author: Mr. Justice Bakes

text:
    Frederick W. Hunerberg v. The Village of Hyde Park.

      Filed at Ottawa

      October 31, 1889.

    1. Special assessment—/or a street—before acquiring title by municipality. The corporate authorities of cities and-villages may levy special assessments for the improving of a proposed street before having acquired the soil by condemnation or otherwise, and afterward take steps to acquire the necessary land.
    2. N Same—time to o bj ect to confirmation. Only such obj ections as were filed in the trial court against the confirmation of special assessments, "will be considered by this court.

      Appeal from the County Court of Cook county; the Hon. Bichard Prendergast, Judge, presiding.
    Mr. Consider H. Willett, for the appellant:
    The owner of land objecting can not be specially assessed for a local public improvement to be located upon his private property. Railway Co. v. Alleghany City, 92 Pa. St. 100; People v. Haines, 49 N. Y. 587; In re Rhinelander, 68 id. 105 ; In re Cheesehrough, 78 id. 232.
    A special assessment can not be levied for an improvement the use of which contemplates a continuing trespass. In re Rhinelander, 68 N. Y. 105.
    A special assessment for a public improvement requiring the use of private property upon which to erect it and locate it and use it, can not be made, if the owner of such private property objects to it, until, by proper proceedings, the public have acquired a right to make such use of the property, or a title to such property. People v. Haines, 49 N. Y. 587.
    If the special assessment could be sustained upon private property before the public had acquired a title, yet the east thirty-three feet of lot 2, block 2, should be assessed as a separate piece of property from the balance of the east half of lot 2, block 2, the same as though the ownership was in fact different. Howe v. People, 86 Ill. 288; Lyman v. People, 2 Bradw. 289; Roly v. Chicago, 48 Ill. 130.
    We do not regard the cases upon which the appellee will depend, as opposed to or modifying the doctrines of our first three points. They are all cases where some stranger attempted to show that the local improvement was located upon private property, the reputed owner of such property disclaiming such ownership or waiving all objections to such use of . his property. Village of Hyde Park v. Borden, 94 Ill. 26 ; In re Ingraham, 64 N. Y. 310; Holmes v. Village of Hyde Park, 121 Ill. 128.

      Mr. James B. Mann, for the appellee:
    The cases of Village of Hyde Park v. Borden, 94 Ill. 26, and Holmes v. Village of Hyde Park, 121 id. 128, are decisive of the points made in this case.
    Counsel for appellant, in his argument, endeavors to raise a hypercritical objection,—that the assessment is made upon the east thirty-three feet of appellant’s premises for the purposes of paving such east thirty-three feet, and hence is invalid. This may be answered by saying, no such objection was filed to the assessment roll, or made in the lower court, and hence can not be made here.
    The question of benefits must be decided upon the evidence in the case, and the only evidence is the assessment roll returned by the commissioners, which shows that appellant’s property is benefited to the amount of the assessment, and there being no offer to contradict this evidence as to benefits, the same is conclusive.
    The fact that a portion of the property upon which the improvement is to be made is assessed therefor, is decisive that it will be benefited to the amount' of the assessment; and if it is benefited the amount which it is assessed, this would enhance its value in condemnation proceedings.
    This assessment for benefits for street improvement is made on the basis of street frontage, and the appellant’s property would be assessed the same amount, and would be benefited the same amount, whether the east thirty-three feet was included in the property which was assessed, or not.
    The question thus raised in the Holmes case, and the decision in that case, is conclusive in this.
   Mr. Justice Bakes

delivered the opinion of the Court:

The village of Hyde Park, appellee, passed an ordinance on the 4th of September, 1888, for the grading and paving of Champlain avenue, from Forty-second to Forty-sixth street, and the cost of the improvement was ascertained, in the mode prescribed by the statute, to be $14,446. A petition was then filed in the county court of Cook county, for the purpose of having a special assessment made, to pay the cost of such improvement. The commissioners appointed to assess the benefits, assessed against the east half of lot 2, block 2, Sal-stonstall & Bussell’s subdivision of the north half of the southeast quarter of section 3, town 38 north, range 14, east of the third principal meridian, the sum of $366.52. The owner, Frederick W. Hunerberg, appellant, filed objections to the confirmation of the assessment roll, claiming that a portion of the contemplated improvement would be located upon his own private property, and that the ordinance providing for the improvement contemplated the use of the east thirty-three feet of his premises as the west half of the street to be improved.

The matter of the objections of appellant to the assessment was tried before the court, without a jury. At the trial, the objector claimed to be the owner of said east thirty-three feet, and to be in possession of the same as his own private property, and the village claimed that at the place in question the street had been opened for many years by common law dedication, and was used by the public as a street, and was in the possession of the village. The objector offered in evidence certain deeds, and other testimony, for the purpose of proving he was the owner of said thirty-three feet, but the court sustained objections to such proffered testimony, and exceptions were taken. No evidence was introduced to show the premises were assessed more than they were benefited, or more than their proportionate share of the cost of the improvement. The court entered judgment overruling the objections and confirming the assessment. Thereupon, and after a motion for a new trial was made and overruled, the objector brought the case to this court by appeal.

The present case is, in legal principle, like those of Village of Hyde Park v. Borden, 94 Ill. 26, and Holmes v. Village of Hyde Park, 121 Ill. 128, and in its facts is on all fours with the latter ease, although the circumstances of identity do not fully appear in the report of said case. It was in said last mentioned case expressly held, that the corporate authorities of cities and villages may levy special assessments for the improvement of a proposed street before acquiring the soil, by condemnation or otherwise, and afterward take the necessary steps to condemn, and have the compensation and damages to be paid assessed, and that the owner of property specially assessed for grading and paving such street can not interpose the objection to the confirmation of the assessment, that the city or village had not acquired title to the soil to be graded and paved. The record of that case shows that Holmes," the then objector, claimed the proposed improvement was in part on his own private property, and was a portion of the lot which had been assessed for making the improvement, thus fully covering the points which are urged by counsel as distinguishing that case from this; and it further appears, from the briefs and arguments on file in that case, those points were made and discussed in the arguments of counsel. The court there said: “Whether the compensation shall be made to the owner of the soil, for the land taken for- the street, before or after the assessment for its improvement, can not make that assessment either larger or smaller; and so, whether title to the soil, entered upon for the purpose of the street, has been heretofore, or remains to be hereafter, acquired, is a distinct question from that of the benefits and damages to result to the adjacent land owner from the improvement of such street, and the latter has no dependence up op. the former. The owner, or claimant of ownership, of the soil covered by the street, is not, as such, merely, required to be made a party to the assessment proceedings, and, manifestly, could not, therefore, be concluded or materially affected in his rights by the judgment confirming the assessment.” The case must be regarded as conclusive of this, so far as appellant relies upon the claim he was himself the owner of a part of the street where the proposed improvement is to be made.

