{ "id": 5200036, "name": "State National Bank of St. Joseph v. John Moran Packing Co., Union National Bank of Chicago et al.", "name_abbreviation": "State National Bank v. John Moran Packing Co.", "decision_date": "1896-12-28", "docket_number": "", "first_page": "25", "last_page": "43", "citations": [ { "type": "official", "cite": "68 Ill. App. 25" } ], "court": { "name_abbreviation": "Ill. App. Ct.", "id": 8837, "name": "Illinois Appellate Court" }, "jurisdiction": { "id": 29, "name_long": "Illinois", "name": "Ill." }, "cites_to": [ { "cite": "159 Ill. 350", "category": "reporters:state", "reporter": "Ill.", "case_ids": [ 3130416 ], "opinion_index": 0, "case_paths": [ "/ill/159/0350-01" ] }, { "cite": "154 Ill. 44", "category": "reporters:state", "reporter": "Ill.", "case_ids": [ 837672 ], "opinion_index": 0, "case_paths": [ "/ill/154/0044-01" ] }, { "cite": "47 Ill. App. 588", "category": "reporters:state", "reporter": "Ill. App.", "case_ids": [ 2438820 ], "opinion_index": 0, "case_paths": [ "/ill-app/47/0588-01" ] }, { "cite": "130 Ill. 87", "category": "reporters:state", "reporter": "Ill.", "case_ids": [ 12121592 ], "opinion_index": 0, "case_paths": [ "/ill/130/0087-01" ] }, { "cite": "45 Mich. 103", "category": "reporters:state", "reporter": "Mich.", "case_ids": [ 1405296 ], "opinion_index": 0, "case_paths": [ "/mich/45/0103-01" ] }, { "cite": "35 Ill. App. 465", "category": "reporters:state", "reporter": "Ill. App.", "case_ids": [ 5006864 ], "opinion_index": 0, "case_paths": [ "/ill-app/35/0465-01" ] }, { "cite": "116 N. C. 827", "category": "reporters:state", "reporter": "N.C.", "case_ids": [ 8655717 ], "opinion_index": 0, "case_paths": [ "/nc/116/0827-01" ] }, { "cite": "87 Mo. 164", "category": "reporters:state", "reporter": "Mo.", "case_ids": [ 436405 ], "opinion_index": 0, "case_paths": [ "/mo/87/0164-01" ] }, { "cite": "35 Mo. App. 366", "category": "reporters:state", "reporter": "Mo. App.", "opinion_index": 0 }, { "cite": "18 Mo. App. 665", "category": "reporters:state", "reporter": "Mo. App.", "case_ids": [ 534477 ], "opinion_index": 0, "case_paths": [ "/mo-app/18/0665-01" ] }, { "cite": "49 Ill. 416", "category": "reporters:state", "reporter": "Ill.", "case_ids": [ 2601849 ], "opinion_index": 0, "case_paths": [ "/ill/49/0416-01" ] }, { "cite": "62 Ill. 493", "category": "reporters:state", "reporter": "Ill.", "case_ids": [ 2607711 ], "opinion_index": 0, "case_paths": [ "/ill/62/0493-01" ] }, { "cite": "18 Ill. 297", "category": "reporters:state", "reporter": "Ill.", "case_ids": [ 438637 ], "opinion_index": 0, "case_paths": [ "/ill/18/0297-01" ] } ], "analysis": { "cardinality": 1043, "char_count": 37916, "ocr_confidence": 0.504, "pagerank": { "raw": 8.906005651515158e-08, "percentile": 0.5001164160536 }, "sha256": "fd86948099addca10fc35c6413ce7c7fe82ee38be1637140bbaf71bca43c4120", "simhash": "1:7bae54a594da200c", "word_count": 6390 }, "last_updated": "2023-07-14T18:19:54.666299+00:00", "provenance": { "date_added": "2019-08-29", "source": "Harvard", "batch": "2018" }, "casebody": { "judges": [], "parties": [ "State National Bank of St. Joseph v. John Moran Packing Co., Union National Bank of Chicago et al." ], "opinions": [ { "text": "Mr. Justice Waterman\ndelivered the opinion of the Court.\nSection 20 of chapter 32 of the Bevised Statutes, is as follows:\n\u201c The by-laws of every corporation shall provide for the calling of meetings of the directors, trustees or other officers corresponding to trustees; and when all such officers shall be present at any meeting, however called or notified, or shall sign a written consent thereto on the record of such meeting, the acts of such meeting shall be as valid as if legally called and notified; provided, that the action of any meeting held beyond the limits of this State shall be void, unless such meeting was authorized or its acts ratified by a vote of two-thirds of the directors, trustees or offi\u00e9ers corresponding to trustees, at a regular meeting.\u201d\nIt is urged by appellants that the foregoing statute was enacted for the protection of stockholders exclusively, and is a matter.in which the creditors of corporations and the public generally have no interest, and therefore that appellees, as creditors of the John Moran Packing Company, can not be heard to say that the meeting of the board of directors of said company, held outside of the State, was void or irregular.\nIn determining whether the mortgage sought to be foreclosed in this case is valid and binding, not only as regards the company, but with reference to appellees and all the creditors of said Packing company, it is well to consider separately and in chronological order the proceedings by virtue of which complainant\u2019s mortgage has validity, if at all.