
    Anderson et al. v. Bullock County Bank.
    
      Bill in Equity to have Cancelled and Annulled a Mortgage executed by a Corporation to secure Corporate Bonds.
    
    1. Corporation; failure to comply mth statutory requirements in. issuance of bonds not available to creditors. — The failure of a corporation to comply with the statutory requirements as to notice for the issuance of corporate bonds and the execution of a mortgage to secure the same, is not available to creditors of the corporation; the statutory provision (Code of 1896, § 1256, subd. 7), being intended for the protection of the stockholders simply.
    2. Same; purchase of bonds by president of corporation; rights of creditors. — The mere fact that the president of a corporation, with the consent of the Board of Directors and the stockholders, purchased corporate bonds of the face value of $18,000 for $16,500, does not, of itself, render the bonds invalid as usurious or fraudulent, or furnish any ground of complaint to creditors, whose debts were not contracted until several years after the issuance and purchase of said bonds..
    3. Same; same; same. — Where the president of a corporation owns its valid bonds, which are past due, and in accordance with an agreement between him and a third person to exchange the bonds of the corporation for other property, a resolution, favored by the president, is passed at a meeting of the stockholders, authorizing the issuance of new bonds to retire those past due held by the president, and the execution of a new mortgage to secure the same, the mere fact that the new bonds purport to be a series of a larger amount than was authorized by the resolution, and the mortgage also purports to secure such larger ¿mount, does not, of itself, manifest a simulated, fictitious debt or render such bonds and the mortgage securing the same invalid as against subsequent creditors of the corporation; nor can such subsequent creditors complain of the exchange by the president of such new bonds with a third person for other property.
    4. Same; right of subsequent creditors to have /decree foreclosing mortgage securing corporate bonds set aside.- — Where a bill filed by the holders of bonds issued by a corporation avers default in the payment of interest and the happening of the contingency authorizing foreclosure proceedings as provided by the mortgage securing said bonds, and it is further averred in said bill that the corporation had become insolvent and its officers had ceased to give it any attention, and the property was being wasted for want of care, and that all the bondholders united in demanding the foreclosure of the mortgage, a decree is rendered ordering the foreclosure of the mortgage and providing that the property of the corporation shall not be sold for less than the amount of the bonds, creditors of said corporation, whose claims did not accrue until the year subsequent to the issuance of said bonds and the execution of the mortgage securing them, can not have said decree of foreclosure set aside and annulled in the absence of averments showing that the foreclosure proceedings were fraudulent and collusive.
    5. Same; right of insolvent corporation to prefer its officers in payment of debt. — An insolvent corporation may transfer its property to its officers in payment of bona fide debts due them, though it thereby prefers such claims to those of other creditors.
    
