Walker v. Flemming, 70 N.C. 483 (1874)

Jan. 1874 · Supreme Court of North Carolina

70 N.C. 483

R. M. WALKER and another v. W. W. FLEMMING and others.

A president defacto of a Railroad Company, when a suit is pending in which his right to the office is to be tried, and just before the decision of such suit, has no right to make a distribution of the funds of the company to such creditors as he may elect to give preference,

For the ordinary purposes of the company, and in order to keep the machinery in motion, a defacto president will be recognized as having power to act.

Civil aotioN, tried by Henry, J., upon demurrer, at the Spring Term, 1873, of the Superior Court of BueKe county.

The plaintiffs, as assignees af a certain mortgage made by the defendant, Flemming to his co-defendant, the Western N. C. Railroad, demands, that after taking an account to ascertain the indebtedness of Flemming to the road, the lands embraced1’ in the mortgage be sold, and the balance, after paying said! debt, be applied to the satisfaction of their debts against the-road.

The defence set up by the road to this action, is fully set out-in 'the opinion of Chief Justice PeaesoN. The plaintiffs demurrer to the answers, which was overruled by his Honor, and judgment given for defendants. From this judgment, plaintiffs appealed.

Armfield, for appellants, argued :

“An officer defacto is one who has the reputation of being-the officer he assumes to be, and yet is not a good officer in point of law.” See Lord ElleNBOEOügh, in the- King v. the Corporation of Bedford.

He may be an officer de facto, “ though indisputably inelii gible.” Though the office is not vacant; though) there is am existing officer de fire at the time.

“ The acts of an officer de facto are good wherever they concern a third person who had a previous right to the act, or who paid a valuable consideration for it.”

A person in office without even the form of an election, might be a de facto officer, and all his acts would bind the corporation, unless the act of incorporation or general statute law avoided them.”

All the above cases and authorities are found in Angel & Ames on Corporations, see. 287, p. 319, 5th edition. See, also, Bacon’s Abridg., tit. Corporations, 2, 6; Angel & Ames on Corporations, pp. 124 and 125.

JicGorMe .<& Bailey, and Bolle, contra.

PeabsoN, C. J.

Pending an action in the Superior Court, the purpose of which was to have it decided, whether the “Tate board” or the “ Howerton board ” were entitled to the office, Tate, who held the office as President de facto, assumes to himself the right to znake preferences among the creditoi'S of the Company, and assigns to the plaintiffs a valuable security belonging to the Company, as a collatez’al security for their debts, and this is done a very short time before the decision in Howerton v. Tate was announced, 68 N. C., 546. It is\true, .that for the ordinary purposes of the Company, and in order 'to keep the machinery in motion, a de facto President will b'§, recognized as having power to act; for instance, his contracts for a supply of wood or to engage conductors and hands on the road are held to be valid. But the idea that a de facto Pz’esi-dent of a Railroad Company, on the eve of his departure, by judgment of-the Court, can anticipate and make distribution of the funds, of the Company to such creditors of the Company as he may elect to give preference to, is a proposition that .needs no discussion.

There is no error. Judgment in the Court below affirmed, with the modification: “it is further ordered, that the plaintiffs, Walker and Simonton deliver to the Clerk of the Superior (Court for the county of Burke, the papers purporting to be an r assignment of-the mortgage set out in the . pleadings to the end that the papers be cancelled so as to remove any cloud from the title of the Railroad Company in respect to the mortgage.

Pee Oubiam. Judgment accordingly.