That which we have already said, is a sufficient justification of the ruling of the county court in excluding the evidence offered for the purpose of showing that appellant was the owner of the legal title to the east thirty-three feet of the lot covered by the street to be improved. But, besides this, there is no provision made in the statute to try titles to land in these proceedings to assess benefits upon property to pay for public improvements, nor is the county court vested with jurisdiction to try and determine the question of title to real estate. If, as is claimed by appellant, he is the owner in fee of the thirty-three feet of land, and is in the possession of the same, then such private property of his can not be taken for public use, without he first receives just compensation therefor; and if he is such owner and is entitled to possession, but is kept out of possession by the tortious act of appellee, then the law gives him his action of ejectment for the recovery of possession.

It is argued that the east half of lot 2 includes the east thirty-three feet thereof, and that said thirty-three feet being included in said east half, is assessed with it for the improvements to be made upon said thirty-three feet, and that if said thirty-three feet is a part of the public street, the assessment upon it is void; and further, that the village, in making the special assessment, should have exempted the thirty-three feet, and should have assessed the residue of the east half of lot 2 only for its own proper benefit. It is a sufficient, answer to this suggestion, that no such objection was filed or made to the assessment roll in the county court, and that it can not be made here for the first time.

We find no error in the record. The judgment of the county court is affirmed.

Judgment affirmed. -


source: Caselaw Access Project

author: Mr. Justice Craig Mr. Justice Bakeb,

license: Public Domain

text:
    Thomas S. Beach et al. v. Joseph F. Miller.

      Filed at Ottawa

      October 31, 1889.

    1. Corporations—director dealing with corporation. A director of a solvent corporation may deal with the same, and may loan it money and take security therefor, or buy property of it, in like manner as a stranger.-
    2. SAME'—director as a creditor—of his relation to the corporate fund—and to other creditors. So long as a corporation remains solvent, its directors are trustees for its stockholders; when the corporation becomes insolvent, the assets will be regarded as a trust fund for the payment of its creditors, and the directors will occupy the position of trustees for the creditors, and they may be prohibited from purchasing the trust property whereby to secure to themselves any advantage over other creditors.
    3. As the directors of an insolvent corporation are trustees of its funds for the creditors, they can not give them away, or use them to exonerate themselves, to the injury of the other creditors. If any of the directors are creditors of the corporation, they can not secure any advantage or preference in the payment of their claims at the expense of other creditors.