\nThe statute under consideration plainly and explicitly pronounces the action of the directors of the Packing company at the meeting held outside the limits of the State of Illinois, at St. Joseph, Missouri, on the 18th day of February, 1895, void, unless such meeting was authorized or its acts ratified by a vote of two-thirds of the directors', trustees or officers corresponding to trustees, at a regular meeting. It is not claimed that such meeting had previously been authorized.- The action taken thereat was therefore void, unless it has since been ratified at a regular meeting by a vote of two-thirds of the directors.\nIt is unnecessary now to discuss whether such action was void as regards the public or the creditors of said company, as it unquestionably was void so far as the company itself was concerned. There can be no doubt that had the directors of the company returned to Chicago on the day following the action had in Missouri, and in the State of Illinois held a regular meeting properly called, that the company, no ratification of the St. Joseph action having been previously made, might have proceeded to rescind and revoke the action of the 18th of February, and to make conveyances in repudiation and annullment of the same, save that perhaps the company might have been bound to restore whatever benefit it had received from the St. Joseph action.\nIt is beyond question that the mere action of the board of directors in St. Joseph, Mo., was, as regards the packing company, entirely void. If, therefore, the complainant\u2019s mortgage has any validity, it is by virtue of something that has taken place subsequent to the St. Joseph meeting.\nIn obedience to the instructions given at the St. Joseph meeting to the president and secretary, they immediately proceeded to execute to the complainant the mortgage which it is sought in this proceeding to foreclose. It is urged that such action upon their part was within their powers and binding upon the company.\nThere is some contrariety of opinion as to what the powers of the president of such a company are. Thompson\u2019s Commentaries on the Law of Corporations, Secs. 4618-4619; Morawetz on Private Corporations, Secs. 537-539.\nIn this State it has long been the rule that the president of a corporation is presumed to have authority to transact for the corporation business of an ordinary nature, arising in the routine of affairs, such as custom or necessity has imposed upon the office. Chicago, Burlington & Quincy Ry. Co. v. Coleman, 18 Ill. 297; Smith v. Smith, 62 Ill. 493; Mitchell v. Deeds, 49 Ill. 416.\nThe instructions given at the St. Joseph meeting were in effect to convey by way of mortgage, substantially all its property, which consisted of a packing house plant in Missouri, and real property in the State of Illinois, amounting in value to many thousand dollars.\nWe are of the opinion that the president and secretary of such a company as was this, have not, by mere virtue of their offices, authority to transfer substantially all the property of the corporation to certain creditors by way of preference to them, and that the company was not bound by and might avoid such conveyances.\nThe transaction was not one within the ordinary or usual course of the business of the company; neither was it such as custom has sanctioned, or the ordinary carrying on of business made necessary. Winsor v. Bank, 18 Mo. App. 665; Hyde v. Larkin, 35 Mo. App. 366; McKeag v. Collins, 87 Mo. 164; Hoyt v. Thompson, 5 N. T. (1st Selden), 320; Bank v. Asheville Furniture Co., 116 N. C. 827; Coke v. National Association, 35 Ill. App. 465.\nUp to the time of the attempted ratification of the acts of the St. Joseph meeting and the conveyances made thereunder, the Packing company was not bound by such transfers. The company not being bound by the mortgage to complainant, its attaching creditor secured whatever rights it had in and to the property so seized.\nIn this State the rights of attaching and judgment creditors are equal to those of tona fide purchasers.