Coleman v. Hagey
| Decision Date | 28 June 1913 |
| Citation | 158 S.W. 829 |
| Parties | COLEMAN v. HAGEY et al. |
| Court | Missouri Supreme Court |
Bankruptcy Law of July 1, 1898, c. 541, § 70a, 30 Stat. 565 (U. S. Comp. St. 1901, p. 3451), vests a trustee in bankruptcy with the title of the bankrupt to all property transferred by him in fraud of creditors and all property which, before the filing of the petition, might have been sold under judicial process against the bankrupt. Section 70e authorizes the trustee to avoid any transfer by the bankrupt of his property which any creditor might avoid and recover the property or its value. Held, that a trustee in bankruptcy cannot avoid a fraudulent transfer by the bankrupt unless a creditor might have avoided it.
2. BANKRUPTCY (§ 287) — FRAUDULENT TRANSFER—AVOIDANCE BY TRUSTEE—WHAT LAW GOVERNS.
In a suit by a trustee in bankruptcy to set aside a fraudulent conveyance by the bankrupt, the trustee must bring his case within the rules of pleading and proof prescribed by the statutes and decisions of the state wherein the suit is brought.
3. CREDITORS' SUIT (§ 11)—CORPORATIONS (§ 548)—NECESSITY OF JUDGMENT.
As a rule creditors before obtaining judgment have no claim or lien upon the debtor's property which will authorize them to object to its disposition, and this rule applies to a corporate as well as to an individual debtor.
4. FRAUDULENT CONVEYANCES (§ 241) — CREDITORS' SUIT—NECESSITY OF JUDGMENT.
A creditor's bill to reach property fraudulently conveyed by the debtor cannot as a rule be maintained until judgment is obtained against the debtor, if there be no legal reason why such judgment cannot be obtained; it being essential that the creditors have no adequate legal remedy, since courts of equity are not primarily instruments to collect debts.
5. ASSIGNMENTS FOR BENEFIT OF CREDITORS (§ 290)—FRAUDULENT CONVEYANCES.
A creditor who has obtained an allowance of his claim before an assignee for the benefit of creditors is a judgment creditor and may sue to set aside the assignor's fraudulent conveyance.
6. CREDITORS' SUIT (§ 1)—NATURE OF PROCEEDING.
A creditor's bill is an equitable proceeding by which the creditor seeks to satisfy his debt from the debtor's equitable estate, which is not liable to levy and sale under execution or out of property fraudulently conveyed by the debtor.
7. CREDITORS' SUIT (§ 7)—JURISDICTION.
To sustain a creditor's bill, there must exist, in addition to the fact that the creditor's legal remedies have been exhausted, some recognized ground of equitable relief.
8. CORPORATIONS (§ 548)—CREDITORS' SUIT —PROCEEDING—ALLEGATIONS.
The material facts relied on to maintain a creditor's suit must be distinctly alleged, and hence, in a creditor's suit to set aside a fraudulent conveyance of corporate property, the petition must show that the creditor's claims against the corporation existed when defendants divided part of the assets and transferred the remainder as alleged.
9. CREDITORS' SUIT (§ 4)—ADEQUACY OF LEGAL REMEDY.
The rule that a creditor must show that he has no adequate legal remedy before suing in equity to set aside a fraudulent conveyance applies to all kinds of creditors.
10. BANKRUPTCY (§ 185)—FRAUDULENT CONVEYANCES—SETTING ASIDE.
A suit by a trustee in bankruptcy to divest from defendants title to property of the bankrupt corporation claimed to have been fraudulently conveyed to defendants is brought on the theory that the transfer of the property was in fraud of the corporate creditors, and if it was not fraudulent the suit cannot be maintained.
11. FRAUDULENT CONVEYANCES (§§ 208, 263) —FRAUDULENT INTENT.
Where the creditors seeking to have a fraudulent conveyance set aside have become such subsequent to the conveyance, the fraud must be actual and not constructive and must be definitely alleged.
12. FRAUDULENT CONVEYANCES (§ 208)—SETTING ASIDE CONVEYANCES—REQUISITES.
To have a conveyance set aside as in fraud of creditors, the transfer must have been made to defraud creditors who were such at the time of the conveyance, and subsequent creditors cannot attack the transfer unless they show that the fraudulent act was intended to injure them.
13. FRAUDULENT CONVEYANCES (§ 263)—ALLEGATIONS OF FRAUD.
A general allegation of fraud is not sufficient in a suit to set aside conveyances in fraud of creditors, but the facts constituting the fraud must be alleged.
14. BANKRUPTCY (§ 303)—FRAUDULENT CONVEYANCE—EXISTENCE OF CLAIM—TIME.
A trustee in bankruptcy in a proceeding to divest defendant of title to property conveyed to them by the bankrupt in alleged fraud of creditors must prove that the claim sued on existed before the conveyance; only those who were creditors before the conveyance being entitled to complain thereof.
