Erickson-Hellekson-Vye Co. v. A. Wells Co.
| Decision Date | 12 May 1944 |
| Docket Number | No. 33538.,33538. |
| Parties | ERICKSON-HELLEKSON-VYE CO. et al. v. A. WELLS CO. et al. |
| Court | Minnesota Supreme Court |
Appeal from District Court, Traverse County; Anton Thompson, Judge.
Action by Erickson-Hellekson-Vye Company and others against A. Wells Company and others to recover for material furnished in remodeling a building owned by defendant corporation, to set aside as fraudulent a mortgage and an assignment of rents executed by defendant corporation, and for other relief. The L. P. Dolliff Lumber Company was impleaded as plaintiff and also sought to recover for material furnished and joined in the allegations of the original complaint for equitable relief. The corporation joined with plaintiff in asking equitable relief with respect to the mortgage and the assignment of rents and by cross-bill against the defendants Margaret Wells Grosche and others sought to recover corporate funds alleged to have been wrongfully paid. The defendants Thomas K. Ranney and Ruth M. Ranney joined with plaintiff in asking equitable relief in respect to the mortgage and assignment of rents, and by cross-bill sought judgment in favor of the corporation and against defendants Grosche and others to recover corporate funds alleged to have been wrongfully paid. A judgment was entered for both plaintiffs against the corporation, the mortgage and assignment of rents was set aside, a money judgment was entered in favor of corporation against the defendants Grosche and others, former stockholders, a receiver for the corporation was appointed, and foreclosure of the mortgage was enjoined, and the defendants Grosche and others, former stockholders, appeal.
Judgment affirmed as to plaintiffs and reversed insofar as it grants affirmative relief to the corporation and the defendants Ranney on their cross-complaint.
Harry W. Oehler, of St. Paul, for appellants.
Murphy, Johanson & Winter, of Wheaton, for plaintiff respondent.
F. C. Anderson, of Herman, for respondent A. Wells Co. STREISSGUTH, Justice.
After considerable pretrial maneuvering and skirmishing, the details of which are unimportant here, this action was brought on for trial with the parties aligned and battling for objectives as follows:
A. Erickson-Hellekson-Vye Company the original plaintiff, sought judgment against A. Wells Company, the corporate defendant, and its stockholders for an unpaid balance due plaintiff for a heating plant, hardware, and other building materials furnished to and used by the corporation in remodeling and repairing a store building owned by it. Plaintiff attacked as fraudulent an $18,000 mortgage dated August 11, 1936, and an assignment of rents dated August 15, 1936, given by the defendant corporation to its stockholder and codefendant Emma B. Wells and by her assigned to her daughters and codefendants Grosché, Van Spall, and Williams; sought to have an attempted foreclosure of the mortgage enjoined; and asked that a receiver be appointed to take possession of the mortgaged real estate.
B. L. P. Dolliff Lumber Company, originally sued as a defendant but later converted into a coplaintiff, likewise sought recovery against the corporate defendant and its stockholders for a bill of materials which it had sold and delivered to the corporate defendant and which was used in remodeling and repairing the store building. The impleaded plaintiff joined in the allegations of the original complaint and asked for the same equitable relief.
C. The corporate defendant admitted its indebtedness to plaintiff and to the impleaded plaintiff and joined with the plaintiff in asking equitable relief in respect to the $18,000 mortgage and the assignment of rents. By cross-bill, this defendant sought recovery from its codefendants and stockholders Grosché, Van Spall, and Williams, heirs of Alpheus Wells, in the sum of $4,908 for corporate funds paid to the Wells estate as "fictitious" corporate profits, and in the further sum of $15,750 for corporate funds used in paying the Wells heirs for corporate stock purchased by defendant Thomas K. Ranney and one Leslie O. Davidson.
D. Defendants Thomas K. Ranney and Ruth M. Ranney, stockholders of the A. Wells Company, likewise admitted the claims of the two plaintiffs and joined with them in asking equitable relief in respect to the $18,000 mortgage and the assignment of rents. These defendants, by cross-bill, asked judgment in favor of the A. Wells Company against defendants Grosché, Van Spall, and Williams for the two items of $4,908 and $15,750, and also sought judgment for $8,000 in their own favor against such codefendants because of the stock purchase transaction.