      i. A director who purchases the property of an insolvent corporation for the purpose of securing his own debt, and takes possession thereof, will take such property charged with the trust in favor of the other creditors, which may be enforced in a court of equity. But this will not authorize another judgment creditor to levy his execution thereon for his debt, after the property has passed into the possession of such director under his purchase.
    5. Same—former decisions. In the case of Merrick v. Peru Goal Co. 61 Ill. 479, the question of the power of a director to purchase property of or deal with an insolvent corporation, did not arise, and what was there said on that subject was mere obiter dictum. And in Harts et al. v. Brown et al. 77 Ill. 226, the expression, that a director may trade with, borrow from or loan money to the company of which he is a member, on the same terms and in like manner as other persons, was not authorized by the case made by the record.
    6. Same—ratification of sale without authority. Where a sale of property of an incorporated company is made by its president or other officer to a creditor, in payment of the company’s notes, without any order therefor by the board of directors, even if the sale is invalid" on that ground, the retention of the notes by the board will amount to a ratification of the sale.
    7. Same—sale of corporate property to a director—whether fraudulent-—evidence on that question. Where a sale of its personal property by a corporation to one of its directors, in payment of a debt due hiim for money loaned by him to the company, is attacked, as, being made-in fraud of creditors, evidence on the part of the creditors, that the-company was at the time of the sale insolvent, and that about the-same-time the company made a mortgage upon its real estate in favor of three of its directors for a large sum, and turned over $1000 of its accounts to a bank, to apply on a debt from it secured by three of its directors, and had sold all the product of its manufacture on hand, is admissible on the issue of fraud, as tending to show fraud.
    8. If, at the time the sale was made to the director, the corporations was insolvent, or if, at or about the time when the sale was made, large-mortgages were placed on all the property owned by the corporation, so-that it had no property left liable to execution, these were facts proper for the consideration of the jury on the question whether the sale was fraudulent or made in good faith. When the good faith of a sale of property is attacked, it is always competent to prove that the vendor was embarrassed or insolvent-.
    Appeal from the Appellate Court for the Second' District— heard in that court on appeal from the Circuit Court of White-side county; the Hon. John Y. Eustace, Judge, presiding.
    Messrs. Weigley, Bulkley & Gray, for the appellants:
    Any act, either of a corporation or any of its officers, inconsistent with its charter, is void. Abbott v. Hard Rubber Co.. 33 Barb. 578; Railway Co. v. Bowser, 49 Pa. St. 29; Rollins v. Clay, 33 Me. 132; Cass v. Iron and Steel Co. 9 Fed. Rep.. 640; Polar Star Lodge v. Polar Star Lodge, 16 La. Ann. 53.
    The property of a corporation is a trust fund for the payment of its debts. Gordon v. Canal Co. 18 Ohio St. 169; Wood v. Dummer, 3 Mason, 308; Railway Co. v. Bee, 48 Cal. 398 ; Duery v. Corp, 7 Wall. 299; Hastings v. Drew, 76 N. Y. 9.
    The directors are the trustees 'of that fund for the benefit of, first, creditors, and second, stockholders. Butts v. Wood, 38 Barb. 181; 37 N. Y. 317; Jackson v. Ludeling, 21 Wall. 616; Field on Corp. sec. 154; Bliss v. Matteson, 45 N. Y. 22; 52 Barb. 348; Holder v. Railway Co. 71 Ill. 106; Chetlain v. Life Ins. Co. 86 id. 220.
    A director can not-deal with the corporation as an individual in any matter when his personal interest is or may be antagonistic to that of the cestui que trust. Railway Co. v. Blaikee, 1 Macq. 461; Steel and Coal Co. v. Coal and Iron Co. 16 Md. 456; Conro v. Iron Co. 12 Barb. 27; Pickett v. School District, 25 Wis. 551; Coal and Iron Co. v. Sherman, 30 Barb. 553; Ogden v. Murray, 39 N. Y. 202; Railway Co. v. Dewey, 14 Mich. 477; Hoyle v. Railroad Co. 54 N. Y. 314; Koehler v. Iron Co. 2 Black, (N. S.) 715; Post v. Russell, 36 Ind. 60; Coleman v. Railroad Co. 38 N. Y. 201; People v. Township, etc. 11 Mich. 222; Brewster v. Strattman, 4 Mo. App. 41; Hawley v. Cramer, 4 Cow. 717; Van Epps v. Van Epps, 9 Paige, 237; Bliss v. Matteson, 52 Barb. 848.
    Such action may be treated by the cestui que trust as void. Michoud v. Girod, 4 How. 503; Nathan v. Whitlock, 9 Paige, 152; Harts v. Brown, 77 Ill. 226.
    Evidence of the insolvency of the corporation was proper. It is only after establishing insolvency that the creditor can introduce evidence tending to show a fraudulent transfer of the debtor’s property. Griffith v. Cox, 79 Ky. 562; Towle v. Lamphere, 8 Bradw. 379; Bank v. Meed, 92 N. Y. 637; Robinson v. First M. E. Church, 57 Iowa, 717; Bishop v. State, 83 Ind. 67.
    To show fraud, it is competent to show what had been the prior business dealings between the parties, and the debtor’s acts and declarations. McKinnon v. Land Co. 63 Texas, 80; Elliott v. Stoddard, 18 Mass. 145; Rosenthal v. Walker, 111 U. S. 185; Strauss v. Kranert, 56 id. 254.
    Messrs. Bennett & Green, for the appellee:
    The appellants, in all the different items of proof offered, and rejected by the court, offered nothing that even pretended to prove any actual fraud in the sale to Miller; and the insolvency of the debtor at the time of a sale of property to a creditor, made in good faith and for full value, to pay an honest debt, would be no evidence of fraud. Nelson v. Smith, 28 Ill. 495; Morris v. Tillson, 81 id. 607; Bump on Fraud. Con. 44, 183.
    A corporation may sell portions of its property at a full price to pay an honest debt to a shareholder or director, even though it should turn out that the corporation had not enough property to pay all its debts in full. Thompson on Liability of Officers and Directors, 401; Buel v. Buckingham, 16 Iowa, 291; Railroad Co. v. Cleghorn, 1 Spear’s Eq. 535; Sargent v. Webster, 13 Metc. 505 ; Life Ins. Co. v. Page, 17 B. Mon. 412; Merrick v. Peru Coal Co. 61 Ill. 479; Harts v. Brown, 77 id. 226 ; Reichwald v. Hotel Co. 106 id. 440.
    Though a member of a corporation be also a trustee or a director, he will not be incapacitated from dealing with it. Angell & Ames on Corp. sec. 233; 1 Potter on Law of Corp. 412; Whitewell v. Warner, 20 Vt. 425; Haywood v. Pilgrim Sec. 21 Pick. 270; Smith v. Lansing, 22 N. Y. 526.
    A corporation may prefer a director who is also a creditor. Bump on Fraud. Con. 185; Sargent v. Webster, 13 Metc. 505; Railroad Co. v. Cleghorn, 1 Spear’s Eq. 535.
    Even if it be held that a director can not obtain a preference over other creditors by a purchase or taking security, when the corporation, although carrying on its usual business, is in fact insolvent, that question can only be raised, in equity, by a creditor, by a bill to compel the director to pay over the excess taken by him beyond his proper proportion of the corporate assets. The cases cited in Morawetz on Private Corp. (1st ed.) under sec. 582, Richards v. Insurance Co. 43 N. H. 263, Bradley v. Farwell, 1 Holmes, 433, and Smith v. Lansing, 22 N. Y. 521, were all suits in equity. In the Bradley case, the reasoning is, that equity, and equity only, would have jurisdiction in such a case.

      In a case like this, where the purchaser was in possession ME the property under a sale made by the president and secretary of the corporation, the presumption would be, when such possession was attacked by a third person, that the officers were properly authorized. Ryan v. Dunlap, 17 Ill. 40; Singer Manf. Co. v. Holdfodt, 86 id. 455 ; Building Society v. Crowell, 65 id. 453; Bradley v. Ballard, 55 id. 413; Angell & Ames on Corp. sec. 297.
    Whether there was any original authority from the board of directors to make the sale and lease or not, if the corporation, with full knowledge of the sale and lease, received the notes, cancelled the same, and retained them, such acts would amount to a ratification. Burrell v. Bank, 2 Metc. 163; 35 Am. Dec. 395; Merchants’ Bank v. Central Bank, 1 Ga. 418; 44 Am. Dec. 665; Bank v. Comegys, 12 Ala. 772; 46 Am. Dec. 278 ; Railroad Co. v. Thompson, 103 Ill. 188; Reichwald v. Hotel Co. 106 id. 439; Ward v. Williams, 26 id. 447; Sheldon Hat Blacking Co. v. Eichmeyer H. B. Co. 90 N. Y. 607; Angell & Ames on Corp. sec. 240.
   Mr. Justice Craig

delivered the opinion of the Court:

This was an action of trespass, brought by Joseph T. Miller, in the circuit court of Whiteside county, against Thomas S. Beach and George C. Keefer. The declaration contained four counts. In the first and second it is alleged, that defendants, with force and arms, broke and entered two certain rooms in a certain warehouse, known as the warehouse of the Bock Biver Packing Company, which said rooms were then and there in the possession of the plaintiff. The third and fourth counts are trespass de bonis asportatis, for taking and carrying away 94,612 tomato cans, 3516 sheets of tin, and a few other articles, alleged to belong to the plaintiff. The defendants pleaded the general issue and several special pleas, in which they averred, that on the 23d day of October, 1885, B. W.. Blatchford & Co. recovered a judgment against the Bock Biver Packing Company, in the circuit court of Whiteside county, for $1415.40; that an execution issued on the judgment, which was placed in the hands of defendants, as sheriff and deputy sheriff, to collect. It is also alleged that the goods named in the declaration belonged to the Bock Biver Packing Company, and as such they were levied upon by defendants, under and by virtue of the execution, and sold in satisfaction thereof. Issue was formed on the pleas, and on a trial the plaintiff recovered a judgment for $1996.41, which was affirmed in the Appellate Court.

