Bear Creek Lumber Co. v. Second National Bank

Briscoe, J., delivered the opinion of the Court. This case was argued and submitted to this Court on the 25th day of October, 1912, but before a decision was reached on the merits, an agreement of counsel was filed on the 11th day of December, 1912, to enter “the case settled.” Upon this agreement the clerk was directed to make the usual entry in accordance therewith on the docket of the Court, and it was so entered. Subsequently on the 28th of Eebruary, 1913, a petition and motion was filed by the appellee to strike out the entry of “settled,” entered in the case, for reasons stated in the petition and by agreement of counsel filed herein, the motion was submitted for the action of the Court. This motion was considered and granted by the Court on the 28th of Eebruary, 1913, and the order “settled” as heretofore entered was directed to be stricken out and the case ordered to be placed upon the January Docket of this Court Ro. 78.

Thereupon, an agreement of counsel dated tire Gth of March, 1913, was filed, submitting the case for our determination on the record and briefs, as heretofore filed in this Court. The general legal principles underlying this case are well and fully stated by Judge Boyd, in his opinion, in the Court below. The questions raised and discussed at the hearing are covered by the opinion, as set out in the record now before us. Eor the reasons stated, and upon the principles announced in the opinion of the Court below, we will affirm the decree appealed against, with costs to the appellee in this Court and in the Court below.

The opinion is as folows: The bill in this case was filed to set aside a deed from the Bear Creek Lumber Company to Harry E. Clark and John McCullough, and to have the property sold for the payment of the plaintiff’s claim. The deed is dated June 22nd, ⁵⁶⁸ 1908, and purports to be in consideration of one dollar “and other good and valuable considerations, it thereunto moving.” It was executed by Walter S. Taylor, its president, under its corporate seal and is attested by M. J. Lang, assistant secretary. First The debt claimed to be due the plaintiff is a note dated May 28, 1908. It was alleged in the answer that the note was the personal debt of W. S. Taylor and that he made the note in the name of the company without its authority, but under section 43 of Article 13: “Every negotiable instrument is deemed prima, facie to have been issued for a valuable consideration; and every person whose signature appears thereon to have become a party thereto for value.” Moreover, Mr. Annan testified that they took it, believing it to have been issued by the company to Taylor for money due him, and he thought Taylor so stated at the time.

The note was payable to Taylor’s order and endorsed by him. As there is no testimony to meet the effect of the statute, or the evidence of Mr. Annan, I will treat the indebtedness of the company as established. The subsequent note of Taylor of December 2nd, 1908, not only did not treat the company’s note as paid, but on the contrary it was referred to as part, of the collateral. Second.

There was no sufficient consideration from the company to support the transfer of its property to the grantees. With the possible exception of a small debt due to Mr. McCullough for taxes paid, the indebtedness claimed to be due Messrs. Clark and McCullough was manifestly Taylor’s individual indebtedness, and not that of the company. The agreements filed and relied on show that, and Mr. McCullough testified as follows: “Q. State whether there was any consideration for the said deed marked ‘Plaintiff’s Exhibit A’ aside from the 50 and 27 acres belonging to the Bear-Creek Lumber Company and the debts that Taylor owed to Clark and you individually.

A. No, sir; nothing more than some back taxes that I paid.” The amount received by the company for those two tracts (50 and 27 acres) was $308, ⁵⁶⁹ of which Messrs. Clark and McCullough claimed one-half, but even that was under their agreement of April 18th, 1901, which was between Clark and Taylor and was not an agreement on the part of the company to pay them. . It is not necessary to cite authorities to show that the property of the company could not be used to pay Taylor’s debts, to the prejudice of creditors of the company, and of course, the purchase of stock of the company by Taylor does not make the company’s property liable for the purchase money due him for such stock. In the absence of express authority the company itself could not purchase its own stock and anyone lending a corporation money with which to buy its own stock (knowing that was to be the use of it) could not recover from the company to the prejudice of its creditors.

Md. Trust Co. v. Mechanics’ Bank, 102 Md. 608 . That principle is applied even to endorsers on notes of corporations given for such purpose. Burke v. Smith, 111 Md. 624 . Third.

The only remaining question in this case is whether Taylor becoming the sole owner of the stock of the company, as the defendants claim, enabled him in the name of the