\nThe meeting of the board of directors, held in Chicago, on Harch 25, 1895, at which an attempt was made to ratify the action of the St. Joseph meeting and the conveyances thereunder made, could not divest the Union National Bank of the lien which it had theretofore secured by virtue of its attachment. But there is another objection to such attempted ratification. The statute provides that the acts of a meeting held outside of the limits of this State may be ratified by a vote of two-thirds of the directors at a regular meeting. The meeting at which the attempt at ratification was made, seems to have been regularly called and held, but there was not thereat, in support of such attempt, a vote of two-thirds of the directors. Four out of the five directors were present; three voted for and one against the attempted ratification. So far, therefore, as the action of the St. Joseph me\u00e9ting, instructing the president and secretary to make the deeds under consideration is concerned, such action was not ratified in accordance with the statute.\nAs to whether the action of the meeting of March 25th was not a ratification of the act of the president and secretary in making the deeds, is, so far as the rights of the Union National Bank are concerned, immaterial, because its rights were secured long before March 25th.\nUndoubtedly, the act of the president and secretary of a company, in executing deeds of its property, may be ratified by mere acquiescence therein for a sufficient length of. time, but as the attachment of the Union National Bank was not made after, but on the same day that the mortgage to complainant was recorded, there was no acquiescence by mere inaction.\nA distinction has sometimes been drawn between statutes said to have been enacted for the benefit and protection of stockholders only, and those which are enacted as a matter of public policy. This is commented upon in Beecher v. Marquette Rolling Mill Co., 45 Mich. 103.\nIf, under the circumstances of this case, such distinction was to be considered, it would seem that the statute before mentioned was created for public purposes, and as a declaration of the policy of this State in respect to corporations. It is manifest that it could make but little difference to stockholders whether a meeting of its directors was held Avithin the limits of this State, or just beyond its border; Avhile public policy might dictate that no action had at any meeting held outside of the limits of this State should be binding unless authorized or ratified by a meeting held within reach of the judicial process of this State.\nThe John Moran Company can not be said to have been\u201d, at the time the attachment of the Union ^National Bank was made, the recipient of such benefits under the mortgage sought to be foreclosed, that it Avas then estopped to deny the validity of the same. The mortgage Avas given, not for anything by the Packing company then received, or any detriment suffered by the complainant; the consideration Avas a debt that had long existed, and the mortgage Avas consequent upon the demand of appellant that such debt should be paid or secured.\nWe have no question of the right of an Illinois corporation to prefer Iona fide- creditors, but when a creditor comes into court, claiming a preference, the burden is upon him to establish the validity of the acts under which such claim is made; which principle appellant insists upon in the present case, by urging that owing to the action of the Packing company in withdrawing the plea it had filed to test the merits of the attachment proceeding, and thus consented to a deault, and judgment against it upon the attachment issue, there was such irregularity that it, appellant, is not in this proceeding entitled to contest the truth of the attachment affidavit. As the attachment was upon property which appellant claimed only to have a valid mortgage upon, we are not prepared to hold that it was ever entitled to contest in the attachment proceeding, the truth of the matters set up in the attachment affidavit.\n' The Supreme Court in the case of Juillard & Co. v. May, 130 Ill. 87, said :\n\u201c The statute giving the remedy by interpleader, is applicable alike to lands and personal property. The issue, and only issue, there can be upon the interpleader, is upon the affirmative claim of property therein, and when that is decided in favor of the claimant, the court has ample power to see that its own process is not abused by making it the means of selling his property to pay the indebtedness of another for which he is not legally liable. It is fundamental that no person shall be deprived of property without due process of law, and the court can protect the claimant in the rights of property guaranteed him, without assuming to vacate or change the judgment rendered at a prior term against the defendant in attachment.