In order to get a correct understanding of the questions presented by the record, a brief statement of the facts seems to be required. The Bock Biver Packing Company is a corporation, organized in 1881, with a capital stock of $16,000, the incorporators being James A. Ingersoll, Edward H. Sears, William. N. Herman, and Joseph T. Miller, the plaintiff here. The corporation was formed for “packing, pickling, canning and bottling of meats, vegetables and fruits, and dealing in the same,” and was located at Sterling, where it provided itself with a factory and warehouse, in which its business was transacted. During the spring and summer of 1885 the corporation borrowed of Miller, who was then a director, money to be used in its business, amounting to the sum of $2000. To secure Miller for the money loaned, the corporation executed and delivered to him its four judgment notes, one dated May 30,1885, amount $500; one July 6, 1885, amount $500; and one for $1000, on August 17,1885. On the 16th day of October, 1885, these notes being due and unpaid, the president and secretary of the corporation sold Miller 80,000 cans and a small quantity of -tin for $1877, to be applied as a payment on the notes. On the same day, Ingersoll, president and secretary of the corporation, leased Miller two small rooms in the north end of the company’s warehouse. On the morning of the 17th, all property belonging to the company was removed from the two rooms, and the possession was turned over to Miller. Miller placed the goods purchased in the rooms, and nailed up the doors communicating with other parts of the warehouse, and placed new locks on the other doors. On the 17th day of October, 1885, the corporation delivered to E. W. Blatchford & Co. a judgment note for $1415.40, upon which judgment was entered. On the 23d day of October an execution issued on the judgment, and on the 24th, defendant Beach, as sheriff, and defendant Keefer, as deputy sheriff, levied on the goods which had been purchased by Miller.

In the circuit court it was contended that the sale of the goods from the. Bock Biver Packing Company to Miller was fraudulent as against creditors, and being fraudulent, the goods were liable to be seized and sold by the sheriff on the execution in favor of Blatchford & Co., against the Bock Biver Packing Company. For the purpose of showing the sale fraudulent, the defendants offered to prove that the Bock Biver Packing Company was, at the time of the sale, insolvent; that on the 16th day of October, 1885, the company executed a mortgage on its real estate for $7000, to three of its directors; that the company turned over $1000 of its accounts to the Sterling National Bank, to apply on a debt due from the company to the bank, which debt was secured by three of the directors of the company; that between the 16th and the 23d days of October, the corporation sold the product of their manufacture to a certain party in Chicago. This offered evidence, and other evidence of a like import, was ruled out by the court, and the decision is relied upon as error. We are of opinion that the court erred in excluding this evidence from the jury. If, at the time this sale was made, the corporation was insolvent, or if, at or about the time when the sale was made, large mortgages were placed on all of the property owned by the corporation, so that it had no property left liable to execution, these were facts proper for the consideration of the jury on the question whether the sale to Miller was fraudulent or made in good faith. What weight should be given to this character of evidence, was a question for the jury. We only determine that it was competent evidence for the consideration of the jury, on the issue presented by the pleadings. Where the good faith of a sale of property is attacked, it is always competent to prove that the vendor was embarrassed or insolvent. Geisendorf v. Eagles, 106 Ind. 38; Bump on Fraud. Con. 591.

But appellants rely upon another ground to defeat the sale, —that it was void for the reason that Miller was, at the time, a director of the corporation, and could not contract with it. This proposition is discussed in the argument under several distinct heads, and various authorities have been cited in its support. There is a conflict of authority on this question, but on the general proposition, whether a director may deal with the corporation, we think the weight of authority is that he may. This court so held in Merrick v. Peru Coal Co. 61 Ill. 479, ■and in Harts et al. v. Brown et al. 77 id. 226. The Supreme Court of the United States hold the same doctrine. In Twin-Lick Oil Co. v. Marbury, 91 U. S. 587, it is said: “It is very true that as a stockholder, in making a contract of any kind with the corporation of which he is a member, he is in some sense dealing with a creature of which he is a part, and holds a common interest with the other stockholders, who, with him, constitute the whole of that artificial entity, and is properly held to a larger measure of candor and good faith than if he were not a stockholder. So when the lender is a director, charged, with others, with the control and management of the affairs of the corporation, representing, in this regard, the aggregated interest of all the stockholders, his obligation, if he becomes a party to a contract with the company, to candor and fair dealing, is increased in the precise degree that his representative character has given him power and control, derived from the confidence reposed in him by the stockholders, who appointed him their agent.” See, also, the following an-thorities, where the same doctrine is announced: Angell & Ames on Corp. sec. 233; Whitehall v. Warner, 20 Vt. 425; Smith v. Lansing, 22 N. Y. 526; City of St. Louis v. Alexander, 23 Mo. 483.

While a corporation remains solvent, we perceive no reason why a director, with the knowledge of the stockholders, may not deal with the corporation, loan it money, take security or buy property of it, in like manner as a stranger; hut whether a director in an insolvent corporation may purchase the assets in payment of a debt, and thus secure a preference over other creditors, presents a different question. So long as a corporation remains solvent, its directors are agents or trustees for the shareholders. They owe no duties or obligations to others. But the moment a corporation becomes insolvent, its directors occupy a different relation. The assets of the corporation must then be regarded as a trust fund for the payment of all its creditors, and the directors occupy the position of trustees, and, a fiduciary relation then existing, they may, with propriety, be prohibited from purchasing the trust property. The relation that directors occupy to the property of a corporation is well stated in Ogden v. Murray, 39 N. Y. 202, as follows: “The appellants and their associates were not in a situation permitting them to secure to themselves a personal advantage in the matter. The stockholders and creditors were entitled, not only to their vote in the board, but to their influence and argument in the discussion which led to the passage of the resolution in pursuance of which they took title as trustees. This brings the ease within the rule which rests in the soundest wisdom, and is sustained by the best consideration of the infirmities of our human nature, and called for by the only safe protection of the interests of cestuis que trust or beneficiaries, viz., that trustees and persons standing in similar fiduciary relations shall not be permitted to exercise their powers, and manage or appropriate the property of which they have control, for their own profit or emolument,—or, as it has been expressed, shall not take advantage of their situation to obtain any personal benefit to themselves at the expense of their cestuis que trust.” See, also, Drury v. Cross, 7 Wall. 299.