      Appeal from tlie Chancery Court of Bullock.
    Heard before the Hon. Jebe N. Williams.
    The bill in this case -was filed by the appellants against the appellees. The averments of the bill are sufficiently stated in the opinion.
    In paragraphs 12 and 13 it is alleged that about February 15, 1897, the officers and directors ceased to look after the affairs of the corporation; that the corporation was insolvent and owed $10,000 in addition to its bonded debt; that J. L. Paulk and W. M. Pitts were engaged in a mercantile business under the firm name of Pitts & Paulk; that said corporation was indebted to Pitts & Paulk in the sum of about $2,000; that it was indebted to W. M. Pitts in about the sum of $2,500; tbat it was indebted to L. Bernheimer in about the sum of $3,000; and that J. A. Paulk, its president, was indebted to Pitts & Paulk in about the sum of $2,000; aud was also largely indebted to said Bernheimer on his individual account. That a short time prior to the time when the corporation ceased to do business, it had on hand a large quantity of cotton seed meal, hulls and cakes, which were substantially all of its property over and above the property covered by the mortgage; that the said officers of the corporation with the intent to prefer the paymefit of the debts due to themselves, and the debts due to Pitts & Paulk and to the said Bernheimer, sold a portion of the said product and paid the salaries due to themselves with the proceeds, and turned over to Pitts & Paulk, W. M. Pitts and L. Bernheimer, a large portion of the said product in payment of the claims due them, and also permitted Pitts & Paulk, W. M. Pitts and Bernheimer to knowingly appropriate the proceeds of said product to the payment of the debts due to themselves, with the intent to prefer the said debts over and above the claims of other creditors; that J. A. Paulk diverted a large portion of said output to the payment of private debts, including his taxes due the State, and also the county of Bullock; that Bernheimer, of the assets of said corporation received by him, failed and refused to apply any part thereof to the payment of the past due coupons of the bonds of said corporation in his hands, but insisted on the payment of the amount due him on such coupons, and threatened to apply to the trustee for the bondholders, under the stipulations of the mortgage given to secure the bonds, to foreclose the same, unless such coupons and all taxes which were unpaid, should be at once liquidated, knowing that he had received assets which he should have applied to the payment of said coupons, and the taxes, for 1896, then past due and unpaid, and the president neglected and refused to require said Bernheimer to apply the assets in his hands to the payment of the past due coupons held by him; that the directors and certain stockholders, on February 23,1897, got together and adopted a resolution authorizing the bondholders to sell the plant at public auction, and this was done at the instigation of L. Bernheimer; that a short time after said meeting, J. L. Pitts, who was a brother-in-law of J. A. Paulk, and a creditor of his to the amount of about $2,000, voluntarily and without any request from Bernheimer, or any officer of the corporation, went to the Bullock County Bank where the unpaid coupons of Bernheimer were sent for collection, and paid the same, and said bank then transferred said coupons to him; that a short time after these coupons were turned over to him, he, Bernheimer, and said L. Sessions, representing themselves to be the holders of all the bonds, in writing made an application to the Bullock County Bank, as trustee, to foreclose the mortgage referred to; that J. L. Pitts owned no bonds, and only held the coupons acquired by him as herein stated; and that all the coupons held by Sessions had been paid to him. The said trustee then filed a bill in the chancery court of Bullock county to foreclose said mortgage, and it is alleged that -I. L. Pitts either employed or agreed to pay all counsel engaged in said suit on the side of the complainant. That the only party defendant to said bill was the Bullock County Manufacturing Company, which was brought into court by service of citation on J. A. Paulk, as its president; that no defense was made to said suit; that a decree pro confesso was taken against the defendant; that said suit was a collusive effort on the part of the parties thereto and the officers of the corporation, to prefer any claim or debt held by J. L. Pitts against said corporation and the said J'. A. Paulk, and also to enforce the payment of the said bonds before they were rightfully due. That although the taxes Avere due, neither the trustee, the bondholders nor J. L. Pitts made any offer or attempt to pay the same; that by written agreement, signed by said corporation and all the officers in direct cause, the said defendant corporation consented for a final decree to be rendered in said cause in Aacation. Said agreement AAras attached to the bill as an exhibit. Said cause was submitted to final decree in vacation, and decree rendered in Amcation, a copy of Avhich is attached to the bill as an exhibit. Said decree ordered the sale of said plant, and the same is noAV advertised for sale by the register. It is then averred that said suit, from its institution to its final decree, is a collusive effort to hinder, delay and defeat the general creditors of said corporation.
    The Bullock County Bank, the Bullock County Manufacturing Company, J. L. Pitts, J. A. Paulk, J. L. Paulk, W. M. Pitts, Dr. L. Sessions and L. Bernheimer are made parties defendant to the bill.
    The bill prays that a receiver be appointed to take charge of the property of the corporation pending this litigation. It further prays: 1. To declare the bill filed by Bullock County Bank v. Bullock County Manufacturing Company to he collusive and fraudulent and begun for the purpose of hindering, delaying and defrauding the manufacturing company’s creditors, and to dismiss the same out of court.
    2. To declare said bonds to be null and void and order them to be delivered up and cancelled, or in the alternative to declare that they are not a prior claim of lien to the debts of the general creditors.
    3. To declare the mortgage null and void, and cause same to be cancelled, and that J. L. Pitts has no claim against the corporation for money paid out by him for past due coupons, or in the alternative that he is only a simple creditor for said amount.
    4. That the amount of the property wrongfully appropriated by W. M. Pitts, Pitts & Paulk, J. A. Paulk, J. L. Paulk and L. Bernheimer be. ascertained and that they he required to bring the proceeds into court, and be held as trustees of all such property and made to account for the same; and that all the property of the corporation be sold and the proceeds be brought into court for distribution, and he subjected to the payment of the-debts due appellant, as Avell as other creditors; also that the decree rendered in the foreclosure suit be declared null and Amid, and the bill in said cause be dismissed.
    The Bullock County Manufacturing Company, J. A: Paulk, J. L. Paulk, j. L. Pitts and W. M. Pitts separately and severally demurred to the bill upon the folloAving, among other grounds: 1st. Said bill seeks to declare void the bonds and mortgages of the Bullock Manufacturing Company, on the ground of irregularity in the issuance of said bonds and the execution of said mortgage; Awhile it sIioavs that none of the complainants Avere or are stockholders of said corporation. 2d. They demur to that portion of said bill Avhich seeks relief upon the averments that S. J. Foster purchased $18,000 worth of .said bonds for $16,500. (a.) Because these complainants are shoAvn by the bill to be simple contract creditors, and do not sIioav that they Avere injured thereby; (b.) because said facts give the complainants no equity, or ground for the relief prayed against these defendants or either of them; (c.) and because usury is a defense personal to the borrower, or his personal representatives; and can not be set up by creditors of a borroAver who had no connection with said transaction, (d.) And because the amount of usury is noriset forth distinctly and correctly, nor the terms and nature' of the usurious agreement, nor the amount of the payments; (e.) and because the purchaser of the bonds of a corporation at less than their face value, is permitted by law7 and is not an usurious transaction; (f.) because the consideration of bonds can not be impeached by a stranger, not standing precisely in the situation of the original parties, and identified in equity by privity of title with them. 3d. The facts averred do not sIioav any wrong committed by S. J. Foster or J. A. Paulk in the transaction averred to have taken place between them in the exchange of the stock and bonds of the Bullock County Manufacturing Company. 4th. The bill is multifarious in that it complains of acts done by different parties who were made defendants to said bill, while said acts have no connection with each other and said parties are not shown to have been in privity with each other. 5th. There is a misjoinder of parties defendant to said hill in that the defendants charged therein ‘with a misappropriation of the proceeds of the product of said defendant corporation are joined with its bondholders, who are charged with acts going to make said bonds mature before they were rightfully due. 6th. The bill does not state any facts which show that these defendants or either of them, in the decree of foreclosure, were guilty of a collusive effort to prefer any claim or debt held by J. L. Pitts against said corporation, and the said J. A. Paulk.
    The Bullock County Bank demurred to the bill upon the following, among other grounds: 1. The bill does not state any facts which show that this defendant in the decree of foreclosure was guilty of a collusive effort to prefer any claim or debt held by J. L. Pitts against said corporation and the said J. A. Paulk. 2. The bill does not state any facts which show that this defendant was guilty of collusive effort to enforce the payment of said bonds before they were rightfully due. 3. The bill does not show that this defendant is violating its fiduciary duties by misusing, misapplying or wasting the said property, the subject matter of this suit.
    There was also a motion made by the defendants to dismiss the bill for the want of equity.
    Upon the submission of the cause upon the demurrers and motion, the chancellor sustained the grounds of demurrer Avhich are above set out. From this decree the complainants appeal, and assign the rendition thereof as error.
    J. I). Norman, for appellants.
    — Appellants do not gainsay the general proposition that creditors can take advantage of defects in the creation of debts and mortgages by corporations, on account of non-compliance with statutory requirements, but Avhen such debts in the shape of bonds and mortgage to secure the same are created in favor of a director and the largest stockholder in the corporation, for a larger amount than is really due, under an agreement in the directory made before hand, and when this debt is permitted to run for several years, the director collecting interest annually on the face thereof ($18000) when the true amount is $16,-500.00, it seems this is such an abuse by the directory of the corporation of their position as amounts to a fraud, and the general creditors can take advantage of it. The creditors of corporations are directly interested in its capital stock and have the right to complain of its illegal embarrassment. — 1 Morawetz on Corporations, § 568; 2 Morawetz on Corporations, ¡5 794; Bank of St. Mary’s v. St. St. John, Powers & (Jo., 25 Ala. 612; O’Connor M. & M. Co. v. Coosa Furnace Co., 95 Ala. 615; Drury v. Gross, 7 Wall, 299. The purchase of said bonds at a discount was an abuse of Dr. Foster’s position as a director in said corporation, and cannot be ■upheld. — Dancomb v. N. Y. E. & N. W. R. R. Co., 84 N. Y. 190; Van Colt v. Van Brant, 82 N. Y. 540.
    The mortgage is fraudulent and void because it tends to increase corporate indebtedness in violation of the constitutional provision hereinbefore referred to, and also because the consideration therein named is simulated, and exagerated. — Lcmson v. Alabama Warehouse Co., 80 Ala. 343; Rail v. Hey den, 41 Ala. 242; Bradley & Co. v. Ragsdale, 64 Ala. 558 -,Dickson v. McLaney, 97 Ala. 390. And the circumstances detailed in the billl show actual fraud in the issuance of the bonds, and is available to future creditors. — Echols v. Orr, Scroggins & Humes, 106 Ala. 237; Dickerson v. McLaney, 97 Ala. 383; Seals v. Robinson, 75 Ala. 364; Yeend v. Weeks, 104 Ala. 339; Price v. Masterson, 35 Ala. 483.
    D. S. Beti-iunb, Ernest L. Blub, Titos. G-. & Citas. P. Jones, Holloway & Holloway, contra.
    
