Clarke v. Ingram

• Decision Date: 02 August 1899
• Parties: CLARKE et al. v. INGRAM et al. INGRAM et al. v. CLARKE et al.
• Court: Georgia Supreme Court

33 S.E. 802

107 Ga. 565

CLARKE et al. v. INGRAM et al.

INGRAM et al. v. CLARKE et al.

Supreme Court of Georgia

August 2, 1899

Syllabus by the Court.

1. A conveyance by an insolvent bank, not made for the benefit of all its creditors and stockholders, to one who at the time of receiving the instrument either had actual knowledge of the bank's condition, or was chargeable with notice of its insolvency, is, under section 1979 of the Civil Code, void.

2. The evidence in the present case demanded a finding against the validity of the trust deed relied on by the plaintiffs in error in the main bill of exceptions.

Error from superior court, Sumter county; W. N. Spence, Judge.

Action by J. B. Ingram and others against W. F. Clarke, trustee, and others. From the judgment, defendants bring error. Plaintiffs also assign cross error. Affirmed on the main bill of exceptions, and cross bill of exceptions dismissed.

W. F Clarke, W. M. Hawkes, and Bacon, Miller & Brunson, for plaintiffs in error.

W. P Wallis. A. Fort, Clark & Hooper, E. A. Hawkins, Guerry & Son, Guerry & Hall, J. E. D. Shipp, R. L. Maynard, Jas. Dodson & Son, J. A. Ansley, and J. B. Hudson, for defendants in error.

LUMPKIN P.J.

