Central Nat. Bank v. Doran

• Decision Date: 14 March 1892
• Parties: CENTRAL NAT. BANK v. DORAN et al.
• Court: Missouri Supreme Court

18 S.W. 836

109 Mo. 40

CENTRAL NAT. BANK v. DORAN et al.

Supreme Court of Missouri.

March 14, 1892.

FRAUDULENT CONVEYANCES — FAILURE TO RECORD — SETTING ASIDE — PLEADING — ESTOPPEL.

1. Where a person indebted to a bank executes a deed of trust upon land, with the understanding that it is to be withheld from record, so as not to impair his credit, and another bank, relying upon the indicia of solvency thus created, extends the debtor's old notes and takes new ones, such renewals and extensions are to be regarded as valuable considerations; and the deed will be regarded as fraudulent as to them, although there may not have been any actual intent to defraud.

2. Although a judgment creditor, who has a lien on land against which there is also the lien of a fraudulent trust-deed, may have the land sold at execution sale, and the trust-deed set aside, he has a right also to have the deed set aside without a sale.

3. An estoppel in pais, in order to be taken advantage of as a defense on the trial of a cause, must be specially pleaded, even though the cause is an equitable proceeding.

BARCLAY, J., dissenting.

In bank. Appeal from circuit court, Cooper county; E. L. EDWARDS, Judge.

Suit by the Central National Bank against B. F. Doran and others to postpone the lien of a trust-deed to the lien of plaintiff's judgment. From a decree in favor of the plaintiff, defendants appeal. Affirmed.

The following is the opinion in division No. 1:

The plaintiff, a judgment creditor of defendant Doran, instituted this proceeding in equity to postpone to the lien of plaintiff's judgment the lien of a certain deed of trust on land lying in Cooper county, executed by Doran to the defendant Bartle, and to declare such deed fraudulent. On hearing the evidence, the court below entered a decree as prayed by plaintiff, making the lien of the latter prior to that of the deed of trust. Summarized, the facts upon which the decree is based are these: Doran, in the year 1885, and long prior thereto, had been a large live-stock dealer, and the largest shipper of cattle and hogs in that section of the state. He resided in Cooper county, on a large farm, worth over $20,000, and also owned a considerable farm in Morgan county, as well as a large amount of personal property, which, with his landed estate, made his financial standing good in the vicinity of his business ventures. The defendant Bartle was Doran's brother-in-law, resided in St. Louis, and to him Doran's shipments of live-stock were usually made. On December 22, 1885, Doran was indebted to the defendant the State Bank of St. Louis in the sum of $12,800, and Bartle was indorser. Doran was in St. Louis at this time, and it was proposed to him in St. Louis, about that time, that he execute a note for $20,000 to Bartle, to cover the amount he then owed said bank, and for future advances, Bartle to indorse the note to the defendant bank, and Doran to execute a deed of trust upon his Cooper county farm, and another upon his Morgan county land, to secure said note. The defendant bank and Bartle knew that Doran was then an extensive trader, and that he intended to continue to carry on his business of buying and shipping stock. Doran, who was called as a witness by the plaintiff, testified that he told Bartle and the president of the defendant bank that he was unwilling to give the deeds of trust, if they were to be recorded, because to do so would impair his credit at home. He consented to execute them upon the distinct understanding and agreement, as he states, with both Bartle and the president of the bank, that they should be withheld from the record, so that his credit might not be impaired by reason of them; that, if there was any danger of trouble, or if he saw that there was any likelihood of their losing anything, or of his becoming insolvent, he would notify them in time to have the deeds put upon record. With this agreement he executed one deed of trust upon his farm in Cooper county, and another upon his Morgan county land, to secure the $20,000 note, which was drawn up, signed by Doran, indorsed by Bartle, and delivered to defendant bank on the 23d or 24th of December, 1885. After these deeds of trust, covering all of Doran's real estate, were executed to secure this note for $20,000, while his real indebtedness, represented by said trust-deeds, was then only $12,800, they were laid aside unrecorded, and their existence was only known to Doran and the parties who held said secret liens. He then, with the knowledge of said parties, continued to carry on his business of buying and shipping stock as before, and, the existence of said deeds of trust being unknown, his credit was unimpaired. Doran had been a customer of the Central National Bank, the plaintiff herein, for a number of years. At the time these deeds of trust were executed that bank held notes which it had discounted for him. When these secret liens were created he could have paid all of his debts. As the notes held by the plaintiff bank became due, the defendant Doran wanted to take them up by making new discounts, the new notes having longer time to run; and also wanted the bank to let him have more money. The officers of the bank, after inquiry, learned that his land in Cooper county was unincumbered; he was in full credit; and upon the faith thereof, during the year 1886, while these deeds of trust were being withheld from record, so as not to impair his credit, the plaintiff let him have more money, and permitted him to make new discounts in lieu of his old notes. Said bank advanced him more money, and accepted renewal notes having longer time to run, and extended him the same accommodations as he had been accustomed to receive, the bank being in entire ignorance of said secret liens. On the 7th of January, 1887, the deed of trust was recorded in Cooper county. It was not recorded until Doran's insolvency made it necessary, and rendered it useless to longer withhold it in order to strengthen his credit. This action was just as Doran testified that the contract provided it should be. The trust-deed was sent to Cooper county by a special messenger, whose anxiety to get it upon the record caused him to have the recorder to permit him, the messenger, to record it himself the night of his arrival, and after the office had been closed for the day. Doran left with the plaintiff, as collateral, some certificates of stock in the Doran Live-Stock Company. The bank officers did not consider this stock worth anything when it was given to them, and the testimony in the record shows that it has no value now. After Doran's insolvency, Bartle did not want these certificates of stock sold, and he agreed that, if the bank would not sell them for two years, he would pay 50 per cent. of its loss, not to exceed $5,000, however; and to secure himself he took a deed of trust upon Doran's personal property. There was nothing whatever in this agreement to prevent the plaintiff from pursuing any other property of defendant Doran. It was simply an agreement not to sell the collateral for that length of time, and did not interfere with any other right or remedy. When this arrangement was made, Doran's insolvency was known, and the deed of trust had been recorded, but the bank officers had no notice whatever of the secret arrangement to withhold said deeds of trust...