Batavia v. Wallace

• Decision Date: 16 April 1900
• Docket Number: 1,287.
• Parties: BATAVIA v. WALLACE.
• Court: U.S. Court of Appeals — Eighth Circuit

102 F. 240

BATAVIA v. WALLACE.

No. 1,287.

United States Court of Appeals, Eighth Circuit.

April 16, 1900

Theodoric B. Wallace, as receiver of the Missouri National Bank of Kansas City, Mo., who is the present defendant in error, on January 5, 1897, brought an action against Morris Loewen and Louis Loewen, who were co-partners doing business under the name of Loewen Bros., to recover the sum of about $4,800 which was alleged to be due from said firm to the insolvent bank, of which Wallace was receiver, on certain notes theretofore executed by the firm of Loewen Bros. In aid of said suit he sued out a writ of attachment. This writ was levied upon a stock of hardware situated in a store Nos. 1209 and 1211 on Grand avenue, in Kansas City, Mo., which was claimed to be the property of Loewen Bros. On February 3 1897, Eugene Batavia, the interpleader, and the present plaintiff in error, as trustee in a deed of trust which covered the stock of hardware, executed a forthcoming bond in favor of the United States marshal for the Western district of Missouri, by whom the writ of attachment had been levied and by that means was enabled to regain possession of the attached property. At a later date he also filed an interplea in the aforesaid attachment suit, wherein he claimed to be the owner of the attached property under and by virtue of the aforesaid deed of trust which was executed by the firm of Loewen Bros. on January 4, 1897, in favor of said Batavia, as trustee, to secure the payment of the following notes: Three notes, aggregating $7,000, which were executed by Loewen Bros. in favor of the National Bank of Commerce of Kansas City, Mo., all of which were dated December 3, 1896; one note in the sum of $1,500, which was executed by Loewen Bros. on March 14, 1894, in favor of Mrs. J. Rodecker, and was due one year after date; and one note in the sum of $2,500, which was executed by Loewen Bros. on December 22, 1896, in favor of C. A. Stavnow, and was due 60 days after date. Wallace, as receiver, replied to this interplea by alleging in substance that the deed of trust under which Batavia claimed as trustee was conceived in fraud, and was executed by Loewen Bros. with intent to hinder, delay, and defraud their creditors, and that such fraudulent intent was well known to Batavia, and to each and all of the beneficiaries named in said deed of trust who held the aforesaid notes that were secured thereby. On this issue there was a lengthy trial to a jury, which resulted in a verdict in favor of Wallace as receiver, and a judgment that the interpleader was not entitled to the property claimed. The case is brought to this court on a writ of error which was sued out by the interpleader.

Elijah Robinson (I. J. Ringolsky, on the brief), for plaintiff in error.

J. McD. Trimble (C. A. Braley and William Wallace, on the brief), for defendant in error.

Before CALDWELL, SANBORN, and THAYER, Circuit Judges.

THAYER Circuit Judge, after stating the case as above, .

It is claimed in behalf of Batavia, the interpleader, that the trial court, at the conclusion of all the testimony, should have directed a verdict in his favor, as it was requested to do, upon the ground that there was no evidence tending to show that at the time he accepted the deed of trust in controversy and consented to serve as trustee therein he had any knowledge of the fraudulent purpose that had actuated the firm of Loewen Bros. by whom that instrument was executed. In the brief of counsel for the interpleader this is said to be the one question in the case 'of highest importance' which demands 'the most consideration.' It is not claimed apparently, nor is there reasonable ground for the contention, that there was any want of testimony to establish a fraudulent intent on the part of Loewen Bros., the grantors in the deed of trust; but it is said that Batavia, the trustee, had no knowledge of the scheme to defraud, and was not a participant therein, and that there was no proof of facts or circumstances from which knowledge on his part could be inferred. We shall accordingly assume, in accordance with the finding of the jury, that the deed of trust was conceived by the makers thereof in bad faith, with a view of defrauding their creditors. The principal point to be determined, therefore, is whether there was substantial evidence that Batavia was cognizant of the fraud; or, to state the question in a different form, was there proof of any fact or circumstance from which knowledge on his part could be legitimately inferred by a jury? The attaching creditor claimed, and sued out a writ of attachment upon that theory, that the money obtained by Loewen Bros. on their notes in favor of the National Bank of Commerce of Kansas City, which were secured by the deed of trust, was obtained from that bank by the members of said firm for the purpose of concealing it, and withdrawing that much of their property from the reach of their creditors. The attaching creditor also claimed that the other notes secured by the deed of trust, which were executed in favor of Mrs. J. Rodecker, who was a sister of the Loewens, and in favor of C. A. Stavnow, who was an intimate friend and associate of theirs, were not founded upon any consideration, but were fictitious and fraudulent obligations. The attorney who drew the deed of trust in controversy was related by marriage to the Loewens. Batavia, the trustee, occupied an office with this attorney, was very intimate with him, acted as his confidential assistant in many transactions, and seems to have been in a measure dependent upon him for employment. The deed of trust was drawn in this attorney's office, and Batavia was asked by one of the Loewens to become the trustee therein, and, upon such request being made, accepted the office without reading the instrument, and without consulting any of the beneficiaries for whose benefit it was made. When the deed of trust was executed, he also placed the same on record, as he says, without reading it fully, and took formal possession of the stock of merchandise thereby conveyed, without having had any prior conference with the beneficiaries in whose behalf he assumed to act. After the stock of merchandise was attached, the trustee requested one of the beneficiaries in the deed of trust, to wit, the National Bank of Commerce, to become his surety on a forthcoming bond to enable him to retain the possession of the attached property; but it declined to do so, whereupon the trustee, at his own expense, and of his own volition, procured a surety company to execute such a bond as his surety. On the day after he had thus regained possession of the attached property by giving a forthcoming bond to the marshal, a man by the name of Hoffman appeared on the scene without any previous correspondence with the trustee, and immediately purchased the attached property from the trustee of the sum of $8,000. This man Hoffman, who was a relative of one of the Loewens, resided in the state of Colorado, and was a wholesale or retail liquor dealer, who had no acquaintance with the hardware business. He came to Kansas City at the request of his relative, Louis Loewen, and, immediately after making the alleged purchase from the trustee, he returned to Colorado, leaving said Loewen to settle with the trustee for the unpaid portion of the purchase price, and at full liberty to deal with the purchased property and to dispose of it as he thought best. From that time forward the attached property was in the custody and control of Louis Loewen, who eventually disposed of the same at a considerable advance over and above the sum which was realized by the trustee. From the time the trustee accepted that office he does not appear to have conferred with any of the beneficiaries in the deed of trust with respect to the management of the mortgaged property, but appears rather to have acted in accordance with suggestions and advice which were from time to time received either from Loewen Bros. or from their attorney. These are, in substance, the material facts which the evidence discloses, and concerning which there is no substantial controversy.

It would be unreasonable to expect, in a case like the one now in hand, where a person is accused of having accepted a conveyance of property with knowledge that the conveyance was made by the grantors therein with a fraudulent intent, that there would be found in the record any direct evidence of such knowledge. Persons who are...