Broussard v. Mason

• Citation: 173 S.W. 698,187 Mo.App. 281
• Parties: J. E. BROUSSARD, Respondent, v. B. C. MASON, Appellant
• Decision Date: 15 February 1915
• Court: Court of Appeals of Kansas

173 S.W. 698

187 Mo.App. 281

J. E. BROUSSARD, Respondent,
v.
B. C. MASON, Appellant

Court of Appeals of Missouri, Kansas City

February 15, 1915

Appeal from Jackson Circuit Court--Hon A. C. Southern, Judge.

Decree reversed and case remanded.

E. H. McVey and B. W. Simpson for appellant..

(1) A judgment may be collaterally impeached for fraud and collusion. Under the circumstances here presented this court has the right to adjudicate the equities of the cause upon the merits. Hamilton v. McLean, 139 Mo. 678; Bates v. Hamilton, 144 Mo. 1. (2) An officer or director of a corporation who purchases its property at execution sale becomes a trustee for the benefit of the parties in interest. Tobin Canning Co. v. Fraser, 17 S.W. 25; Brewster v. Stratman, 4 Mo.App. 42 and 43; McAllen v. Woodcock, 60 Mo. 180; Ward v. Davidson, 1 S.W. 846, 89 Mo. 455. (3) When Broussard became trustee he was not at liberty to exercise his rights as creditor in opposition to his duties as trustee. Jamison v. Glascock, 29 Mo. 191, 197; Rogers v. Rogers, Hopkins Chancery Courts, 515; Grumley v. Webb, 44 Mo. 451; Connecticut Mt. Life Co. v. Smith, 117 Mo. 295; Tobin Canning Co. v. Fraser, 17 S.W. 25; Brewster v. Stratman, 4 Mo. App, 42-3; McAllen v. Woodcock, 60 Mo. 180; Ward v. Davidson, 89 Mo. 445; Hoffman v. Reichert, 35 N.E. 527. (4) Indemnity to one surety inures to the benefit of all. Urbahn v. Martin et al., 46 S.W. 291, 293; 19 Tex.Civ.App. 93; Tolle v. Boeckeler, 12 Mo.App. 63; Chilton v. Chapman, 13 Mo. 336; Gibson v. Sheehan, 28 L.R.A. 400.

Gilmore & Brown for respondent.

(1) Even if such defense could be allowed, the questions attempted to be presented have been the subject of litigation in the Texas courts, where they have been adjudicated and those adjudications are binding upon this court. Kitchen v. Railroad, 69 Mo. 224; Foster v. Mill Co., 92 Mo. 79; Foster v. Refining Co., 118 Mo. 238, 264; Williams v. Jones, 23 Mo.App. 132; Neun v. Assn., 149 Mo. 74; Hamilton v. McLean, 139 Mo. 678; Bates v. Hamilton, 144 Mo. 1; Field v. Sanderson, 34 Mo. 542. (2) Defendant having pleaded fraud in the foreclosure, cannot rely upon fraud in the original sale of the Rice Company. Wesley v. Bowers, 58 Mo.App. 419; Reed v. Bott, 100 Mo. 62. (3) An officer or director of a corporation may take security for a debt from the corporation and enforce payment as any other creditor. 21 Am. & Eng. Ency. of L., 911; Kittle v. Railroad, 84 F. 386; Rylander v. Sheffield, 108 Ga. 111; Bank v. Dovetail Co. , 143 Ind. 534; Rollins v. Wagon Co., 80 Ia. 320; McMurty v. Remple Co., 86 Ky. 206; Holt v. Bennett, 146 Mass. 437; McDowell v. Shehan, 59 Hun, 618; Neal's Appeal, 129 Pa. 64; Bruce v. Hawley, 31 Ver. 643.

OPINION [173 S.W. 699]

[187 Mo.App. 284] TRIMBLE, J.

-The parties to this suit and one, B. D. Hurd, were accommodation endorsers upon a note of the Jefferson County Rice Company (a corporation), given on April 28, 1902, to the First National Bank of Beaumont, Texas. On October 14, 1903, plaintiff paid said note in full, amounting then to $ 3367.42. This suit for contribution was instituted against the defendant Mason and said Hurd, March 24, 1906. In his bill or petition plaintiff alleged that on the date he paid said note the Rice Company was, and ever since has been, insolvent and has had no assets from that date to the present time; and is therefore unable to pay said note or any part thereof; and on that account plaintiff prayed that each of the defendants be compelled to contribute one-third of the amount so paid by him on said note.

After suit was brought, Hurd made a satisfactory arrangement of some sort with plaintiff in consequence of which the suit was dismissed as to him.

