Elliott v. Pontius
| Decision Date | 28 November 1893 |
| Docket Number | 15,499 |
| Citation | 35 N.E. 562,136 Ind. 641 |
| Parties | Elliott et al. v. Pontius et al |
| Court | Indiana Supreme Court |
Reported at: 136 Ind. 641 at 648.
From the Miami Circuit Court.
The judgment is affirmed.
L Walker and W. B. McClintic, for appellants.
W. C Bailey and J. T. Cox, for appellees.
Appellants brought suit in the court below, against appellees, to set aside a conveyance of real estate and a chattel mortgage on a stock of goods, on the ground that the deed and mortgage were fraudulent as against appellants and others, as the creditors of the appellees Rufus Pontius and James O. McElwee partners, doing business under the firm name of Pontius & McElwee.
Trial by the court, special finding of facts, and conclusions of law thereon upon which the court rendered judgment for the appellees, defendants below.
It is assigned for error here: 1. That the court erred in overruling the demurrer by plaintiff to the second paragraph of answer. 2. That the court erred in overruling the motion for a venire de novo. 3. That the court erred in overruling the motion for a new trial.
The special finding makes the first assignment of error unavailable, and, in addition to that, appellants have waived that and the second assignment by not discussing them in their brief.
Three months after the submission of the cause here appellants, as appears by the clerk's indorsement on the record, made, by agreement, an additional and fourth assignment of error, by which the conclusions of law are called in question.
The appellees Rufus Pontius and Jacob O. McElwee, partners, in the mercantile business at Denver, Indiana, under the firm name of Pontius & McElwee, were, at the time of making the mortgage and conveyance complained of, not possessed of, and said firm did not own, property and assets enough to equal in value the amount of the firm's indebtedness to the appellants and others. Pontius was at the time trustee of Jefferson township, Miami county, Indiana, and his co-appellees, Speck, Hoff, Fisher, and Thomas S. McElwee, were sureties on his official bond.
Pontius and McElwee conveyed to Thomas S. McElwee certain real estate in Denver, Indiana, belonging to the firm, and the transfer was made in contemplation of insolvency and while intending an assignment for the benefit of their creditors.
Pontius had let the firm have and use in its business about $ 1,600 of the township funds. For the purpose of repaying the debt due the township, Pontius & McElwee, on March 5, 1889, borrowed of the First National Bank of Peru $ 1,600 on 180 days' time, and gave their note for the same, with Speck, Hoff, Thomas S. McElwee, and Fisher as sureties, they also being sureties on the official bond of Pontius; and to secure the sureties on the note, Pontius & McElwee executed to them a chattel mortgage on their stock of goods and merchandise. The sureties knew the purpose of the loan, and the money thus borrowed was used in repaying the township funds to the successor of Pontius in the office of township trustee.
On March 8, 1889, Pontius & McElwee made an assignment for the benefit of their creditors to the other appellee, William O. Piper.
The object of the suit was to set aside the conveyance and mortgage above mentioned, as a fraud on the creditors of Pontius & McElwee, and obtain a decree directing the assignee to sell the property for the benefit of the creditors regardless of said mortgage and conveyance.
The conclusions of law are to the effect that the debt of $ 1,600, for the payment of which that sum was borrowed from the bank, was the debt of the firm to the township. There is no question made as to the conveyance of the real estate, because the court found as a fact, that Thomas S. McElwee, the grantee in the conveyance, was a bona fide creditor of the firm, and that the value of the property conveyed to him was less than his said claim against the firm.
The only question, therefore, for our consideration and decision is the correctness of the conclusions of law.
It is maintained with great earnestness and ability, that, under the facts found, the debt for the payment of which the $ 1,600 was borrowed was the individual debt of Pontius to the township, and that the insolvent firm had no right, as against the creditors of the firm, to apply the assets of the firm in direct payment thereof, or to secure the payment of the same by mortgaging the assets of the firm, either directly or indirectly. If the debt for the payment of which the money was borrowed was the debt of the firm, it is conceded that the insolvent firm had the legal right to prefer that debt by either paying or securing it, though that would defeat all the other creditors. But it is strenuously insisted that the debt was not the debt of the firm, but was the individual debt of Pontius, and that therefore it was a fraud upon the creditors to apply the assets of the insolvent firm, either in direct payment of, or security for, the individual debts and liabilities of a member of the firm so as to defeat the creditors of the partnership. It is not denied that the firm used the money of the township in its partnership business, and the finding shows that it was all used in the payment of the debts of the partnership, and some of the very creditors now complaining were recipients of that money in the partial payment of their claims.
But it is sought to work out the problem of forcing the sureties on the official bond of Pontius to let go their collateral security, by applying that line of decisions of this court which hold that the money of a township, when it passes into the hands of the trustee, ceases to be the money of the township, and becomes the property of, and belongs to, the trustee. That being so, it is claimed that when Pontius lent the money which he had received on account of the township to the firm of which he was a member, or used the money for the benefit of the firm in its business, it was his individual money, and his firm simply became indebted to him...
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