    — -The attacks made upon the bonds and mortgage are solely upon the ground that the statutes controlling and governing the issuance of bonds, and the execution of mortgages by private corporations have not been complied with. The facts alleged that they were not authorized by the stockholders ; that the debt was simulated and fictitious; that it was an increase of the indebtedness of the corporation beyond its capital stock that the transaction was usurious; that the bonds were sold below their face value, &c, &c, all come within the provisions of the statute laws of the State, and this Court has repeatedly held, so that it has become a settled rule iu this State, that stockholders, and they alone, can complain of irregularities, or non-compliance with statutory requirements in such cases made and provided. Simple contract creditors can not take advantage of any such matters. For these reasons demurrers 3, 4 and 5, and all other bearing-on this proposition should be sustained. The chancellor did not err in his ruling. — Code of 1886, § 1664, subd. 7; Barrett v. Bóllale, 108 Ala. 390; Ala. Iron Works v. Mc-Keever, 112 Ala. 134; Code of 1886, § 1562; Nelson v. Hubbard, 96 Ala. 238; O’Connor M. cG M. Co. v. Furnace Co., 95 Ala. 618; M. cG G. R. R. Co. v. Woods, 88 Ala. 630; Morton íG Bliss v. N. O. cG S. R. Co., 79 Ala. 610.
    Fact that bonds sold below their face value does not violate any law, and the bonds if voidable at all, are only voidable at the election of the corporation and stockholders. Consideration of bonds cannot be impeached by a stranger not standing precisely in the situation of the original parties, and identified in equity by privity of title with them.- — Nelson v. Hubbard, 96 Ala. .238; O’Connor o. Furnace Go., 95 Ala. 618; Morton v. R. Go., 79 Ala. G10; M é C. R. R. Co. v. Woods, 88 Ala. 630. Usury is- a defense personal to the borrower and his personal representative and cannot be set up by creditors of a borrower who had no connection with the transaction. Amount of usury, terms, not set out. — 3 Brick. Dig. 574, § 47 and authorities.
    The bill shows that there are bonds of the corporation outstanding to the amount of $17,000.00, and it alleges that the defendant L. Bernheimer holds $1-3,000.00 thereof, and that the defendant L. Sessions holds $2,000.00 thereof, which leaves $2,000.00 in Amine thereof unaccounted for. It is not alleged who owns them, nor is it alleged that after diligent inquiry the OAvners are unknoAvn. The bill seeks to have all the bonds declared null and void, yet does not offer to g¡Ae the party, or parties, aaOio hold the remaining $3,090.00 unaccounted for, any opportunity to defend the suit. In so far the hearing Avould be purely ex parte. The rights of- all the bondholders being the same, and the results sought to be enforced against them being the same, the owners of said bonds unaccounted for in the bill are necessary parties. — Prout v. Hoge, 57 Ala. 28; Stammers v. McNaugh
      