Defendant Mason filed an answer setting up the defense that plaintiff was an original incorporator and stockholder in said Rice Company and was a director and the treasurer thereof from and ever since its organization to the present time; and that in violation of his duty as such director and officer of the corporation he [187 Mo.App. 285] caused a receiver to be appointed therefor and had a secret understanding with the receiver that plaintiff was to be allowed to do all the work of the receivership, care for all the assets of the company, and handle all the moneys due the receiver as such; that by means of his control of the assets and business of the receivership, plaintiff acquired to himself and now holds and claims to own all the property and assets of the Rice Company and destroyed the ability of said company to pay said note, and, by other fraudulent and wrongful practices, procured property in excess of the amount due him or paid by him; that by reason of the premises plaintiff is a Trustee Ex Maleficio and as such must make an accounting, and that the result of an accounting will be to show that plaintiff has already been indemnified.

Plaintiff filed a reply denying the facts alleged in the answer, and the parties went to trial. Being in equity, the case was tried by the court sitting as a chancellor.

The decree was in plaintiff's favor requiring defendant Mason to make contribution to the full extent of one-third of the amount paid with interest at six per cent from October 14, 1903, aggregating $ 1797.47. With reference to the defense set up in the answer, the decree recites that none of the matters therein alleged "constitute any defense for this action, even if they are true; that for that reason the court declines to pass upon or decide the questions sought to be raised."

This recitation in the decree is equivalent to sustaining a demurrer to defendant's evidence. If, as a matter of law, the facts charged in the answer do constitute a defense, or affect the liability of defendant, then it was error to refuse to pass upon them. And, in that event, if defendant's evidence is sufficient to support an inference that plaintiff has wrongfully and fraudulently deprived the Rice Company of its ability [187 Mo.App. 286] to pay said note, or has lessened said ability so that the defendant's liability for contribution has been created, or has been increased, then the decree should not be allowed to stand. It is true, in the case of an ordinary trustee, the right of a beneficiary or party in interest to demand an accounting does not depend upon whether any amount is due or not, for in such case the relation of trustee and cestui que trust exists independently of that fact, and the latter has a right to an accounting in order that he may learn whether anything is due or not. But, in the case at bar, defendant's right to assert the trust relationship of plaintiff depends solely upon the question whether or not it is likely that the ability of the principal debtor to pay the note has been destroyed or lessened and defendant's liability to contribution has been thereby created or increased. No right of defendant's ownership or interest in the assets of the corporation is affected by this suit. His liability to contribution is the only thing that is affected. Hence, in this case, although he asserts that plaintiff is a trustee ex maleficio, yet he cannot demand an accounting before making contribution unless he makes some showing that his liability to contribute has been injuriously affected, and that an accounting will disclose that fact and enable the chancellor to render the particular decree which the equities of the case may demand. In other words, defendant is not entitled, as a matter of course, to an accounting merely upon showing that plaintiff, by reason of his official connection with the Rice Company and his acts in the premises, is a trustee; defendant must also show that there is at least a reasonable probability that his liability has been affected by the acts of such trustee so as to make an accounting reasonable necessary. For these reasons we say we must decide, first, whether the facts charged in the answer constitute a defense in whole or in part, and, second, whether the evidence is sufficient to support that charge or make an accounting [187 Mo.App. 287] reasonably necessary. Of course, if the evidence discloses beyond question that after an accounting had been made, nevertheless defendant would still be required to contribute all that is asked, then it would be needless, and a useless expense, to require an accounting. But if the evidence offered in defendant's behalf shows that his [173 S.W. 700] liability has been wrongfully affected, or even leaves it an open question whether it has or not, then defendant is entitled to an accounting, provided, of course, the first proposition is decided in the affirmative.

The facts upon which defendant relies to constitute plaintiff a trustee ex maleficio are as follows:

In 1899, J. E. Broussard, B. C. Hebert and I. D. Polk, all residents of Beaumont, Texas, were the owners of 10,424 acres of land in Jefferson county of that State. Certain parties were contemplating the organization of a corporation to purchase these lands and engage in the rice growing business, and also to sell the land at retail in small tracts to settlers from the north. Hurd was the promoter and organizer of the scheme. On December 26, 1891, the three owners of the land entered into a contract with B. D. Hurd and A. H. McVey, trustees for the stockholders of the proposed corporation, whereby the owners agreed to sell said land to said trustees or to such corporation as they might designate for $ 185,000 of which $ 15,000 was to be in cash and the other $ 170,000 secured by promissory notes secured by recorded vendor's lien, which was the same as a deed of trust, to secure that amount of the purchase price.

On May 14, 1900, the corporation was organized by Broussard, Hebert, Polk, Hurd, Mason, and McVey, and was called the Jefferson County Rice Company. A few days prior thereto, to-wit, on April 26, 1900, these last named parties entered into a secret agreement or contract whereby...