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A large number of stockholders present, including the petitioner, protested against the adoption of the resolution and the manner of conducting the election, and the court finds, as fact, that they “demanded to be allowed to cumulate their respective votes on one or more persons for directors, but that they were not permitted so to do, and were prevented from so doing by said resolution;" and, as law, “that the election was not had in accordance with the provisions of article 2 of chapter 1 of part 4 of the Civil Code of the state of California, and that said election was and is illegal and void.” The decision is predicated upon the fact that the petitioner and others, as qualified voters at the election, had the right, under the charter of the corporation, to cumulate their votes upon any one candidate, or distribute them upon two or more candidates; and that they were deprived of this right by the adoption of the resolution and by the manner of conducting the election. Section 12, art. 12, Const. 1879, reads thus:
“In all elections for directors or managers of corporations, every stockholder shall have the right to vote, in person or by proxy, the number of shares of stock owned by him for as many persons as there are directors or managers to be elected, or to cumulate said shares and give one candidate as many votes as the number of directors multiplied by the number of his shares of stock shall equal, or to distribute them, on the same principle, among as many candidates as he shall think fit; and such directors or managers shall not be elected in any other manner, except that members of co-operative societies, formed for agricultural, mercantile, and manufacturing purposes may vote on all questions affecting such societies in manner prescribed by law.'
This section is understood to confer upon the individual stockholder entitled to vote at an election the right to cast all the votes which his stock represents, multiplied by the number of directors to be elected, for a single candidate, should he think proper to do so. So that the petitioner, as the representative of a single share of stock, if qualified under the charter of the company to vote, was entitled to cast seven votes for any one of the candidates for the office of director, or to distribute them among any two or more candidates. In that way a minority of the stockholders would be enabled to secure representation upon the board of directors by electing one or more of the directors. Such, doubtless, was the object of the provision; and the rule was considered of sufficient importance as to make it part of the organic law. Under this rule, a corporation holding an election for directors is bound to follow the constitutional mode. It has no power, by resolution or otherwise, to adopt any other. And when an election for directors has been properly called, each qualified stockholder present has the same right, in exercising his power of voting for directors, to vote at one time the number of shares in his name for the whole number of directors to be elected, or to cumulate his shares by voting for one candidate for director as many votes as shall equal the number of his shares multiplied by the number of directors to be elected, or by distributing them, upon the same principle, among as many candidates for directors as he shall think fit. We think the power thus conferred upon a corporate elector can only be exercised according to the constitutional provision by allowing him to cast his ballot singly, cumulatively, or distributively, at one time, for the election of directors. For if but one director at a time be balloted for, a majority of the stockholders could, by combining, cumulate their votes each time upon a single candidate and elect him; and by thus shaping and controlling the manner of the election, it would be in the power of the majority of the stockholders to virtually cancel the votes of the minority and deprive them of their rights to representation on the board of directors. Judgment and order affirmed.
(67 Cal. 541)
LEWIN v. HOPPING. (No. 9,911.) 1
Filed September 28, 18:5. PERSONAL PROPERTY-TRANSFER OF-FRAUD ON CREDITORS.
A transfer of personal property, accompanied by an actual, immediate, and continued change of possession, is not fraudulent as to creditors because made in consideration of a promise by the transferee to use the property in a certain manner, which would confer pecuniary profit on the transferrer. Commissioners' decision. Department 2. Appeal from superior court, Shasta county. W. Taylor and L. W. Frisbie, for appellant. Edw. Sweeny and Chipman & Garter, for respondent.
Foote, C. Action of claim and delivery. The plaintiff obtained judgment for the return of a certain wire rope, or its value, which had been seized in attachment by the defendant, as sheriff of Shasta county, at the suit of Chappel and Houston against one Joseph Waugh. It
appears that the plaintiff, being requested by a large number of citizens of the county, had raised money by subscription from divers individuals to complete a road to a certain point on the Sacramento river; 'that, as an incident to that object, and as a part of the scheme, it was found advantageous to establish a ferry across said river at a place where a railroad could be reached, and this was where one Waugh kept a hotel. He possessed a certain wire rope, suitable for such a purpose, and Lewin visited him and proposed to obtain it from him (on his own behalf and that of these public-spirited citizens) as an aid to accomplish the end in view. Waugh, for the consideration that his hotel would thereby receive increased patronage from the traveling public and himself derive pecuniary benefit, and that a boat would be built by Lewin and those he represented, so that a ferry would be established, agreed to let the rope be used as desired by Lewin, and to make a permanent transfer of it for that express purpose. This he at once did, giving a written order therefor to Lewin, who took possession and control of and removed it to a warehouse, and left it there subject to his disposition. It remained in this situation for nearly a month before it was seized in attachment. Some days after this transfer, but before the attachment levy, the board of supervisors of Shasta county subscribed $300 towards aiding in the establishment of the ferry as a free and public one, and made an order, upon a petition of certain citizens asking that such a one be established at that point, that the franchise should be granted as prayed for; but, for the convenience of having some individual to take out a license, they gave it to Waugh, although he had not petitioned therefor. Lewin had possession all this time of the rope, and
1 See note at end of case.
, was proceeding to get the ferry ready for use when the attachment was levied on the property in dispute, and although he claimed it as his own, it was taken, and is still withheld from him. And he instituted this action to recover it.