      ten, 57 Ala. 277; Teague v. Corbitt, 57 Ala. 529; Bragg v. Beers, 71 Ala. 151.
   McCLELLAN, C. J.

— Appellants as simple contract creditors of the Bullock County Manufacturing Company, a private corporation, filed their bill for the purpose of having cancelled and annulled mortgages exe- . cuted to secure the bonds of said corporation, and to hold certain of its officers, president, secretary, and a director, individually responsible for assets of the corporation, alleged to have been appropriated by them to debts due them individually, and also one of the bondholders for the proceeds of assets applied to the payment of the individual debt of the president of said corporation, and also a debt due him from the corporation. Neither of the debts due complainants accrued prior to the year 1896. The first eleven paragraphs of the bill deal principally with the bonds and mortgages executed by the corporation. The respondent debtor corporation was incorporated on the 7th of November, 1889, with an authorised capital stock of $25,000, of which $21,800 was paid up, and no more of the stock it seems' was ever subscribed for or issued. On the same date, by resolution of a majority of the stockholders, authority was given to issue forty bonds, each of the face value of $500, aggregating $20,000, to mature and become due in five years. Only thirty-six of the bonds were issued, all of which were taken by S. J. Foster, the president of the corporation, he paying in cash therefor the sum of $16,500. It is averred in the bill that the bonds Avere Avorth their face value, and it is charged that the statutory requirements as to notice for the issuing of bonds and making mortgage, were not complied with. The pleader concludes from this statement of facts with the averment that the bonds and mortgage Avere usurious and void.