E. Defendant Fred F. Ranney pleaded the general issue.
F. Defendants Margaret Wells Grosché, Lucille Wells Van Spall, Edyth Wells Williams, and Emma B. Wells, former stockholders of the A. Wells Company and holders of the mortgage under attack, by separate but identical answers, contested the right to any relief of plaintiffs and the defendants filing cross-bills. These answers are too lengthy to justify analysis here, but the separate defenses pleaded will be referred to during the course of the opinion.
Pursuant to the findings made by the court, judgment was entered in favor of the plaintiff, Erickson-Hellekson-Vye Company, against the A. Wells Company for $1,235.20, with costs, and in favor of the impleaded plaintiff, L. P. Dolliff Lumber Company, against the A. Wells Company for $619.70. This judgment was made a lien and charge upon lots 27 and 28, block 3, of the village of Wheaton, for the improvement and repair of which plaintiffs' materials had been used, superior to any right or lien of any of the defendants. The $18,000 mortgage and the assignment of rents were set aside, vacated, and annulled to the extent necessary to satisfy and discharge the judgment of the two plaintiffs. Judgment was further entered, pursuant to the findings, in favor of the A. Wells Company, cancelling and setting aside the $18,000 note and mortgage and the assignment of rents. The judgment also cancelled and set aside a $17,000 mortgage executed on January 4, 1928, by the corporation in favor of the executors and trustees under the last will of Alpheus Wells, deceased, and his heirs, as mortgagees, as well as a $27,000 mortgage executed by the corporation on September 1, 1933, in favor of the same parties, as mortgagees. A money judgment was entered in favor of the defendant A. Wells Company against the defendants Grosché, Van Spall, Williams, and Wells in the sum of $16,784.74 with interest, and the lien of said judgment was impressed upon 232 shares of stock in the A. Wells Company, registered in the name of defendants Thomas K. Ranney and Ruth M. Ranney, which shares were ordered restored to said defendants Grosché, Van Spall, Williams, and Wells upon payment of the judgment. These four defendants were also directed by the judgment to surrender eight promissory notes of $50 each delivered by A. Wells Company to defendant Emma B. Wells, and said notes were ordered cancelled, set aside, and annulled. Finally, the judgment provided for a receivership of defendant corporation and permanently restrained defendants Grosché, Van Spall, Williams, and Wells from foreclosing the $18,000 mortgage and from continuing to collect any of the rents, income, or profits of the mortgaged real estate.
Defendants Grosché, Van Spall, Williams, and Wells are the only appellants.
The defendant A. Wells Company is a South Dakota corporation organized about 1901. Its principal stockholder up to the time of his death in 1924 was Alpheus Wells, the husband of defendant Emma B. Wells and the father of defendants Margaret Wells Grosché, Lucille Wells Van Spall, and Edyth Wells Williams. At the time of his death, Wells owned 232 shares of the corporate stock out of a total of 398 shares outstanding. By his will, this stock was bequeathed in trust to his widow and his three daughters. The other stockholders at the time of Well's death were A. O. Malmgren, Oscar J. Davidson (a brother-in-law of Wells), Edward G. Olson, and William H. Damon. A. S. Grosché, a son-in-law of Wells, succeeded him as president. To qualify Grosché as such officer, one of the 232 shares had been transferred to him; the other 231 shares were held in trust for the Wells heirs.
While for many years after its organization in 1901 the A. Wells Company engaged in many and varied activities extending generally over western Minnesota, in 1921 its business had become localized at Wheaton, where it owned a two-story brick building, in which it conducted a general retail mercantile store as well as an undertaking establishment, and other real estate. The company did not prosper from 1921 to 1929, with the result that in 1929 its officers and stockholders decided to discontinue its mercantile business and rent its store building. Accordingly, the entire stock of merchandise was sold and the store building remodeled. The building is 50 feet wide and 100 feet long with a full basement, and, up to 1929, its heating system serviced the first floor only. The second floor, prior to 1929, was used exclusively as a lodge hall, was heated with individual stoves, and brought an income of not to exceed $100 a year. The remodeling consisted in dividing the first floor so as to make two 25-foot stores and in converting the second floor into eight living apartments. This necessitated a new heating system, furnace, and boiler, plumbing equipment and fixtures, as well as a large quantity of building material. Following the alterations and remodeling, one of the stores was rented for $125 and the other for $150 per month. The income from the sceond story was increased from about $100 per year to more than $200 per month.
Plaintiff, Erickson-Hellekson-Vye Company, furnished the heating system and much of the building material for the new improvement. All the items for which it...
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