During the fall of 1892 the Bank of Americus became financially embarrassed. At the close of the year it was heavily involved, and its condition continued to grow worse until finally, on January 20, 1893, at a meeting of its board of directors, "it was deemed advisable to close the doors of the bank," and accordingly a resolution was passed directing that its operations be immediately suspended. On the same day, Cooper, Gatewood & Co. and other creditors filed in the superior court of Sumter county an equitable petition, in behalf of themselves and all creditors who might subsequently intervene, alleging that the bank was insolvent, and praying that its affairs be placed in the hands of a receiver. At the interlocutory hearing had upon this petition, the court passed an order appointing a temporary receiver, who at once took possession of all the assets of the bank. Among its largest creditors were the Southern National Bank of New York, the Tremont National Bank of Boston, and the Louisville Banking Company. In the interest of these three institutions, W. W. Flannagan, the president of the first, went to Americus for the purpose of making an investigation and ascertaining the precise condition of the defendant bank. After going over its affairs with the assistance of a committee composed of three of its directors, the conclusion was reached that if the bank was furnished with funds sufficient to meet the more urgent demands upon it, and indulgence was granted by the creditors whom he represented, it might be able to successfully resume business, and eventually discharge in full all its liabilities. On his return North, Flannagan made to his principals a report to this effect; and, after various negotiations between them and the directors of the Americus bank, a plan looking to its reopening was adopted, the details of which were substantially as follows: The New York bank volunteered to make a loan of $30,000, of which $20,000 was to be advanced in cash, and the remainder credited to the Americus bank as a "standing balance," not subject to be drawn against. The Boston bank and the Louisville bank each agreed to make a similar loan of $15,000, of which $5,000 in each case was to be retained as a "standing balance," subject to a like condition. In consideration of these advances, the Americus bank agreed, on its part, as security therefor, to deliver $60,000 in notes signed by its directors, and by it indorsed; and to execute a conveyance to Flannagan, as trustee, covering the greater part of its available assets, the proceeds of which were to be applied to the extinguishment of its indebtedness to the three banks coming to its assistance. Prior to the conclusion of the negotiations just mentioned, each of these three banks had intervened and become a party plaintiff to the pending litigation. Desiring to carry into effect the arrangement above set forth, they joined with the Americus bank in making application to the court for authority so to do, and asked that the temporary receiver be discharged. An order was there upon passed reciting that, it being represented to the court that the Bank of Americus would thus "be enabled to resume business, and in the course of time meet and discharge all its liabilities," and all parties then before the court expressly consenting in writing, the terms of the restraining order previously granted were accordingly modified to the extent of allowing the directors of that bank "to pass such resolutions, and to execute such conveyances, assignments, and transfers, as [might] be found necessary to perfect such arrangement above described." This order further provided that, "upon the performance and completion of all the acts necessary to said adjustment to the satisfaction of" the receiver, "said restraining order be wholly dissolved and annulled," and he be thereupon authorized to turn over to the bank, or to such person or persons as it might designate, all of its assets which had come into his hands. The petition filed by Cooper, Gatewood & Co. was not, however, dismissed; but, on the contrary, the order expressly declared that the same should "remain of file and duly pending in said court, and that it so remain until the further order of the court, not to be disposed of or dismissed except by order of the court duly granted upon and after notice to all parties at interest." Agreeably to the terms of this order, all necessary steps were promptly taken to put into operation the arrangement agreed upon, including the execution of a deed of trust conveying to Flannagan the major part of the assets of the Americus bank. This instrument clothed him with power to convert into cash, for the use and benefit of the three banks therein named as beneficiaries, all the property thereby conveyed, and provided that the proceeds thus realized were "to be by him, as such trustee, paid over to them, prorata, according to the amounts advanced by each of said banks, respectively, to said Bank of Americus, as above recited, and to be by said three banks applied to the payment of any indebtedness due by the Bank of Americus, as principal or as indorser, to them, respectively." The funds they had agreed to advance were duly paid over to the Americus bank, and it resumed business in the early part of April. The attempt to thus establish it upon a sound financial footing proved, however, entirely unsuccessful, for in less than a month it was forced to again suspend payment and permanently close its doors. Being hopelessly insolvent, no further attempt was made to reopen it; and on July 8th, at the instance of certain creditors who had not consented to the above-mentioned order, but who had intervened and been made parties to the equitable petition after that order had been granted, the court appointed a permanent receiver to take charge of and administer the bank's assets. Subsequently J. B. Ingram and others intervened, and prayed, among other things, that the trust deed to Flannagan be declared null and void; it being alleged that this conveyance was executed after the bank became insolvent, which fact was known to the beneficiaries named therein, who fraudulently procured it to be made with a view to thus securing to themselves an inequitable and unlawful advantage over other creditors. In reply to this attack upon the validity of the conveyance in question, each of the three banks concerned filed a separate answer, in which the defense was set up that the deed was executed under the sanction of the court, and in entire good faith; neither they nor the directors of the Americus bank knowing or suspecting it was at the time insolvent, and their sole purpose being to assist the bank in tiding over what was then supposed to be a merely temporary embarrassment, so that all creditors would be alike benefited, etc. A similar answer was filed by W. F. Clarke, who had succeeded Flannagan in the office of trustee. The case was eventually referred to an auditor, who, in passing upon the issue thus presented, in effect found that although the Americus bank was, as matter of fact, insolvent at the time it executed this trust deed, the conveyance was nevertheless binding upon all creditors alike; no evidence of fraud being introduced, and it not appearing that the parties therein named as beneficiaries knew of the bank's insolvency until long thereafter. Being dissatisfied with this finding, Ingram, and the other creditors who had sought to have the deed declared void as to them, filed numerous exceptions, both of law and of fact, to the auditor's report in this connection. The trial judge sustained a number of these exceptions, and, upon a submission to a jury of the controlling questions of fact involved, a verdict was returned in favor of the excepting creditors. Thereupon Clarke, as trustee, joined with his cestuis que trustent in making a motion for a new trial, the overruling of which they here assign as error. By a cross bill of exceptions, Ingram and others present the complaint that the trial judge erred in disallowing certain additional exceptions filed by them to the auditor's finding that the deed of trust was legal and binding upon all parties to the case.

1. Section 1979 of the Civil Code (Code 1882, § 4429) expressly provides that "all conveyances, assignments, transfers of stocks, or other contracts made by a bank in contemplation of insolvency, or after insolvency, except for the benefit of all creditors and stockholders, shall be fraudulent and void unless made to an innocent purchaser for value without notice or...