It has been often decided that subdivision 7 of section 1256 of the Code of 1896 (1664 of the Code of 1886), was intended for the protection of the stockholders, and if there was no complaint on their part, the failure to observe its provisions was not available to creditors.— Nelson v. Hubbard, 96 Ala. 238; Barrett v. Pollak, 108 Ala. 390; Ala. Iron Co. v. McKeever, 112 Ala. 134.

The mere fact that the president of the corporation with the consent of the hoard and stockholders, purchased bonds of the corporation of the value of eighteen thousand dollars for sixteen thousand and five hundred dollars alone furnished no ground of complaint to creditors, whose debts were not contracted for nearly six years afterwards, either on the ground of usury or fraud. Prom all that is said in the bill, our conclusion is, that so far as complainants are concerned, the issue of the bonds referred to and the execution of the mortgage to secure them, was done in good faith and are valid. The bill then proceeds, to set out a transaction or “deal” between the said S. J. Poster and J. A. Paulk, which occurred in the year 1895. It avers that the said Poster owned the stock originally issued to him, and seventeen thousand dollars of said bonds (one thousand of the eighteen thousand having been retired); that J. A. Paulk owned a large quantity of the stock of the Bullock County Bank, a private corporation, and that they agreed to exchange the one for the other; that is, that S. J. Poster would transfer his bonds and stock of the Bullock County Manufacturing Company to J. A. Paulk, and in exchange therefor the said Paulk would transfer his bank stock to said Poster. As the bonds were past due, it was agreed that Poster should procure the issue of new bonds, to run for ten years. At the time of the agreement between Foster and Paulk, the bill avers that Paulk was indebted largely to one Bernheimer and to one Sessions, to secure which he had deposited with them as collateral a large part of the bank stock owned by him, and in order to carry out his agreement with Poster, it was agreed and understood that the said Bernheimer and the said Sessions should release the bank stock thus held as collateral, and to receive from J. A. Paulk the new bonds of the Bullock County Manufacturing Company when transferred to him by Poster in lieu of the bank stock. At a meeting of - the stockholders of the Bullock County Manufacturing Company held on the 22d of May, 1895, a resolution was adopted, authorizing the issue of thirty-four bonds, each for five hundred dollars, aggregating seventeen thousand dollars, bearing eight per cent with interest coupons attached, payable semi-annually, to be secured by mortgage on all the assets owned or to be acquired, and it is stated in the resolution, that the purpose of this issue of bonds was to retire and cancel the old outstanding bonds, which were then past due and unpaid. The new bonds for five hundred dollars each were issued, and the mortgage to secure them executed, which was duly acknowledged and recorded. Each of these bonds on its face purports to be one of a series of forty, each of five hundred dollars, aggregating the sum of twenty thousand dollars, and in the mortgage to secure them it was stated, that the bonds were issued to'purchase new machinery, lots, etc. to carry on the business of the corporation. Complainants do not aver that more than thirty-four bonds, aggregating seventeen thousand dollars, were issued, and it is fairly inferred from their pleading that thirty-four bonds were issued and delivered to S. J. Foster, the owner'of all the outstanding old bonds, and that the old bonds were surrendered in lieu of them. The bill further shows that S. J. Foster endorsed said bonds without recourse, and that they were delivered and his stock transferred to J. A. Paulk as agreed upon, and that J. A. Paulk delivered thirteen thousand of them to Bernheimer and two thousand to Sessions, and the bank stock held as collateral was delivered to Foster, thus carrying out the agreement between the said Foster and J. A. Paulk. So far, we discover nothing unusual or fraudulent in the transaction between S. J. Foster and J. A. Paulk, and J. A. Paulk and Bernheimer and Sessions. It seems to be a mere contract between the parties for the exchange of property and the substitution of one collateral for another. But complainants insist that as the resolution of the stockholders of the Bullock County Manufacturing Company authorized the issue of only thirty-four bonds of five hundred dollars each, aggregating seventeen thousand dollars, and as the new bonds on their face show that they were a series of forty bonds, aggregating twenty thousand dollars, and as the mortgage executed to secure them, purports to secure forty bonds aggregating twenty thousand dollars, it is manifest that there is a simulated, fictitious debt secured, which stamps both bonds and mortgage with fraud, and vitiates them as valid claims, and further, that the bonds were issued without authority. The bonds and mortgage bear date May 22d, 1895; the mortgage seems to have been drily filed for record. Neither the bonds nor mortgage are void upon their face. Complainants did not become creditors until almost a year subsequent to the issue of the bonds and the execution and record of the mortgage. They were chargeable with notice of the existence of the bonds and mortgage. It does not appear that there were creditors then, other than the holders of the bonds and coupons, and they were owned and held by a stockholder and director of the corporation, who favored the resolution at the stockholders meeting and signed the bonds. Neither the corporation nor the bondholders, nor owners of the stock, raise any objection to their validity. Probably the stockholders may have cause to complain, but in the absence of actual fraud —a conclusion not authorized by the facts stated — the complainants cannot complain. If we were to concede the invalidity of the new bonds and mortgage to secure them, we do not see how complainants are to be benefitted in this phase of the case. As stated, the corporation was indebted to S. J. Foster in the sum of seventeen thousand dollars evidenced by the old bonds, and which are secured by the first mortgage. Unless this debt was satisfied and can-celled by the new bonds, it remains in force, and must be satisfied from the proceeds of the assets of the corporation debtor covered by the first mortgage, in preference to complainants’ claims. We do not find that complainants are entitled to any relief from the averments thus far considered.