\u201d\nAs appellant knew of, and could have intervened in, the attachment proceeding, it would seem that if at any time entitled to be heard as to the truth of the alleged grounds for attachment, it should, prior to judgment, have made its contest in the court in which that issue was presented. \u2022 \u2022\nThe Moran Packing Company was not bound to contest the truth of the affidavit setting forth statutory grounds for an attachment. On the contrary, it might, before or after the issue of the writ, have voluntarily .mortgaged the attachment property to the Union \u00a1National Bank as security for its claim.\n\u00a1Nor do we think that the lien of the Union National Bank was lost by the withdrawal by the Packing company of its plea and the entry of judgment against it by default.\nThere was no unreasonable departure from the law, if any, by the attaching creditor. Waples on Attachment, Sec. 811 (Second Ed.).\nAs to the attachment by the Atlas National Bank, made April 26, 1895, a month previous thereto, the Backing company, by its president and secretary, in accordance with directions given by the directors of said company, at a meeting held in the city of Chicago on March 25, 1895, had executed another mortgage to appellant, securing the indebtedness to it, which mortgage was on the same day recorded, and which the bill filed in this case seeks to foreclose.\nWhatever may be the rule in other States, it is in this well established that a corporation, although insolvent, may, by a conveyance of its property, prefer one of its creditors, subject to the same restrictions that apply to individual debtors. Gottlieb v. Miller, 47 Ill. App. 588; same case in Supreme Court, 154 Ill. 44; Blair v. Illinois Steel Company, 159 Ill. 350.\nThe decree of the Circuit Court holding that the lien acquired by the Atlas National Bank under its attachment, i's superior to the lien acquired by appellant under its mortgage executed March 25, 1895, is reversed.\nThe decree of the Circuit Court holding that the attachment of the Union National Bank has precedence over each of the mortgages executed to appellant, is affirmed, and the decree of the Circuit Court as to all the parties to said foreclosure proceeding, save the Atlas National Bank, is affirmed.\nThe costs of this court in this case will be taxed, one-half of the same against appellant, and one-half against the Atlas National Bank.\nReversed as to the Atlas National Bank.\nAffirmed as to all other appellees.", "type": "majority", "author": "Mr. Justice Waterman" } ], "attorneys": [ "Paddock, Weight & Billings, attorneys for appellant; Brown & Pratt, of counsel.", "Hamlin, Holland & Boydkn, attorneys for John Moran Packing Company, appellee.", "Green, Bobbins & Honors, attorneys for the Union National Bank, appellee." ], "corrections": "", "head_matter": "State National Bank of St. Joseph v. John Moran Packing Co., Union National Bank of Chicago et al.\n1. Corporations\u2014Meetings Outside of the State.\u2014 Sec. 20 of Chap. 32, E. S., plainly and explicitly pronounces void the action of the directors of a corporation at a meeting held outside of the State, unless such meeting was authorized or its acts ratified by a vote of two-thirds of the directors, trustees, or officers corresponding to trustees, at a regular meeting.\n2. Same\u2014Power of Officers to Dispose of Property.\u2014The president and secretary of a packing company have not, by virtue of their offices, authority to transfer substantially all the property of the corporation to certain creditors by way of preference to them; and the company is not bound by and may avoid such a conveyance.\n3. Same\u2014May Give Preference to Creditors.\u2014In this State a corporation, although insolvent, may, by a conveyance of its property, prefer one of its creditors, subject to the same restrictions that apply to individual debtors.\n4. Attachments\u2014Invalid Mortgages.\u2014Ad. attaching creditor secures whatever right his debtor has in and to the property seized, and a mortgage on such property which is void as to the debtor is also void as to the attaching creditor.\n5. Saw\u2014Bight of Third Parties to Question a Judgment.\u2014A defendant in an attachment suit is not bound to contest the truth of the affidavit setting forth the grounds for attachment, and another creditor of such defendant, who knew of and could have intervened in the attachment proceeding, can not question the judgment on that point in another suit regarding the property attached\n6. Estoppel\u2014To Deny Validity of Mortgage.\u2014Where a mortgage is given, not for anything received by the mortgagor at the time of its execution, or any detriment then suffered by the mortgagee, but to secure a debt that has long existed, the mortgagor is not the recipient of such benefits under such mortgage that he will be estopped to deny the validity thereof.