It is urged by the appellant that Lewin had no title or right of possession to the property, that it was a gift from Waugh to unknown persons, and in fraud of the rights of creditors.
The intention of the parties to this transaction, as gathered from the evidence, was to establish a ferry at a given point, from which mutual benefit would flow to them. Lewin was one of a number of persons who, although their names are undisclosed, it would seem could easily be identified, who, upon their part, had agreed to use their money in building a boat, and preparing the other things necessary to carry on the ferry as a free and public one. This agreement being communicated to Waugh, he, because of the promise on their part to fulfill it, and because he expected to realize pecuniary profit therefrom, transferred to the possession and control of Lewin, for the purpose specified, the custody, control of, and property in the rope. To his title and right of possession no condition, mutual or precedent, was expressly attached, but actual, immediate, and continued change of possession was given him of the property, and such possession was maintained up to the time of the levy of the attachment, a period of nearly a month. According to the testimony of Lewin, which is undisputed, he, for himself and those acting with him, was proceeding with “the erection of the ferry” at the time the defendant made the seizure in attachment. It would seem, therefore, as if between Waugh and the plaintiff and those acting with him, the conditions of the transfer were being complied with, that the consideration for it was sufficient, and that there was no fraud or attempt to hinder or delay creditors shown by the record; and that Waugh had parted with his title and right of possession to the property in good faith, and in such manner as to bar him from bringing an action of claim and delivery against the plaintiff.
The findings are sufficient, and are supported by the evidence. There is no error shown by the record, and the judgment and order should be affirmed.
We concur: SEARLS, C.; BELCHER, C. C.
BY THE COURT. For the reasons given in the foregoing opinion the judgment and order are affirmed.
Fraudulent Transfer. 1. FRAUD. The statute of 13 Eliz. c. 5, which was made perpetual by 29 Eliz. c. 5, is the law which furnishes the basis of all remedies for fraudulent conveyances, (Bump, Fraud. Conv. 58,) and all our statutes on the subject are merely declaratory of the common law, or the statute of 13 Eliz. Farr v. Sims, Rich. Eq. Cas. (S. C.) 122; S. C. 24 Amer. Dec. 396
A fraud which will vitiate a sale must be mutual; that is, must be intended by both parties, or by one with a knowledge of such purpose on the part of the other, and thus acquiesced in and furthered. Horbach v. Hill, 5 Sup. Ct. Rep. 81; Mehlhop v. Pettibone, 11 N. W. Rep. 553.
It has been held that, to make a conveyance fraudulent, the fraudulent intent must be shown to have been shared by the grantor and grantee alike. Splawn v. Martin, 17 Ark. 146; Partelo v. Harris, 26 Conn. 480; Ewing v. Runkle, 20 I11. 448; Meixsell v. Williamson, 35 Ill. 529; Hessing v. McCloskey, 37 Ill. 341, Fitield v. Gaston, 12 lowa, 218; Steele v. Ward, 25 Iowa, 535; Violett v. Violett, 2 Dana, (Ky.) 323; Brown v. Foree, 7 B. Mon. 357; Brown v. Smith, Id, 361; Harrison v. Phillips Academy, 12 Mass. 456 ; Bridge v. Eggleston, 14 Mass. 245–250; Foster v. Hall, 12 Pick. 89; Kittredge v. Sumner, 11 Pick. 50; Byrne v. Becker, 42 Mo. 261; Bancroft v. Blizzard, 13 Ohio 30; Union Bank v. Toomer, 2 Hill, (S. C.) Ch. 27; Weisiger v. Chisholm, 28 Tex. 780; Leach v. Francis, 41 Vt. 670; Governor v. Campbell, 17 Ala. 566; Magniac v. Thompson, Baldw. 344. Yet it has been held by our courts that a conveyance maile to hinder, delay, or defraud creditors is void as to them, although founded on a full and valuable consideration, (Bozman v. Draughan, 3 Stew. Ala. 243; Rogers v. Evans, 3 Ind. 574; Ruffing v. Tilton, 12 Ind. 259, 264; Musselman v. Kent,' 33 Ind. 452, 458, Lowry v. Howard, 35 Ind. 170; Poague v. Boyce, 6 J. J. Marsh. Ky. 70; Reed v. Carl, 11 Miss. [3 Smedes & M.] 74; Trotter v. Watson, 6 Humph. Tenn. 509; Peck v. Land, 2 Ga. 1; Chandler v. Von Roeder, 24 How. 224 ; Walcott v. Brander, 10 Tex. 419; Mills v. Howeth, 19 Tex. 257;) and that a deed fraudulent on the part of the grantor may be set aside, though the purchaser be a bona fide purchaser for value and ignorant of the fraud. Hildreth v. Sands, 2 Johns. Ch. 35; Gamble v. Johnson, 9 Mo. 605; Miller v. Tollison, 1 Harp. (S. C.) Eq. 145; Lee v. Figg, 37 Cal. 328. But this cannot be regarded either as the better doctrine or the prevailing law of the land.
