Claypoole v. McIntosh, 182 N.C. 109 (1921)

Oct. 5, 1921 · Supreme Court of North Carolina

182 N.C. 109

J. S. CLAYPOOLE, Trustee of the Estate of WILLIS GROCERY COMPANY v. W. A. McINTOSH et al.

(Filed 5 October, 1921.)

1. Corporations — Subscriptions—Unpaid Balance — Statutes.

Stockholders of an insolvent corporation are liable pro rata for their unpaid subscriptions to an amount necessary to liquidate the corporate debts. O. S., 1160.

2. Corporations — Directors—Unlawfully Declaring Dividends — Statutes.

A director of a corporation who has not brought himself within the provisions of C. S., 1179, exonerating him from liability for the payment of dividends to the stockholders when the profits of the business did not justify it, or its debts exceeded two-thirds of its assets, etc., is liable, in the action of the trustee in bankruptcy of such corporation, for the amount of such debts, and the proper court costs and charges, not exceeding the amount of the dividends unlawfully declared,

3. Courts — Costs—Bankruptcy—Instructions—Trials.

It appearing in this case that the trustee in bankruptcy had a certain amount of money available to creditors, subject to costs and fees in the bankrupt court: Held, there was sufficient evidence to justify the court in instructing the jury to deduct a certain allowance from the amount in the trustee’s hands and credit the amount of indebtedness with the difference, leaving the balance due as the costs chargeable to the defendants in the bankrupt court.

4. Appeal and Error — Presumptions.

On appeal to the Supreme Court the presumption is against error, and in this case it is held,, the appellee’s objection is not sufficiently supported to justify the court in disturbing the results of the trial.

Appeal by defendants from Devin, J., at tbe February Term, 1921, of CRAVEN.

Tbe action is instituted by plaintiff, trustee in bankruptcy of Willis Grocery Company, an insolvent corporation, tbe same being by order of bankruptcy court to collect assets to pay creditors from stockbolders on tbeir unpaid subscriptions under O. S., 1160, and against defendants, directors and officers in control of said corporation and its affairs, by reason of dividends paid out to themselves contrary to law as contained in section 1119, etc. On denial of liability, tbe jury rendered tbe following verdict :

“1. Wbat amount of stock in tbe Willis Grocery was beld by tbe defendants McKeel, Mclntosb, and Weeks at tbe time tbe said company became insolvent ? Answer: ‘McKeel, $2,000; Mclntosb, $2,000; Weeks, $1,000.’

“2. Wbat amount, if any, is due by each of said defendants on tbe stock beld by tbem? Answer: ‘$2,000; Weeks, $1,000.’

“3. Were tbe defendants officers of tbe Willis Grocery Company? Answer: ‘Yes.’

“4. Did tbe defendants pay out of tbe funds of said Willis Grocery Company dividends when debts of said company were more than two-tbirds of its assets, and if so> in wbat amount ? Answer: ‘$6,644.’

“5. Did tbe defendants pay to or for themselves any part of tbe capital stock of Willis Grocery Company, and if so, in wbat amount ? Answer: ‘$5,308.’

“6. Wbat amount will be refunded to pay tbe debts of Willis Grocery Company, over and above tbe assets of tbe bankrupt estate of tbe Willis Grocery Company? Answer: ‘$3,234.’”

■' Judgment on verdict for plaintiffs for $3,234, amount required to pay tbe corporate debts, and defendants excepted and appealed.

H. P. Whitehurst and B. A. Nunn 'for plaintiff.

Whitehurst & Bar dm and Ward & Ward for defendants.

Hohie, J.

Both under general principles of corporate law, appertaining to tbe subject, and witb us by express enactment, stockholders of an insolvent corporation are liable pro rata for tbeir unpaid subscriptions to an amount necessary to liquidate the corporate debts. Whitlock v. Alexander, 160 N. C., 465; McIver v. Hardware Co., 144 N. C., 478; C. S., ch. 22, sec. 1160. In tbe same statute, sec. 1179, it is also provided as follows:

“No corporation may declare and pay dividends except from tbe surplus or net profits arising from its business, or wben its debts, whether due or not, exceed two-tbirds of its assets, nor may it reduce, divide, withdraw, or in any way pay to any stockholder any part of its capital stock except according to this chapter. In case of á violation of any provision of this section, tbe directors under whose administration tbe same occurs are jointly and severally liable, at any time within six years after paying such dividend, to tbe corporation and its creditors, in tbe event of its dissolution or insolvency, to tbe full amount of tbe dividend paid, or capital stock reduced, divided, withdrawn, or paid out, witb interest on tbe same from tbe time such liability accrued. Any director who was absent wben tbe violation occurred, or who dissented from tbe act or resolution by which it was effected, may exonerate himself from such liability by causing bis dissent to be entered at large on tbe minutes of tbe directors at tbe time tbe action was taken or immediately after be has bad notice of it.”

Tbe verdict of tbe jury on tbe fourth issue brings case of defendants directly within tbe provisions of this section 1179, to an amount more. than sufficient to pay tbe corporate debts, and tbe judgment for tbe amount of such debts and proper costs and charges has been properly •entered’ against them.

Tbe only objection to tbe judgment insisted upon in tbe argument before us was to tbe allowance of $500 for costs aúd expenses of tbe bankruptcy court. It appeared that plaintiff as trustee in bankruptcy bad on band from other sources $636 available to creditors subject to costs and fees of tbe bankruptcy proceedings, and tbe court merely instructed tbe jury that they should deduct tbe amount of $500 for such costs from this $636 and credit tbe amount of indebtedness witb tbe ■difference which would leave tbe balance due from defendants tbe amount found by tbe jury in response to tbe sixth issue. This was ■clearly permissible, and tbe objection made was not to tbe allowance of tbe fees, but that tbe evidence on tbe subject is not as full and satisfactory as could be desired. We think tbe testimony of tbe trustee made without objection on the cross-examination is sufficient to uphold tbe amount allowed.

Tbe presumption is against error, Bernhardt v. Dutton, 146 N. C., 206-209, and we are of opinion tbat tbe objection is not sufficiently supported to justify, tbe Court in disturbing tbe results of tbe trial. Judgment affirmed.

No error.