15. CORPORATIONS (§ 548)—CAPITAL STOCK —PRESUMPTION OF GOOD FAITH.
There is no presumption as to the reliance reposed by creditors of a corporation in dealing with it as to alleged representations as to its capital stock being paid up.
16. COURTS (§ 89)—RULE OF DECISION—PRECEDENTS.
Judicial precedents are valuable only so far as they state definite rules for guidance in future similar cases.
17. CORPORATIONS (§ 547) — TRUST FUND DOCTRINE—APPLICATION.
The property of a corporation is not impressed with a trust in favor of creditors until it becomes insolvent, so that until then no general creditor may enforce a lien against the corporate property.
18. CORPORATIONS (§ 439)—CONVEYANCE OF PROPERTY—POWER.
A solvent private business corporation may dispose of its property as it sees fit, subject to statutory regulations.
19. CORPORATIONS (§ 375)—TRANSFER OF PROPERTY—CORPORATE FRANCHISES.
A solvent private business corporation may transfer its charter and corporate franchises.
20. CORPORATIONS (§ 542)—TRANSFER OF PROPERTY.
The character of the transfer of the assets or franchises of a corporation is to be determined by the circumstances, and such a transfer cannot be assailed as a fraud upon creditors, if sufficient property remains to pay the corporate debts.
21. FRAUDULENT CONVEYANCES (§ 272)— BURDEN OF PROOF.
One seeking to set aside a conveyance as in fraud of creditors has the burden of showing that it was made in bad faith and rendered grantor insolvent.
22. CORPORATIONS (§ 234)—CAPITAL STOCK.
The statutes respecting the decrease of the capital stock of a corporation are primarily for the protection of creditors, and where corporate stock had been fully paid up, and there were no creditors when an alleged fraudulent conveyance, claimed to decrease the capital stock, was made, such statutes would not apply, though the corporation subsequently became insolvent.
23. CORPORATIONS (§ 227) — ASSETS — PROCEEDS OF STOCK.
The funds arising from the payment of capital stock subscriptions became assets of the corporation.
24. FRAUDULENT CONVEYANCES (§ 208)— RIGHTS OF CREDITORS—SUBSEQUENT CREDITORS.
As a rule subsequent creditors cannot assail a transfer by the debtor as fraudulent unless they show that the fraudulent intent was directed to them.
25. CORPORATIONS (§ 228)—STOCK SUBSCRIPTION—RIGHTS OF CORPORATE CREDITORS.
Failure of a shareholder to pay his stock subscription creates a liability in the nature of a debt to the corporation whose nonpayment becomes an actionable fraud upon corporate creditors.
Appeal from St. Louis Circuit Court; Hugo Muench, Judge.
Action by Frank B. Coleman, trustee of the Hagey Stove Company, against Henry Given Hagey and others. From a judgment for plaintiff, defendants appeal. Reversed, and suit dismissed.
This is an equitable proceeding to divest title to certain real property out of defendants and vest it in plaintiff, as trustee in bankruptcy of the Hagey Stove Company, a corporation, and for judgment against defendants in the sum of $32,000 of $50,000 in cash claimed to have been taken from the treasury of the corporation by the defendants. Upon a trial in the circuit court a judgment was rendered in favor of the plaintiff, from which defendants appeal.
Pleadings. The petition alleges the adjudication of the Hagey Stove Company as a bankrupt in the United States District Court for the Eastern Division of the Eastern Judicial District of Missouri in February, 1908, and the subsequent election of plaintiff as trustee of said estate, and that he qualified and has since been acting as such. That the Hagey Stove Company was organized under the laws of the state of Illinois in December, 1890, but has always had its plant or place of business in the city of St. Louis in the state of Missouri. That the capital stock of said company is $100,000, and that same was issued as fully paid and nonassessable. That, at the time, as hereinafter alleged, of the withdrawal of part of the capital stock by defendants, they were the owners of all of the shares of said stock, composed its board of directors, were its only officers, and had and exercised exclusive control and management of its affairs. That at the time of the incorporation of said Hagey Stove Company the statutes of Illinois contained provisions forbidding the payment of dividends out of capital stock and forbidding the decrease of the capital stock of any corporation without notice to the shareholders and after the assent of two-thirds of all the stock had been given at a meeting of the shareholders that such decrease should be certified to and filed with the Secretary of State, and similar action taken in regard to the recorder of deeds of the county followed by three weeks' public notice of such decrease in a newspaper nearest to such county. That prior to November, 1905, said corporation purchased certain real estate in the city of St. Louis, Mo., for $17,000, which is described as per municipal subdivisions. That in November, 1905, the total assets of the corporation...
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