In Curran v. State of Arkansas, 15 How. 307, Mr. Justice Curtis, delivering the opinion of the court, speaking of an insolvent banking corporation, says: “The assets of such a corporation are a fund for the payment of its debts. If they are held by the corporation itself, and so invested as to be subject to legal process, they may be levied on by such process. If they have been distributed among stockholders, or gone into the hands of others not creditors or purchasers, leaving debts of the corporation unpaid, such holders take the property charged with the trust in favor of the creditors, which a court of equity will enforce, and compel the application of the property to the satisfaction of their debts. This has often been decided, and rests upon the plainest principles.”

In Richards v. New Hampshire Ins. Co. 43 N. H. 263, on a bill in equity filed by creditors, it was held, that directors and managers of insolvent corporations are trustees of the funds for the creditors, and are bound to apply them pro rata, and can not use them to exonerate themselves, to the injury of other creditors. It is there said: “Every agent and trustee who has claims of his own must be regarded as agent for himself and. others, and bound to give his diligence and care equally to all the claims in his hands, and consequently to apply all moneys paid to him, without an appropriation by the debtor, to the payment of all claims in his care, whether of his own or others, in just proportions to their amounts.”

In Morawetz on Corporations, (1st ed.) sec. 579, it is said: “It is the duty of the directors, and other agents of an insolvent corporation, to preserve its assets for the benefit of creditors. The legal ownership of the assets is not altered by insolvency, and the regular agents of the company retain the same powers of management with which they were originally invested. But upon the insolvency of the corporation, the equitable lien of creditors attaches upon all of the company’s assets; and the directors, who originally stood in a fiduciary relation to the company’s members, become placed in a fiduciary relation to its creditors. Accordingly, it has been held * * * that they can not give away the company’s property gratuitously, or sell it at a sacrifice in the interest of others, even with the consent of the stockholders; and if themselves creditors, they can not receive any advantage or preference in the payment of their claims, at the expense of other creditors.”

In Haywood v. Lincoln Lumber Co. et al. 64 Wis. 639, where an action was brought to foreclose a mortgage given by the company to its directors to secure an indebtedness due from the company to them, on the hearing it appeared that at the time the mortgage was executed the company was insolvent, and it was insisted as a defense, that the mortgage was invalid. The court, in deciding the case, said: “The main question is the validity of the mortgage in suit. There was abundant evidence to justify the finding of the circuit, court that at the time it was given the company was insolvent. In such case the authorities seem to be uniform that the directors and officers of a corporation are trustees of the creditors, and must manage its property and assets with strict regard to their interests; and if they are themselves creditors, while the insolvent corporation is under their management they can not secure to themselves any preference or advantage over other creditors. The directors are then trustees of all the property of the corporation for all its creditors, and an equal distribution must be made, and no preference to any one of the creditors, and much less to the directors or trustees, as such.” See, also, Post v. Russell, 36 Ind. 60, and Lippincott v. ShawCarriage Co. 21 Fed. Rep. 577.

The language used in Merrick v. Peru Coal Co. supra, is hroad enough to authorize a director of an insolvent corporation to deal with the corporation; but the question of the power of a director to purchase property of or deal with an insolvent corporation did not arise in that case, and what was said was mere obiter dictum. There, the Peru Coal Company, a corporation, executed certain notes payable to the Michigan Car Company, and also drew certain drafts in favor of the company. These notes and drafts were purchased by Merrick, who was an officer of the corporation, with his own funds, and brought an action on the notes and drafts, and the only question was, whether he was entitled to recover, and the court properly held he might recover upon the notes and drafts.

Harts et al. v. Broum et al. 77 Ill. 226, is another case where expressions may be found similar to those used in the Merrick case, which were not justified by the questions presented for decision. That was a bill brought by stockholders to vacate a sale under a trust deed given by the company to secure the payment of certain bonds issued by the company and sold to one of the directors. The question arose whether the company had the power to execute a trust deed, and whether it could borrow money of a director. It was held that the charter conferred power to borrow money and secure it by mortgage or deed of trust, and that the board of directors might borrow money of one of its members. The question before the court was properly decided, but the expression, that a director may trade with, borrow from or loan money to the company of which he is a member, on the same terms and in like manner as other persons, was not authorized by the case made by the record.

After a careful examination of the authorities, we are inclined to the opinion, that if this corporation was insolvent at the time of the sale, Miller,’ who was a director, could not lawfully purchase the property in satisfaction of his own debt to the exclusion of other creditors, but he took the property charged with the trust in favor of other creditors, which may be enforced in an appropriate action. Miller, being a creditor, would doubtless be entitled to share with the other creditors in the property, but he could not appropriate the entire amount to the payment of his own debt. This, however, conferred no right upon appellants to seize the property, and sell it in satisfaction of the debt of Blatchford & Co. As creditors of the, corporation they occupied no better position than Miller. It, may be, and no doubt is, true, that if Blatchford & Co. had. levied on the property while in the hands of the corporation,, before the sale to Miller, they would, under such circumstances,, have been entitled to hold it. But after the sale and delivery-to Miller they had no such right,—the property had passed, beyond the reach of their execution. It had passed into Miller’s hands charged with a trust which a court of equity might, enforce in favor of all the creditors of the corporation, or such, as might invoke the aid of that court.

One other question remains to be considered. The sale was, made to Miller without an order of the board of directors of the corporation, and upon this ground it is claimed to be invalid. Conceding that the sale was irregular, we think it might be ratified by the corporation, and the fact that it took up the-notes held by Miller, and cancelled them, and retained them in its possession, may be regarded as a ratification of the sale. As to the lease of that part of the building where the goods, were stored, whether it was strictly valid or invalid was of no. moment. The only purpose of the lease was to give Miller-possession of that .part of the building, and there was ample-evidence to establish possession independent of the lease.