Where a vendee participates in the fraud of the vendor to delay, hinder, or defraud the creditors of such vendor, even though a full consideration has been paid for the property, the conveyance will be set aside. Gardinier v. Otis, 13 Wis. 460; Briscoe v. Clarke, 1 Rand. 213; Tootle v. Dunn, 6 Neb. 93. This is a well-recognized principle of law, and courts have held that the purchaser is to be charged with notice of the character of the transaction when he is acquainted with the circumstances sufficiently to convince a court or jury that he knew the facts, (Green v. Tantum, 19 N. J. Eq. 105;) or, if he has a knowledge of such facts as would excite the suspicions of an ordinarily prudent man, and fails to make inquiry, and purchases from a fraudulent vendor, he is not a bona fide purchaser, or a purchaser in good faith, and will be charged with notice of any fraud upon creditors effected by the sale and transfer. State v. Estel, 6 Mo. App. 6.
The transfer, though fraudulent, cannot be complained of by a creditor who lias not been injured thereby. Barnett v. Knight, 3 Pac. Rep. 747. And, in an action to set aside a fraudulent conveyance, the petition must set out and the proof show that the grantor had not sufficient property subject to the payment of his debts left for that purpose. Sherman v. Hogland, 54 Ind. 578; Zimmerman v. Fitch, 28 La. Ann. 454; Wiley v. Bradley, 67 Ind. 560.
Equity will not set aside a deed which complainant made to hinder, delay, and defraud creditors. Wier v. Day, 10 N. W. Rep. 304.
(1) Definition. In this connection fraud is unlawful conduct operating prejudicially to creditors' rights, (Bunn v. Ahl, 29 Pa. St. 387,) and consists in withdrawing from another that which is justly due him, or depriving him of his rights by deception and artifice. Burdick v. Post, 12 Barb. 168; S. C.6 N. Y. 522. A fraud upon creditors is any act which, by intention, withdraws the property of the debtor from their reach. McKibbin v. Martin, 64 Pa. St. 352; Alabama İns. Co. v. Pettway, 24 Ala. 544.
(2) Evidence. The question of fraud is one of fact, to be determined from all the facts and circumstances bearing upon the good faith of the transaction, (Knowlton v. Mish, 17 Fed. Rep. 198; Morse v. Riblet, 22 Fed. Rep. 501 ; Hills v. Stockwell & Darragh Furniture Co., 23 Fed. Rep. 432 ;) and a transfer may be held fraudulent, although no distinct fact proves it. McDaniels v. Perkins, 19 N. W. Rep. 902. But, as a rule, evidence of fraud, upon which a conveyance will be canceled, must be clear. Fick v. Mulholland, 4 N. W. Rep. 527; Le Saulnier v. Loew, 10 N. W. Rep. 145.
Insolvency of grantor is not, of itself, sufficient to show fraud. Leffel y. Schermerhorn, 14 N. W. Rep. 418. The acts and declarations of the vendor prior to the sale are not sufficient to show knowledge of the fraudulent intent on the part of the vendee. Bixby v. Carskaddon, 18 N. W. Rep. 875. The rule of evidence excluding the admissions or declarations of a party after he has parted with his interest in the subject-matter is said not to apply to fraudulent sales and conveyances. Carney v. Carney, 7 Baxt. (Tenn.) 284. All admissions or declarations before sale are, of course, admissible in evidence to show intent, (McLane v. Johnson, 43 Vt. 48; Edgell v. Lowell, 4 Vt. 405;) but where such declarations are evidence of fraud on the part of the grantor, participation of the grantee must be shown by separate evidence. Eaton v. Cooper, 29 Vt. 444. Relationship of the parties admissible, but does not invalidate the conveyance, unless proof shows grantee knew of grantor's intent to defraud creditors. Adanis v. Ryan, 17 N W. Rep. 159.
