Thompson v. Natchez Water & Sewer Co. , 68 Miss. 423 ( 1890 )

Campbell, J.,

delivered tbe opinion of the court.

The board of directors had the power to issue bonds and execute a deed of trust to secure them, unless restrained by the charter or by-laws or the law of the state creating the corporation; and if it be conceded that the corporators could not lawfully meet in Mississippi, since the directors might and did, the fact that they acted after and in pursuance of an illegal assemblage of stockholders, did not invalidate their act, which was valid because they did it. It does not appear that the law of Kansas, or the charter or by-laws of this corporation in any way abridge or restrain the usual powers of the directors, and, if not, the consent of stockholders was not necessary to the valid execution by act of the directors of obligations and securities; and an unnecessary attempt by stockholders not lawfully assembled to empower the board of directors to do what they could lawfully do, independently of shareholders, had no effect whatever. It is true that the two deeds of trust exhibited with the bill show that in each case the stockholders met, and resolved in favor of what was afterwards done by the board of directors, and this shows the course of dealing by this corporation in these matters, but it falls short of showing that the directors might not lawfully have acted in each case without any meeting of stockholders. It may have been supposed that authorization by the stockholders was necessary to • enable the directors to issue bonds and secure them, or that precedent authority expressly given by a meeting of shareholders would give greater value to the evidences of debt, but no such view could exert any influence on the legal question as to the ordinary powers of directors of corporations, which the directors of this corporation must be held to have possessed in the absence of anything in the law governing them which abridged their powers.

Upon the record before us, the bonds and deed of trust must be held to be valid. Cook on Stock & Stockholders, §§ 592, 689, 709, 712; 1 Morawetz Priv. Corp. §§ 510, 583; Field on Corporations, §§ 149, 152, 244.

As a bill to foreclose, this bill was prematurely exhibited, because the condition prescribed by it for that result did not exist, but viewed not as a bill for foreclosure, and as an application upon the facts it states, for the appointment of a receiver, it is prima faeie sufficient to call for an answer. While it is true, as a general rule, that appointing a receiver is auxiliary to the main purpose of the suit, and that no suit can be brought until the- debt is due, where “ default is imminent and manifestly inevitable, though none has taken place, a receiver of a railroad company may be appointed on the application of a mortgage bondholder in order to prevent the breaking up and destruction of its business, and to protect the property against attachments and execution in favor of other creditors.” Jones on Corp. Bonds & Mortgages, § 433, and cases cited. There is no reason for limiting this doctrine to railroad companies, and in Long Dock Company v. Mallery, 1 Beasley’s Rep. (12 N. J. Ch.) 93, and the same case p. 431, it was differently applied.

It is suggested, and is apparent, that the bill was exhibited with the connivance of the debtor company, which may be a circumstance rather favorable to the application for a receiver, since not the debtor, but its creditors, who are proceeding by law against it, alone object that the bill was prematurely filed.

We do not decide that a receiver should be appointed, but only that the bill was not properly dismissed on demurrer.

Reversed and remanded.