The complainants further aver that after’ J. A. Paulk acquired the bonds and stock from S. J. Foster, at a meeting of the stockholders held in June, 1895, he, the said Paulk, was elected president and his son secretary, and that he continued as its president, exercising a controlling influence in its management.

Paragraphs twelve and thirteen of the bill are quite lengthy, consisting of many disconnected statements, which seem to have no special relations to each other, and we are not sure that we fully apprehend the purpose and scope intended by them all. We are of the opinion that the main purpose of these paragraphs was to assail the validity of a decree which had been rendered by the chancery court, foreclosing the mortgage for the benefit of the bondholders, and also to hold the president, J. A. Paulk, and secretary and treasurer J. L. Paulk, and certain creditors of the corporation, trustees in invitum, for the proceeds of the property of the corporation, applied to the payment of claims due them, by which they were preferred to other creditors. The bona fides of these claims is not assailed. The complaint is, that such preferences are unauthorized and illegal. The mortgage provides that in default of the payment of the taxes due from the corporation for six months, or in default of the payment of the coupons, the whole of the bonds shall mature and become due, and upon request of the bondholders owning one-fourth of the entire amount, the trustee shall proceed to foreclose the mortgage. The bill for the foreclosure avers default for more than six months, and that there -were past due over fifteen hundred dollars of unpaid interest coupons, that the corporation has become insolvent, and that the officers of the corporation had ceased to give it any attention, and that the property wa.s wasting for want of care, and that all the bondholders had united in demanding the foreclosure of the mortgage. The foreclosure decree is dated June 12th, 1897, and complainants’ bill was filed July 19th, 1897. It avers the insolvency of the corporation, that i ts officers had ceased to give it any attention, and that its property was being wasted for want of attention, and it prays for the sale of the same property decreed to be sold by the foreclosure suit. No reason is assigned why the property will not sell for as much under the foreclosure decree, as under a decree in the present proceeding, and the foreclosure decree provides that the register shall not receive a less bid than seventeen thous- and dollars. It is clear from complainants’ bill, that there is a valid debt, evidenced by bonds issued by the corporation debtor, secured by mortgage, amounting to seventeen thousand dollars, which is entitled to preference' over complainants’ claims, and it is not shown that the assets are worth more than seventeen thousand dollars. The averments of the bill of complainants fall far short of showing, that the proceedings in the chancery court were fraudulent and collusive. This- decree is defective and insufficient in that the decree does not ascertain and adjudge an indebtedness, and ascertain the amount. It is probable that the decree should be amended nunc pro tunc, so as to authorize a sale of the property.

Tbe bill is also without equity in its attack upon transfers of property by the corporation to and in payment of debts held by its directors and officers. — Corey v. Wadsworth et al., 118 Ala. 488. The assignments of demurrer going to this part of the bill were well taken; and the motion to dismiss the bill for Avant of equity should have been granted. But as this appeal is by the complainants beloAV and only the court’s rulings in sustaining certain assignments of demurrer are assigned as error, and these rulings are without error, the decree must be affirmed.

Affirmed.

(The foregoing opinion, AV'itb the exception of the last paragraph, Aims prepared by former Justice C-olbman.)  