\n7. Burden of Proof\u2014Is on Creditor Claiming Preference.\u2014When a creditor -comes into court, claiming a preference over other creditors of his debtor, the burden is upon him to establish the validity of the acts under which such claim is made.\nMortgage Foreclosure.\u2014Appeal from the Circuit Court of Cook County;' the Hon. Oliver H. Horton, Judge, presiding.\nHeard in this, court at the October term, 1896.\nAffirmed in part, and reversed in part.\nOpinion filed December 28, 1896.\nStatement of the Case.\nThis was a suit to foreclose a -mortgage brought in the Circuit Court of Cook County, Illinois, by the State National Bank of St. Joseph, the appellant, upon real estate situated in the city of Chicago, owned by the John Moran Packing Company, mortgagor, a corporation, incorporated under the laws of the State of Illinois, doing a packing business at St. Joseph, Missouri.\nThe Union National Bank of Chicago, and the Atlas National Bank of Chicago, attaching creditors, were defendants. By answer and cross-bill of the former, and by answer of the latter, it was contended that the mortgage was invalid because authorized by only three of the five members of the board of directors of the mortgagor company at a meeting held outside of the State of Illinois. The defendant banks also contended that the John Moran Packing Company was at that time insolvent, and that the giving of the mortgage under the circumstances operated as an unlawful preference which should not be enforced against the later attachment liens, and further contended that the description of the mortgaged premises was insufficient to convey the premises.\nPrior to October 20, 1894, the defendant, John Moran, was the owner of a packing plant situated in St. Joseph, Missouri, which he was then operating, and was also the owner of an equity of redemption in real estate located in Chicago, being the premises in question in this suit. Upon these premises was a trust deed dated March 12, 1892, to William H. Matthews, trustee, securing an unpaid balance of over 'fifteen thousand dollars. In carrying on his packing business Moran was borrowing from time to time large sums of money from the State National Bank of St. Joseph, the complainant.\nIn October, 1894, the John Moran Packing Company was incorporated under the laws of the State of Illinois, with a capital stock of one hundred and fifty thousand dollars, the number of shares being 1,500, and the par value of each share $100.\nJohn Moran became and still is president of the John Moran Packing Company, and C. W. Taylor was elected secretary.\nSoon after the complete organization of the John Moran Packing Company, John Moran sold and transferred to it his packing plant in St. Joseph, Missouri, together with his entire business there, his bills and accounts receivable, good will, etc., and also his equity in his above described mortgaged premises situated in Chicago, for the nominal sum of $150,000, and the Packing company assumed all his liabilities growing out of the said packing business, including the aforesaid advances made to him by the complainant.\nIn payment, John Moran received 1,139 shares of stock in the John Moran Packing Company at a valuation of $113,900, and due bills or orders of the company for the remaining $3(5,100. So far as it appears he continued to own that number of shares at all times since he so acquired them.\nAmong the liabilities so assumed by the John Moran Packing Company was an indebtedness to complainant of $50,000 for moneys advanced to Moran as before stated, which became due in November, 1894. On November 8,1894, two new notes for $25,000 each, payable in three and four months respectively from date, were executed by the John Moran Packing Company to the order of complainant to take up the said indebtedness. These two notes of $25,000 each were indorsed by John Moran, and are the notes secured by complainant\u2019s mortgage sought to be foreclosed by complainant\u2019s bill.\nThe mortgage in question was not executed until February following, however.\nAmong the other liabilities of Moran assumed by the John Moran Packing Company was a contract between John Moran and the St. Joseph Stock Yards and Terminal Company, dated June 25, 1894.