Evans v. Unity Investment Co.

• Decision Date: 11 June 1917
• Docket Number: No. 12474.,12474.
• Citation: 196 S.W. 49
• Parties: EVANS v. UNITY INVESTMENT CO. et al.
• Court: Missouri Court of Appeals

196 S.W. 49

EVANS v. UNITY INVESTMENT CO. et al.

No. 12474.

Kansas City Court of Appeals. Missouri.

June 11, 1917.

Appeal from Circuit Court, Jackson County; Thomas B. Buckner, Judge.

"Not to be officially published."

Suit by Harry M. Evans against the Unity Investment Company and another. From the judgment rendered, plaintiff appeals. Affirmed.

E. D. Ellison and Ben E. Todd, both of Kansas City, for appellant. Harding, Murphy & Harris, of Kansas City, for respondents.

TRIMBLE, J.

This is a suit to recover the unpaid balance due on each of three notes indorsed to plaintiff by the defendant Unity Investment Company. It is an action in equity, since the plaintiff seeks to hold the defendant Caddo Realty Company, on the ground that the latter is the successor to, and the fraudulent transferee and assignee of, all the assets of the former whereby its creditors, and especially plaintiff, were defrauded and prevented from collecting the debts owed by it.

The chancellor heard the evidence, and in each count rendered judgment for the amount due on the note therein against the Unity Investment Company, but refused to hold the Caddo Realty Company liable. Plaintiff has appealed contending that the judgment should be against it also.

The Unity Investment Company, which for brevity and convenience we shall hereinafter call the old corporation, was organized in 1910 to do a brokerage business and to buy and sell second mortgage paper. It had a paid-up capital of $100,000, of which E. O. Haight owned $50,000, J. D. Eubank had $25,000 and plaintiff Evans, $25,000. In the course of its operations it became the owner of a large amount of second mortgage notes. Plaintiff, Evans, obtained about $25,000 worth of these notes at a discount, at the same time demanding and receiving an additional cash margin of $2,000 to protect him. The Unity Investment Company indorsed these notes to plaintiff. At this time Eubank was in Europe and knew nothing of the transaction. The three notes in suit were among the notes thus obtained by the plaintiff. The Unity Company was in debt somewhere near $100,000 to various banks and individuals, on all of which paper Eubank and Haight were individual indorsers. Evans was on none of it, and sold his stock in the corporation to Haight, or perhaps to him and Eubank, for $15,000, though, in fact, the stock was worthless at that time. Haight gave his note for this $15,000 and put up two-thirds of the capital stock of the Unity Company as security. Plaintiff sold the note to a bank, and the stock as collateral went along with it. At this time the assets of the Unity Company were worth somewhere between $15,000 and $17,000, while its liabilities were more than four times that much. These assets consisted of equities in property scattered here, there and everywhere, and while they were carried on the books of the Unity Company at a valuation of somewhere near $54,000, we are not disposed to disagree with the finding of the chancellor that they were really worth only the amount hereinabove stated.

The creditors of the Unity Company were threatening bankruptcy proceedings, and, while this was being discussed, the unsecured or open account creditors agreed to take 35 cents on the dollar for their claims. Eubank was, as stated, indorser upon the paper of the Unity Company except the notes plaintiff had bought. Thereupon Eubank, and the banks which held the Unity paper on which was Eubank's name, agreed to an arrangement whereby a new corporation, the Caddo Realty Company, was to be organized, and Eubank and his wife would put a large sum of money into the new concern, the old company would convey all of its assets to the new, and the new company would pay off these debts and the unsecured claims at 35 cents on the dollar which the holders thereof had agreed to accept.

The new corporation was formed with Eubank owning practically all of the stock; a representative from each of the creditor banks holding one share and filling out the board of directors. Thereupon the old corporation held a stockholders' meeting, at which all were present, and passed a resolution reciting in substance that, whereas the corporation had outstanding obligations, and the unsecured creditors had agreed to accept 35 cents on the dollar for their debts, and an offer to pay that amount had been made if the corporation would turn over its assets to the one making the offer, and it being to the interest of the corporation to do this, therefore the officers were...