For the error indicated, the judgments of the Appellate andi circuit courts will be reversed, and the cause remanded.

Judgment reversed.

Mr. Justice Bakeb,

having passed upon this case in th& Appellate Court, took no part in its consideration here.


author: Mr. Justice Bailey

text:
    The People ex rel. George Hunt, Attorney General, v. The Chicago and Alton Railroad Company.

      Filed at Mt.Vernon

      October 31, 1889.

    1. Railroads—location of freight and passenger stations—how far subject to control. There is no statute of the State which attempts to prescribe rules,by which railway companies are to be governed in the location of their freight and passenger stations, or to confer upon the courts the power to interpose and direct as to their location.
    2. The act of 1877, which requires all railway companies to build and maintain depots for the comfort of passengers and for the protection of shippers, applies only to towns.and villages on their lines of road, having a population of five hundred or more, at which they are in the practice of receiving and delivering passengers and freights. The act does not compel a railway company to establish a station where none has before existed.
    3. Railway companies, in the absence of statutory provisions limiting and restricting their powers, are vested with a very broad discretion in the matter of locating, constructing and operating their railways, and of locating and maintaining their freight and passenger stations. This discretion, however, is not absolute, but is subject to the condition that it must be exercised in good faith, and with a due regard to the necessities and convenience of the public.
    4. It is in recognition of the paramount duty of railway companies to establish and maintain their depots at such points and in such manner as to subserve the public necessities and convenience, that it has j)een held by all the courts, with very few exceptions, that contracts materially limiting their power to locate and relocate their depots are against public policy, and therefore void.
    5. A petition for a mandamus against a railway company to compel it to locate and maintain a station and depot on its line of road in a village Of eighteen hundred inhabitants, on grounds there owned by the company, showed, by facts and circumstances detailed, the public importance and necessity for such station, and the refusal of the company to locate such station. The facts were admitted by demurrer: Meld, that the petition showed a clear and undoubted right to the relief sought.
    Appeal from the Circuit Court of Madison county; the Hon. Amos Watts, Judge, presiding.

      Mr. George Hunt, Attorney General, for the petitioner:
    A railway company may be compelled to perform its public duties by mandamus. Morawetz on Corp. sec. 487.

      Mandamus is a proper action to compel a railroad company to deliver grain at a particular warehouse. Railway Co. v. People, 56 Ill. 365.
    It will lie to compel a railroad company to so build its track, level and grade the streets, as to render the use of the streets and the crossings of the track convenient for the public. Railroad Co. v. State, 37 Ind. 489.
    Where a railway company wrongfully took up its track, mandamus was held to lie to compel it to re-lay the same. King v. Railway Co. 2 B. & A. 646.

      Mandamus will lie to compel a railway company to build a' bridge. People v. Railroad Co. 70 N. Y. 569.
    A law required the railroad company to establish a-flag station on their railroad, at Knight’s crossing, and erect there a station house at which at least two trains each way, each day, should stop, and it was held valid by the Supreme Court of Massachusetts. Commonwealth v. Railroad Co. 103 Mass. 254.

      Mandamus will lie to compel a railroad company to perform the public duties required of it by its charter, and to compel it to erect and maintain a depot. Railroad Co. v. Railroad Co. 63 Me. 269.
    Where a railway company has abandoned a portion of its line which it is its duty to maintain, mandamus may be sustained to compel the maintenance and operation of such portion of its line. Railway Co. v. Crane, 113 U. S. 424.
    The writ of mandamus has always been regarded as an appropriate remedy to enforce the performance of duties by artificial bodies. State v. Railroad Co. 9 Rich. (L. E.) 247.
    Corporate bodies must be compelled, in the performance of their duties, to discharge their public obligations. Railroad Co. v. State, 9 Rich. (L. R.) 247.

      The case of Union Pacific Railroad Co. v. Hall et al. 91 U. S. 343, was a suit begun to compel, by mandamus, the railroad company to operate a certain portion of its alleged line of railroad. The writ was awarded by the circuit court, and the Supreme Court sustained the judgment.
    When a railway company is required by statute to restore a railroad crossing to its former state, it may be compelled to perform this duty by mandamus. Railroad Co. v. People, 12 Hun, 195.
    In People v. New York Central and Hudson River Railroad Co. 28 Hun, 543, the court said: The writ of mandamus has been awarded to compel a company to operate its road as one continuous line:—Railroad Co. v. Hall, 81 U. S. 343; to compel the running of passenger trains to the terminus of the road:—State v. Railway Co. 29 Conn. 538; to compel the company to make fences and cattle-guards:—People v. Railroad Co. 14 Hun. 373; 76 N. Y. 294; to compel it to build a bridge : —People ex rel. v. Railroad Co. 70 N. Y. 569 ; to compel it to construct its road across streams so as not to interfere with navigation:—State v. Railroad Co. 9 Rich. 247; to compel it to run daily trains:—In re Railroad Co. 1 P. & B. 667; to compel the delivery of grain at a particular elevator:—Railroad Co. v. People, 56 Ill. 365; to compel the completion of its road:—Loan and Trust Co. v. Henning, 17 Am. Law Reg. (N. S.) 266; to compel the grading of its track so as to make crossings convenient and useful:—People ex rel. v. Railway Co. 58 N. Y. 152; Railroad Co. v. People, 12 Hun, 195; 74 N. Y. 302; Railroad Co. v. State, 37 Ind. 489; to compel the re-establishment of an abandoned station:—State v. Railroad Co. 37 Conn. 154; to compel the replacement of a track taken up in violation of its charter:—Rex v. Railway Co. 2 B. & A. 646; to prevent the abandonment of a road once completed: — Talcott v. Pine Grove, 1 Flippin, 145; and to compel a company to exercise its franchise: —People v. Railroad Co. 24 N. Y. 261.

