Dunham v. Stevens

• Decision Date: 12 February 1901
• Citation: 60 S.W. 1064,160 Mo. 95
• Parties: DUNHAM v. STEVENS et al.
• Court: Missouri Supreme Court

60 S.W. 1064

160 Mo. 95

DUNHAM v. STEVENS et al.

Supreme Court of Missouri, Division No. 1.

February 12, 1901.

FRAUDULENT CONVEYANCES — MORTGAGOR RETAINING POSSESSION — PLEADING — DECREE.

1. A chattel mortgage on a stock of goods sold to the mortgagor by the mortgagee, which was duly recorded, allowed the mortgagor to retain possession and continue the buying and selling, but required a monthly accounting of proceeds to the mortgagee to be applied on the mortgage debt. The mortgagor made the required statements, but failed to make the required payments. The evidence was conflicting as to an agreement between the parties, contemporaneous with the execution of the mortgage, by which the business was to be conducted as formerly under a prior incumbrance, which allowed the mortgagor free control of the business without any accounting. Held, that the mortgage was not fraudulent as to creditors.

2. In a suit to foreclose such mortgage the plaintiff will not be charged with the proceeds of the sales made by the defendant on the theory that he was defendant's agent if the latter's pleadings failed to tender such issue.

3. In a suit to foreclose a chattel mortgage on a stock of goods, which allowed the mortgagor to retain possession and continue the buying and selling, and required a monthly accounting of proceeds to the mortgagee to be applied on the mortgage debt, a decree for plaintiff properly included a lien on the book accounts of the business.

Appeal from circuit court, Jackson county; Ed. L. Scarritt, Judge.

Action by C. U. Dunham against H. A. Stevens and others. From a judgment in favor of the plaintiff, defendants appeal. Affirmed.

Ellis, Reed, Cook & Ellis, for appellants. Porterfield & Pence, for respondent.

VALLIANT, J.

This is a controversy between creditors as to the priority of their respective liens on a stock of goods of their insolvent debtor. Plaintiff claims under a chattel mortgage, defendants under certain attachments and executions, and one of them under a mortgage. Plaintiff's mortgage, being first in time, is, therefore, first in right, unless the defendants make good their charge that it is fraudulent. The suit is in equity to foreclose the plaintiff's mortgage, and incidentally to have a receiver appointed to hold and dispose of the goods as a decree may direct. The mortgagor and the attaching creditors are defendants. The former's answer is a general denial. The latter set up in their answers their respective claims, and state that the plaintiff's mortgage "was originally given by the mortgagor and taken by plaintiff, and has been at all times since used by plaintiff and defendant Stevens, for the purpose and with the effect to hinder, delay, and defraud creditors of Stevens"; and that Stevens was allowed by plaintiff to handle the goods as a retail stock of merchandise, buying and selling in the usual course of trade, applying the proceeds as he saw fit, and never accounting to plaintiff therefor; in the course of which he incurred the debts sued for by defendants for merchandise which was put into the stock in trade, except one debt, which was incurred before the date of plaintiff's mortgage. Upon these allegations issue was joined. From a preponderance of the evidence we deduce the following as the facts: In 1893 the plaintiff was doing a retail business in his own name at 114 West Eighth street, Kansas City, dealing in stationery and engineers' supplies. Stevens was in his employ as clerk. Negotiations between them resulted in plaintiff's selling the stock and business to Stevens for $400 cash and a note and a mortgage on the stock for $5,149, dated October 1, 1893. The note was payable in installments of $50 monthly. The mortgage was duly recorded, and the plaintiff went to Philadelphia to live, leaving defendant Stevens in possession carrying on the business. By the terms of that mortgage it seems that Stevens was allowed free control of the business, buying and selling in usual course of trade, without being required to render any account to the plaintiff. In the latter part of October, 1894, the plaintiff, having been advised that his mortgage was obnoxious to the Missouri statutes in regard to fraudulent conveyances, returned to Kansas City, and demanded a new mortgage for the remainder of the debt, which then amounted to $4,835.06. Thereupon a new note for that sum, and the mortgage in question to secure it, were executed dated November 1, 1894. The new note was payable $35.06 on its date and in $50 monthly installments thereafter, with interest graduated at 4 per cent. per annum for the first year, 5 for the next, and so on, increasing 1 per cent. each year until it should reach 8 per cent., the maker having the privilege of increasing the amount of the monthly payments if he so desired. The mortgage covered the stock of merchandise, store, fixtures, and trade appliances, and all additions there to, and contained a power of sale by the mortgagee in case of default. It contained also this clause: "Said party [meaning the mortgagor] is to have the privilege of selling said stock of goods in the usual course of trade and business, but said party of the first part shall on the first day of each month from and after the date thereof, account to said second party for the proceeds of said sales less the actual and reasonable expenses thereof, which shall in no case exceed the sum of one hundred and fifty-seven dollars ($157.00) for any one month, and which proceeds are to be credited upon said indebtedness and upon said payments." In other respects there was nothing unusual in the provisions of the mortgage. This mortgage was duly recorded, and the plaintiff returned to Philadelphia, and remained there until about the date of the commencement of this suit, August, 1896.

Stevens testified that when the new mortgage was given plaintiff told him it would make no difference in the course of their dealings; he would go on just as he had done under the first mortgage; but the plaintiff denied that there was any understanding or agreement other than that expressed in the mortgage. In fact, the course of dealing was different under the second mortgage from what it had been under the first. Under the first mortgage Stevens paid the monthly installments of $50 to plaintiff, but rendered no account of his sales. Under the second mortgage — the one in question — he rendered monthly accounts of the business, showing sales, purchases, expenses, collections, etc., but from its date to the commencement of this suit — November, 1894, to August, 1896 — he paid only $85 on the debt. He wrote frequent letters to plaintiff, explaining his inability to pay, indicating that it was the unsatisfactory condition of the business. The monthly statements rendered showed that with the selling and buying the stock in trade was kept...