attach to the plaintiff. He was no party, but an entire stranger to the proceedings resulting in the defendant’s purchase; the sale was not made under his judgment, nor was the error into which the defendants fell superinduced by any fault or misconduct of his. The defendants had the most ample notice of the existence of the plaintiff’s debt and of the reservation in the deed [386] for its security. They deduce their title through the very deed on which the plaintiff’s right rests, and as an inference of law they stand affected with notice of its contents. But more than this : before their purchase, as they show by their testimony, they caused the title of the property to be investigated and the amount of the encumbrances to be ascertained, to enable them to bid intelligently at the then approaching sale, which investigation resulted in information to the defendants of the existence of the plaintiff’s present demand. The defendants knew the facts but mistook the law, and they must abide the consequences of their mistake. The other judges concurring, the judgment of the Land Court is affirmed.