      These are all express or implied obligations arising from the charters of railroad companies, but not more so than the duty to carry freight and passengers. That duty is, indeed, the ultima ratio of their existence—the great and sole public good for the attainment and accomplishment of which all the other powers and duties are given or imposed. It is strangely illogical to assert that the State, through the courts, may compel the performance of every step necessary to bring a corporation into a condition of readiness to do the very thing for which it is created, but is then powerless to compel the doing of the thing itself.
    That it is the duty of the railroad company to furnish full accommodations to the public for the transportation of freight and passengers upon and along the entire length of its road, and that it may be compelled, by mandamus, if necessary, to perform that duty, we believe to be the settled law. State v. Railroad Co. 29 Conn. 546; Railroad Co. v. Railroad Co. 63 Me. 269 ; People v. Railroad Co. 28 Hun, 543; People v. Railroad Co. 120 Ill. 48; Railivay Co. v. People, id. 206; Vincent v. Railroad Co. 49 id. 33; Railway Co. v. People, 56 id. 365.

    Messrs. Wise & Davis, for the appellee:
    The right to build the road, and the power to regulate and control the manner of using it, rest in the officers of the company, subject only to such limitations as are contained in the charter of the company or the general laws of the State.
    There being no provision in the charter of the company as to where the company shall build its depots, and no law of the State regulating where railroad companies shall build depots along their lines,- except “where such railroad companies are in the practice of receiving and delivering passengers and freight at all towns and villages on the line of their roads hav- • ing a population of five hundred or more,” (Laws 1877, p. 165,) therefore the power, the right, the discretion, as to where the company shall build its depots, is still left in' the officers of the company. Railroad Co. v. Railroad Co. 110 U. S. 667.
    This case is to be distinguished from those cases where, by its charter, the company was required to construct a depot at a particular place or places, or where, by the general law of the State, the conditions were complied with which entitled the people to a depot, or where the company, having built a depot and used it, then abandoned it, and refused to stop its trains at the depot. In such eases the company either had no discretion, or, having it, exercised it, and having established the depot, must legally maintain it. In this case the discretion still rests with officers of the company as to whether they will establish a depot at Upper Alton or not. That right, power or discretion being still vested in the officers of the company, the court will not interfere with the same,—will not constitute itself a majority of the members of the board of directors, and thus out-vote those in whom is vested the right and discretion.
   Mr. Justice Bailey

delivered the opinion of the Court:

This was a petition for a mandamus, brought by the People of the State of Illinois, on the relation of the Attorney General, against the Chicago and Alton Eailroad Cqmpany, to compel said company to establish and maintain a station for the receipt and discharge of passengers and freight, at Upper Alton, in Madison county. The petition alleges, that said company is a railroad corporation organized under the laws of this State, and owning, operating and controlling a line of railway in said county, known as the St. Louis, Jacksonville and Chicago Eailroad, and extending from Godfrey, a station in said county, to Wann, also a station in said county, said stations being seven miles apart; that said company is a common carrier, and operates and runs upon and over said railway two passenger trains daily from south to north and one passenger train daily from north to south, and two or more freight trains daily in each direction; that about midway between said stations there is located upon the line of said railway the town of Upper Alton, the same being an incorporated town or village containing over eighteen hundred inhabitants; that many persons require the use of said railway in order to be transported thereon as passengers to and from said town of Upper Alton, and that in said town are many merchants, manufacturers, dealers and business men who require the transportation of freight, produce and manufactures over said line of railway to and from said town of Upper Alton; “that the accommodation of the public living in and near to said town of Upper Alton, in the transportation of freight and passengers to and from said town, requires and long has required, that said Chicago and Alton Eailroad Company establish a depot and freight house at said town of Upper Alton, and stop its trains, both freight and passenger, thereat, for receiving and discharging freight and passengersthat said company has acquired and for many years has owned suitable and convenient grounds for the establishment of a depot and freight-house in the town of Upper Alton upon its line of railway, which said grounds were acquired by condemnation proceedings, for use for side-tracks, freight and passenger depots and depot grounds, and that property in said town has been bought and sold upon the belief and representation that a depot would be maintained at that place; that the town council of said town and many of the citizens of the town and vicinity requiring the use of said railway, and the Eailroad and Warehouse Commission of the State of Illinois, have requested and demanded of said company that it establish and maintain upon its said grounds in said town a suitable depot and freight-house, and that it stop its trains, or a sufficient number thereof, to accommodate the public at said station, and that it receive and discharge freight and passengers thereat when requested, yet said company has wholly refused and still does refuse to maintain either a passenger or freight depot in said town, or to receive or discharge freight or passengers thereat.

The petition further alleges that said line of railway extends in a westerly direction from the town of Godfrey, and that there are many persons desiring to travel on said railway from said town of Upper Alton to towns on the line of said railway west of said town of Godfrey, and that persons going west are now compelled to go to Godfrey to take the same train which passes through the corporate limits of the town of Upper Alton, and the most convenient route for passengers to reach Godfrey now is, to go a distance of two and one-half or three miles to the station of Alton, and go by the way of the Chicago and Alton Railroad a distance of four or five miles to Godfrey, and there they are compelled to wait one hour for the train which such passengers might, if the prayer of the petition were granted, take in the town of Upper Alton.

The petition prays for a writ of mandamus commanding said company to establish a passenger and freight depot upon its said line of railway in said town of Upper Alton, at a suitable and convenient point to accommodate the public and all persons desiring transportation for freight or passengers to and from said town, and to stop its trains, both freight and passenger, or a sufficient number thereof, to accommodate the public, and discharge passengers and freight thereat when requested, and that, upon the final hearing, such further order might be made in the premises as to the court should seem meet and proper.

To the foregoing petition the defendant interposed a general demurrer, which was sustained by the court, and the Attorney General electing to abide by his petition, final judgment was entered in favor of the defendant. From that judgment the petitioners have appealed to this court.

