Bobb v. Woodward

• Decision Date: 31 March 1872
• Parties: JOHN H. BOBB, Respondent, v. E. K. WOODWARD AND ERASTUS SMITH, Appellants.
• Court: Missouri Supreme Court

50 Mo. 95

JOHN H. BOBB, Respondent,

v.E. K. WOODWARD AND ERASTUS SMITH, Appellants.

Supreme Court of Missouri.

March Term, 1872.

Appeal from St. Louis Circuit Court.

C. C. Whittelsey, for appellants.

Cline, Jamison & Day, for respondent.

BLISS, Judge, delivered the opinion of the court.

At a sale by execution upon a judgment in favor of one Owings against defendant Woodward, the plaintiff, on the 30th of January, 1867, purchased Woodward's interest in certain real estate in St. Louis, the legal title of which was in defendant Smith. The plaintiff presents his petition in equity to set aside a previous sale by Woodward to Smith as fraudulent in fact, and to vest the title in the plaintiff. This is the same case which was once before this court and reported in 42 Mo. 482, and is now here upon an amended petition with a large amount of testimony.

The petition, after alleging the purchase at sheriff's sale, represents that defendant Woodward, being in failing circumstances, employed defendant Smith, his brother-in-law, and a resident of Hartford, Connecticut, to compromise his debts; and that, failing in that, they had entered into a conspiracy to defraud said Woodward's creditors. It describes in detail the steps to that end pursued by the parties, and avers that on the 8th of December, 1860, defendant Woodward, with his paper under protest and with suits pending against him, wrote to said Smith to come to his relief; that he came on, and, aware of said Woodward's condition, entered into a scheme with him by which all his property should be transferred to said Smith, to be held for the use and benefit of said Woodward, and to compel a compromise by the creditors; and in pursuance of said scheme, that Woodward's stock of goods of the value of $20,000, with book accounts, etc., was transferred to said Smith for the nominal sum of $11,360, but that none of this amount was paid or intended to be paid. The petition describes the manner of the pretended payment, showing that Smith, on behalf of said Woodward and with his funds, purchased at twenty-five cents on the dollar claims against him amounting on their face to said sum of $11,360, and turned them over as full payment for said goods.

After thus describing the manner in which said Smith became the nominal owner of the store, by way of inducement and support, as I suppose, of the subsequent allegations in relation to the property in dispute, the petition further sets out, in substance, that said Woodward, on the 22d of April, 1861, without consideration, conveyed to said Smith said real estate, which was encumbered at the time by two trust deeds--one to one Curtis as trustee for one Brown, to secure the payment of $3,000 with interest notes, and one to C. C. Whittelsey as trustee of Crawford & Gray, to secure a note of $1,037; that the notes secured by said trust deed have been paid in full out of the proceeds of said store, but for fraudulent purposes have been assigned to defendant Smith, who holds them as a valid lien upon the premises; and that the said trust deeds, together with the conveyance from Woodward, are a cloud upon the plaintiff's title, which he desires to have removed.

Defendant Smith, answering, is informed that defendant Woodward, in December, 1860, became liable to said Owings as accommodation indorser, and that judgment was obtained in March. 1866; knows nothing of the levy and sale; denies all fraud and conspiracy, and avers that with his own money, and without the knowledge of Woodward, he purchased debts against him at twenty-five cents on the dollar, and with those debts purchased the stock of goods in the book store at their fair value. He denies that he has carried on the business for Woodward's benefit, or that Woodward has any interest in the store; and with regard to the real estate in controversy, claims that out of his own means he paid said Woodward $1,000 for his equity of redemption, which was its full value; and that he has purchased the debts secured by the trust deeds and taken an assignment of them to himself. He also denies the plaintiff's equity, and claims the benefit of the statute of limitations.

From an examination of the evidence it appears that Woodward, in the latter part of 1860, became embarrassed in his business, employed an agent to compound with his creditors, and that he wrote to defendant Smith requesting him to aid the agent in the matter. Failing to effect the compromise, he again wrote to Smith stating his embarrassments; that while his largest creditors were willing to compromise, others refused; asking him to go to New York, Philadelphia, etc., for him, and try to perfect the arrangements, giving the names of some he was to see, and saying, “if you cannot arrange with them, come right on here and buy me out on terms that you will be safe in, etc., and they will be forced to our terms.” He sets forth the peril he is in from pending suits, and fears that everything will be swallowed up unless he comes out to protect him. This letter was not answered, but Smith at once proceeded to buy up Eastern claims against Woodward at twenty-five cents on the dollar, to the amount of over $7,000, and came on to St. Louis and bought out Woodward's store. He turned over in part payment, at their face, the claims he had so purchased, and gave his notes for the balance, which were paid by other claims against Woodward subsequently purchased. It does not appear that the money used by Smith in making these purchases belonged to Woodward, or was in any way furnished by him, but, on the contrary, they both testified that Smith used therefor his own means; nor does it appear that Smith acted as the agent of the failing debtor, or was governed by his directions, further than the natural inference that his action was prompted by the letter referred to. But if the matter were directly in issue, there is evidence enough to warrant a finding by the court that the whole transaction, the purchase of the claims against Woodward and with them of his stock in trade, were made to hinder and delay his creditors in the collection of their debts, and compel them to compromise their claims. There is no direct testimony of Smith's designs in that regard, but there is abundant evidence that such were Woodward's motives, of which Smith had notice; and his sympathy in the object must be inferred. The creditors, then, were at liberty, within the period allowed by the statute of limitations, to treat the sale as a nullity as against their demands, and by attachment or other proper proceedings, to subject the property thus sold to the payment of their debts. (Potter v. Stevens, 40 Mo. 229.) This course they did not pursue, but lay quietly by, suffered Smith to carry on the business in his own name and with his own money and credit, to sell out all or the greater portion of the stock thus purchased, and make large additions to the same, to take a partner in the business, and engage in other transactions based upon their acquiescence. The sale, then, of the goods and of the stand where the trade was carried on, being in its inception good as against Woodward and all others except creditors, and they acquiescing, it became as valid as though the fraudulent...