\nOn January 23, 1895, the John Moran Packing Co. entered into an agreement with one C. M. France (a nephew of C. B. France, who was then president of the State National Bank), whereby certain portions of the packing company\u2019s packing house, at St. Joseph, were leased to him to be used for the storage of meat products, lard and other products from slaughtered animals, etc., the John Moran Packing Company to warehouse its products, keep said warehouses at the right temperature, etc.; said O. M. France to act as warehouseman, issue warehouse receipts for products stored, furnish all necessary weighers therefor and keep all necessary accounts, all at his own cost and expense; for which he was to be paid $300 per month by the John Moran Packing Company.\nBusiness began under this agreement at once, and the result was that the State National Bank during its continuance advanced the John Moran Packing Company a large amount of money upon warehouse receipts issued by the warehouseman, C. M. France, at various times upon pork products.\nThese advances upon collateral were entirely distinct from'the moneys covered by the two promissory notes of $25,000 each first mentioned. They were loans of new capital by the State National Bank.\nThis course of business continued up to the middle of February, 1895. One of the notes for $25,000 to complainant being then past due and wholly unpaid, and complainant demanding security, the company then owing about $160,000, a meeting of the board of directors of the John Moran Packing Company was, after notice to each director, held at St. Joseph, Missouri, on the 18th day of February, 1895. Three of the five members of the board of directors, namely, John Moran, C. W. Taylor and P. Fogarty, were present at the meeting and voted in favor of the following resolution:\n\u201c Besolved, that the president and secretary be and they are hereby instructed to execute deeds in the nature of mortgages upon all property of the company situated in this State and in Illinois, for the purpose of securing the payment of two notes, made by this company to the State National Bank on the eighth day of November, 1894, for $25,000 each, and also for the purpose of securing and carrying out the contract with the St. Joseph Stock Yards and Terminal Company, made by John Moran on the twenty-fifth day of June, 1894, assumed by this company, that is to say\nThe resolution sets out in haee verba\u2014\nA deed from the company to John Donovan, Jr., trustee for the State National Bank, covering all its real estate, and all its machinery, tools and other personal property at St. Joseph, Missouri.\nA mortgage by the Packing Company to the same bank upon its real estate in Cook county, Illinois.\nA deed by the Packing Company to the St. Joseph Stock Yards and Terminal Company, to secure a contract between the Packing Company and the Stock Yards Company in reference to packing a certain number of hogs per year, this deed also covering the same property in Missouri covered by the foregoing deed to the State National Bank, and being made expressly subject to it.\nAlso a deed from the Packing Company to the Stock Yards Company, to secure the same contract, and covering the same property in Cook county which is included in the foregoing mortgage to the State National Bank, and being made subject to said mortgage.\nThese deeds cover all the property in Illinois and Missouri, being all the assets of the company, except some pork products covered by warehouse receipts which were then held by the State National Bank.\nThe president and secretary, under the corporate seal, thereupon executed the mortgage sought to be foreclosed by complainant herein, dated February 18, 1895, securing the two promissory notes mentioned, which mortgage was duly acknowledged on the same day, and afterward recorded in the recorder\u2019s office of Cook county, Illinois, on February 19, 1895, at 9:55 o\u2019clock a. m.\nAt the same time the foregoing mortgage was given, the president and secretary, under the corporate seal, executed the other mortgage mentioned in the said resolution, which mortgages were duly acknowledged, and recorded at the same time as complainant\u2019s mortgages.\nJohn Moran and wife, on February 16,1895, also executed a mortgage to the State National Bank to secure the same notes covered by,the mortgages from the corporation, conveying certain real estate owned by him and located in Cook county, Illinois, and at the same time executed a mortgage to the-St. Joseph Stock Yards & Terminal Company conveying the same premises, to secure the before mentioned contract. These individual mortgages were recorded at the same time as the mortgages from the corporation.\nOn the same day that the mortgages to complainant and the mortgages to the Terminal company were recorded in Cook county, i.