There is, so far as we have been able to discover, no provision of any statute which can be appealed to in support of the prayer of the petition. Neither in the defendant’s charter nor in any other act of the General Assembly does there seem to be any attempt to prescribe the rules by which the defendant is to be governed in the location of its freight and passenger stations, or to confer upon the circuit court the power to interpose and direct as to their location. It is plain that the act of 1877, the only one to which we are referred in this connection, can have no application. That act provides : “That all railroad companies in this State carrying passengers or freight shall, and they are hereby required, to build and maintain depots for the comfort of passengers, and for the protection of shippers of freight, where such railroad companies are in the practice of receiving and delivering passengers and freight, at all towns and villages on the line of their roads ' having a population of five hundred or more. ” 2 Starr & Curtis’ Stat. 1924. While it is true that Upper Alton is a town having a population of more than five hundred, it affirmatively appears that it is not a place where the defendant has been in the practice of receiving and delivering passengers and freight, and so is not within the provisions of said act. The petition seeks to have the defendant compelled to establish a station where none has heretofore existed, while the statute merely requires the erection of suitable depot buildings at places where the railway company has already located its stations, and is in the practice of receiving and discharging passengers and freight. In point of fact, the Attorney General, in his argument admits that there is no statute upon which his prayer for a mandamus can be based, the position taken by him being that, upon the facts alleged in the petition and admitted by the demurrer, the legal duty on the part of the defendant to establish a freight and passenger station on its line of railway in the town of Upper Alton arises by virtue of the principles of the common law.

It is undoubtedly the rule that railway companies, in the ■ absence of statutory provisions limiting and restricting their powers, are vested with a very broad discretion in the matter of locating, constructing and operating their railways, and of locating and maintaining their freight and passenger stations. This discretion, however, is not absolute, but is subject to the condition that it must be exercised in good faith, and with a due regard to the necessities and convenience of the public. Eailway companies, though private corporations, are engaged in a business in which the public have an interest, and in which such companies are public servants and amenable as such. This doctrine has been repeatedly announced by this and other courts. Thus, in Marsh v. F., P. d N. W. R. R. Co. 64 Ill. 414, which was a bill for the specific performance of a contract by which the railway company agreed to locate its passenger and freight depots at a particular point in a certain town and at no other point in said town, we said: “This is

not a case which concerns merely the private interests of two suitors. It is a matter where the public interest is involved. Eailroad companies are incorporated by authority of law not for the promotion of mere private ends, but -in view of the public good they subserve. It is the circumstance of public use which justifies the exercise on their behalf of the right of eminent domain in the taking of private property for the purpose of their construction. They have come to be almost a public necessity, the general welfare being largely dependent upon these modes of inter-communication, and the manner of carrying on their operations.” In the same case, in holding that the contract there in question ought not to be specifically enforced, we further said: “Eailroad companies, in order to fulfill one of the ends of their creation—the promotion of the public welfare—should be left free to establish and re-establish their depots wheresoever the accommodation of the wants of the public may require. ”

In O. & M. Ry. Co. v. The People, 120 Ill. 200, which was a petition for a mandamus to compel the railway company to repair, generally, a certain portion of its road, and to increase its passenger trains thereon, we said: “There can be no doubt of the duty of a railway company to keep its road in a reasonable state of repair, and in a safe condition. Nor is there any doubt of its duty to so operate it as to afford adequate facilities for the transaction of such business as may be offered it, or at least reasonably be expected. * * * The company, however, is given, as it should be, a very large discretion in determining all questions relating to the equipment and operation of its road. Hence courts, as a general rule, will not interfere with the management of railways in these respects, except where the act sought to be enforced is specific, and the right to its performance in the manner proposed is clear and undoubted.”

It is in recognition of the paramount duty of railway companies to establish and maintain their depots at such points and in such manner as to subserve the public necessities and convenience, that it has been held by all the courts, with very few exceptions, that contracts materially limiting their power to locate and re-locate their depots are against public policy and therefore void. St. L., J. & C. R. R. Co. v. Mathers, 71 Ill. 592; St. L., J. & C. R. R. Co. v. Mathers, 104 id. 257; Bestor v. Wathen, 60 id. 138; Linder v. Carpenter, 62 id. 309 ; St. J. & D. C. R. R. Co. v. Ryan, 11 Kan. 602; P. R. R. Co. v. Seely, 45 Mo. 212; Holladay v. Pattison, 5 Ore. 177; Taylor on Corporations, see. 162, and authorities cited.

We have now to consider whether, in the light of the principles above laid down, a right to the relief prayed for is sufficiently shown by the petition. There can be no doubt that the act sought to be enforced—the establishment and maintenance of a freight and passenger station on the defendant’s line of railway at a convenient point within the town of Upper Alton—is sufficiently specific to be enforced by mandamus,, and it only remains to be seen whether the right to have its performance enforced is shown to be clear and undoubted. It should be observed that there is no controversy as to the facts, the allegations of the petition being, for all the purposes of this appeal, conclusively admitted by the demurrer.

The petition undertakes to show the public importance and necessity of the station asked for in two ways, first, by alleging the facts and circumstances which tend to prove it, and, secondly, by directly averring it. It cannot be doubted, we think, that the facts alleged make out a clear and strong case of public necessity. They show that Upper Alton is a town of over eighteen hundred inhabitants, situated on the line of the defendant’s railway, about midway between two other stations seven miles apart. The residents of the town and vicinity are shown to be possessed of at least the ordinary inclination to travel by railway, and it is averred that many of them have occasion and desire to travel by the defendant’s railway between Upper Alton and other points on the line of said railway. Various manufacturing and other business enterprises are shown to be carried on within the town, creating a necessity for the use of said railway for the transportation of manufactured articles, merchandise and other freights. To avail themselves of transportation upon trains which pass by their doors, the inhabitants of Upper Alton are compelled to go and transport their freights by other conveyances to a neighboring town about three and one-half miles away. Then, as we have already said, the petition directly avers and the demurrer admits, that the accommodation of the public living in and near said town requires and long has required the establishment of a passenger and freight depot on the line of its road within said town. Unless then there is some explanation for the course pursued by the defendant which the record does not give, we cannot escape the conviction that its conduct in the premises exhibits an entire want of good faith in its efforts to perform its public functions as a common carrier, and an unwarrantable disregard of the public interests and necessities.

It cannot be admitted that the discretion vested in the defendant in the matter of establishing and maintaining its freight and passenger stations, extends so far as to justify such manifest and admitted disregard of its duties to the public. We are of the opinion that the petition shows a clear and undoubted right on the part of the public to the establishment- and maintenance of a freight and passenger station on the line of the defendant’s railway in the town of Upper Alton, and it therefore follows that the demurrer to the petition should have been overruled. For the error in sustaining the demurrer, the judgment will be reversed and the cause remanded for further proceedings.

Judgment reversed.