delivered the opinion of the court.
Counsel speaking for plaintiff in error commenced their argument by this statement:
“ He assigns specifically a large number of errors, which we, for convenience’ sake, will summarize and argue mainly under two heads : First, that assuming all the facts to be true as found by the master in chancery and approved by the court, the conclusion of law drawn from them by the master and court is clearly erroneous. Second, that the evidence does not support the findings of the master that the property conveyed to Rokker by the Rokker-O’Donnell Go. exceeded in value the amount due Rokker and defendants in error, and Rokker should pay them the amount of their judgments with interest.”
The questions thus presented are frankly accepted by counsel for defendants in error as fairly presenting the issues in this court.
It is argued by counsel for plaintiff in error and conceded by counsel for defendants in error,that ordinarily, an insolvent corporation may prefer creditors who are not directors or officers of such corporation.
Counsel for plaintiff in error also contend that the plaintiff in error was not, at the time he received the chattel mortgage security, an officer or a director of said company; that the company had a right to give and he to receive such security, and that he had the right to enforce the lien of said mortgage in the manner indicated.
It is true that .at the time said chattel mortgage was executed and delivered, plaintiff in error was not an officer or a director of said company. It is also true that he had been such president and a director up to within two or three hours prior to the time said mortgage was delivered to him, and that said mortgage had been prepared by his attorney at his instance and after consultation with other officers and directors of said company before he resigned as such president and director. A meeting of the directors was held at nine o’clock a. m., at which plaintiff in error resigned as president and director, and his successor as president and his successor as director were elected. At ten o’clock a meeting of the stockholders was held at which the directors were instructed to cause the proper officers to execute and deliver the mortgage to plaintiff in error. At eleven o’clock a meeting of the board of directors as then constituted was held, at which the president and secretary were instructed to execute and deliver the chattel mortgage in question. Plaintiff in error was present at all of said meetings. At about twelve o’clock said mortgage was executed and delivered to plaintiff in error. At five o’clock the same day plaintiff in error took possession, under said chattel mortgage, of the property therein described.
The conclusion seems to us to be irresistible, that the whole scheme of securing a pre-existing debt due to the plaintiff in error, by making a chattel mortgage upon all the property and assets of said corporation, was fully prepared and arranged by the plaintiff in error while he was the president and a director of said company, and in consultation with other directors. The fact that he did not receive the chattel mortgage, duly executed and acknowledged, until two or three hours after he had resigned, does not change the rule of law applicable to the case. The purpose and spirit of the rule is to prevent officers who are creditors of an insolventcorporation from taking advantage of their position as such officers, to secure a preference over other creditors of such corporation. Under the facts and circumstances appearing in this case, it must be held that plaintiff in error sought to avail himself of a preference over other creditors which was obtained through, and by reason of his position as an officer of said corporation.
It is further contended by counsel for plaintiff in error that said chattel mortgage is valid and binding because it was authorized and directed to be given by the stockholders of the corporation at a meeting where all the stockholders were present in person.
When the facts are considered this argument is more specious than real. The stockholders present at that meeting and the number of shares held by each were as follows, viz.: Charles J. Ambs, one hundred and fifty shares; Charles Edwards, forty-five shares; plaintiff in error, ninety-five shares; James McCartney, five shares, and Paul Eich, five shares. The facts as to Mr. Arabs’ stock and his relation to plaintiff in error and to said company appear in the preceding statement. Plaintiff in error had agreed to protect Mr. Edwards as to his stock. Plaintiff in error had but just transferred to Mr. McCartney, who was his attorney, five shares, and he had been made a director within the preceding hour. The transfer to Mr. Rich of five shares by plaintiff in error had just been reported, and he also had been made a director within the preceding hour. This is a suit in equity and said chattel mortgage can not be validated by or by reason of the proceedings of said so-called stockholders’ meeting. And there was no error in the decree of the court below holding that said chattel mortgage did not constitute a lien as against the claims of defendants in error.
The second question presented is, does the evidence support the finding that the property conveyed by said company to plaintiff in error was equal to, or exceeded, the amount of the debts owing by said company ?
The amount of such debts as appears from the testimony of plaintiff in error are:
Amount found to be due to defendants in error. .$ 2,369.20 “ due plaintiff in error, secured by said
chattel mortgage.................. 21,217.11
“ debts since paid by plaintiff in error... 9,000.00
$32,586.31
Mr. Edwards, secretary and treasurer of said company, testified that the indebtedness of said company aside from the chattel mortgage note was between $15,000 and $18,000. That would make the total indebtedness between $36,217.11 and $39,217.11. There is no other evidence as to the amount of such indebtedness.
The averment in the bill of complaint is that plaintiff in error is liable “ not only for the amount which was bid for the said assets but for their actual fair market value of $25,000.” There were no other assets received by plaintiff in error. If the allegation of the billas to the value of the property be relied upon, and defendants in error are bound thereby, the indebtedness exceeded the value of the property by from $7,500 to $14,000.
It appears that plaintiff in error paid for the plant a little more than a year prior to the mortgage sale, $17,500. He testified that at the time of such sale the property was in his judgment worth $18,000 to $19,000. The sale was extensively advertised in this and neighboring cities, and the highest bid was $12,500. In another part of his testimony plaintiff in error says that at the time he took the chattel mortgage he understood from a statement by the secretary and treasurer that the assets of the company amounted to about $35,000. Again, he says that if the plant and machinery were worth $30,000, the plant, machinery, accounts and contracts to be done, would be about $40,000. The contracts amounted to about $15,000, upon which $3,000 to $4,000 worth of work had been done. The accounts amounted from $10,000 to $12,000, of which $7,000 to $8,000 were bad. From all this testimony we are unable to see any theory upon which it can be fairly contended that the value of the property belonging to said company and taken by the plaintiff in error, was equal to the amount of the debts of said company. The plaintiff in error is liable only for the fair value of the property taken by him. As he did not .take property equal in value to the amount of the indebtedness of the company, it was error to decree that he must pay the demands of the defendants in error in full.
The decree of the Circuit Court will be affirmed except as to the amounts to be paid by plaintiff in error to defends ants in error. While we are of opinion that the evidence now before the court establishes the fact that the debts of said company .exceeded in amount the value of the property taken by plaintiff in error, such evidence is not sufficient to determine therefrom definitely the amount of either. Further testimony should be taken for the purpose of showing such amounts. The case will therefore be remanded with directions to the Circuit Court that testimony be taken to determine, first, the amount of the indebtedness of said company at the time the plaintiff in error took pos: session of the property under said phattel mortgage Hay 24, 1895, and second, the value at that time of all the prop-. erty, belonging to said company, taken by plaintiff in error. If it shall be found from the .testimony thus taken in connection with the testimony heretofore taken, that the value of such property is equal to the amount of such indebtedness, then the court will decree the payment by plaintiff in error to defendants in error of the full amount due to them, respectively, or so much thereof as they shall be entitled to receive under the allegations of said bill of complaint. If it shall be found that the value of such property is less than the amount of such indebtedness, the court will decree the payment by plaintiff in error to defendants in error, the same proportion or percentage of the amount due to them, respectively, which the value of such property bears to the whole amount of such indebtedness, or so much thereof as they shall be entitled to receive under the allegations of said bill. Affirmed in part and reversed in part, with directions.