(3) Presumption. Fraud will not be presumed where the facts are consistent with honesty of purpose, (Clemens v. Brillhart, 22 N. W. Rep. 779,) but must be established by evidence. Baughman v. Penn, 6 Pac. Rep. 890.
Fraud will be presumed, in courts of equity, from the circumstances of the parties. Ward v. Lamberth, 31 Ga. 150; Kendall y. Hughes, 7 B. Mon. 368; Pope v. Andrews, Smedes & M. Ch. 135; White v. Trotter, 22 Miss. 30; 14 Smedes & M.; King v. Moon, 42 Mo. 551; Gallatian v. Cunningham, 8 Cow. 361; Booth v. Bunce, 33 N. Y. 139; Briscoe v. Bronaugh, 1 Tex. 3:26; Burch v. Smith, 15 Tex. 219, Chesterfield v. Janssen, 2 Ves. Sr. 155; i Story, Eq. & 190. For a fraudulent intent is seldom susceptible of direct proof, but must be established, if at all, by a consideration of all the circumstances of the case. Blackman v. Wheaton, 13 Minn. 326, (Gil. 299 ;) Hicks v. Stone, 13 Minn. 434, (Gil. 398;) Weisiger v. Chisholm, 28 Tex. 780; Craig v. Fowler, 13 N. W. Rep. 116.
In an action for fraudulent conveyance the grantee's relations to the grantor, and his means of knowing the grantor's circumstances, and all connections with him, are admissible in evidence. Stadtler v. Wood, 21 Tex. 622. But relationship does not invalidate a sale unless the proof shows that the grantee had knowledge, or should have known, of grantor's intent to defraud his creditors. Adams v. Ryan, 17 N. W. Rep. 159. Where evidence tending to show the fraudulent character of the transfer to one claiming to be a bona fide purchaser, and he remains silent, this is presumptive evidence of fraud. Whitney v. Rose, 4 N. W. Rep. 557.
(4) Burden of ProofFraud must be proved by party who alleges. Craig v. Fowler, 13 N. W. Rep. 116; Eckert v. Pickel, 13 N. W. Rep. 708; Adams v. Ryan, 17 N. W. Rep. 159; Clemens v. Brillhart, 22 N. W. Rep. 779; Morse v. Riblet, 22 Fed. Rep. 501 ; Curry v. Lloyd, 22 Fed. Rep. 258. This may be done by facts and circumstances. Craig v. Fowler, 13 N. W. Rep. 116. But, as against creditors, the wife nust show by preponderance of evidence that she is a bona fide purchaser for value. _Kaiser v. Waggoner, 12 N. W. Rep. 754; Thompson v. Loenig, 14 N. W. Rep. 168. Burden of proof is on grantee when it becomes necessary to establish the bona fides of the transaction. Lane v. Starky, 18 N. W. Rep. 47.
(5) Secret Trust. The reservation of a secret benefit, upon the execution of an absolute conveyance, does not necessarily render such conveyance fraudulent as to creditors. Howe Machine Co. v. Claybourn, 6 Fed. Rep. 438. But the land may be charged in equity with the benefit reserved. Id. As a general rule, a conveyance in trust for the benefit of the grantor is fraudulent as against existing creditors. Smith v. Conkwright, 8 N. W. Rep. 876.
(6) Badges of Fraud. It is said that kinship in any relation or any degree, in transactions under suspicious circumstances, is a badge of fraud, (Bump, Fraud. Conv. 96, and
cases cited ,) but relationship of itself is not a badge of fraud, (Id.; Adams v. Ryan, 17 N. W. Rep. 159,) for business dealings between parents and children, or near relations, are to be treated as the transactions of other people, and if the bona fides thereof be attacked, the fraud alleged must be proved. Curry v. Lloyd, 22 Fed. Rep. 258.
Possession after sale is a badge of fraud, although the conveyance is by absolute deed, (Peck v. Land, 2 Ga. 1; Beers v. Dawson, 8 Ga. 556; Perkins v. Patten, 10 Ga. 241 ;) for the law will not permit a debtor in failing circumstances to sell his land, convey it by deed without reservations, and yet secretly reserve to himself the right to possess and occupy it for a limited time for his own benefit. Lukins v. Aird, 6 Wall. 78; Wooten v. Clark, 23 Miss. 75; Arthur v. Commercial & R. R. Bank, 9 Smedes & M. 394; Towle v. Hoit, 14 N. H. 61 ; Paul v. Crooker, 8 N. H. 288; Smith v. Lowell, 6 N. H. 67.
The following acts are evidences of retention of possession, (Bump, Fraud. Conv. 90:) Renting, (Duvall v. Waters, 1 Bland, 569; Callan v. Statham, 23 How. 477;) collecting rents, (Sands v. Hildreth, 14 Johns. 493; S. C. 2 Johns. Ch. 35; Lee v. Hunter,