La Grange Butter Tub Company v. National Bank of Commerce

• Decision Date: 24 May 1894
• Citation: 26 S.W. 710,122 Mo. 154
• Parties: La Grange Butter Tub Company, Appellant, v. National Bank of Commerce et al
• Court: Missouri Supreme Court

26 S.W. 710

122 Mo. 154

La Grange Butter Tub Company, Appellant, v. National Bank of Commerce et al

Supreme Court of Missouri, Second Division

May 24, 1894

Appeal from St. Louis City Circuit Court. -- Hon. L. B. Valliant Judge.

Affirmed.

W. C. & J. C. Jones for appellant.

(1) The court erred in dismissing plaintiff's bill. (2) There should have been a decree in accordance with the prayer in plaintiff's petition. (3) The court erred in the exclusion of the testimony showing that no defense was made to the attachment suits brought by other creditors. Woolen Mills v. Kampe, 38 Mo.App. 229; Williams v. Jones, 23 Mo.App. 132; Roan v. Winn, 93 Mo 503; Foster v. Company, 92 Mo. 79; Morawetz on Corporations, secs. 582, 579; Eppright v. Nickerson, 78 Mo. 482; Chew v. Ellingwood, 86 Mo. 260; State ex rel. v. Brockman, 39 Mo.App. 131; Marr v Bank, 4 Cold. 471.

Albert Arnstein for respondents.

(1) So long as the directors and officers of an insolvent corporation have and retain control of its affairs, it is liable to all process to which an individual is subject. (2) Where a corporation fraudulently conceals its assets, it subjects itself to the provisions of the attachment act. That act applies to corporations as well as individuals. Roseboom v. Whittaker, 132 Ill. 81; Life Association v. Fassett, 102 Ill. 315; Foster v. Mullanphy Planing Mill, 92 Mo. 79. (3) The assets of an insolvent corporation become "trust funds" only from the time when a court of equity is properly appealed to, to protect and distribute the same upon equitable principles, and on such application asserts control over them; and, until a court of equity declares the insolvency and the trust, liens which have theretofore attached under proceedings instituted by creditors, remain affixed thereto. Van Alstyne v. Cook, 25 N.Y. 489; Roseboom v. Whittaker, 132 Ill. 81. (4) The giving of a voidable preference by an insolvent corporation (under recent decisions of our courts) contemplates some affirmative act on the part of the officers of the corporation, as such, whereby its life is terminated. Kingsley v. Bank, 31 Hun, 329-337. (5) It was never contemplated that the securing of a preference by a diligent creditor, by means of attachment, where there was ample ground for the same, could be construed into a "preference," merely because the officers of the corporation were friendly disposed to the attaching creditor, and did not add perjury to their frauds, by swearing to a false plea in abatement. Hall v. Glessner, 100 Mo. 156; Varnum v. Hart, 119 N.Y. 101. (6) It is wholly immaterial what defenses, if any, may have been interposed by the company in other actions; they could not affect the merits of this one, there being no defense thereto. Equally immaterial is it from what source the information came which caused the attachment, if ground therefor existed.

OPINION

Burgess, J.

This is a proceeding by petition in the nature of a creditor's bill, brought on behalf of plaintiff and all other creditors of the Batchelder Egg Case Company, its object being to subject $ 5,000 in the hands of the defendant, the National Bank of Commerce, to the payment of the general indebtedness of the Batchelder Egg Case Company, and to restrain the sheriff from paying the same to the defendant bank.

The Batchelder Egg Case Company was incorporated under the laws of this state. On August 16, 1890, it owed the Bank of Commerce $ 65,000. On that day the company owned a box mill in Arkansas, which was afterwards sold for $ 31,000; a stock of goods in St. Louis, worth about $ 7,000; and a stock of goods in Chicago, worth about $ 3,000. It owned no other property. Its bills receivable did not exceed $ 1,500, while its aggregate indebtedness was $ 130,000. It owed the plaintiff something like $ 2,000, and various parties, sums amounting to about $ 10,000, which was past due, and for which the Egg Case company was being hard pressed. The cash on hand did not amount to exceeding $ 200 or $ 300. On the night of August 16 the company completed arrangements to sell out its Chicago stock to the Creamery Package Company, which was closed on the following Monday, the eighteenth. On the sixteenth, which was Saturday, the Egg Case Company employed Mr. Douglass, an attorney at St. Louis, to go to Helena, and there make a bill of sale to the defendant bank of its Helena plant, or run an attachment against the plant in favor of the defendant bank. On the morning of the eighteenth, between 7 and 8 o'clock, Clark, the cashier and one of the directors of the Egg Case Company, went with Paxton, the company's St. Louis attorney, to the defendant bank and told the cashier that the company was in bad shape, and that they thought it best for him to bring an attachment on the stock of goods at 935 North Main street. The stock of goods was the same day attached by defendant bank. Other creditors of the Egg Case Company ran attachments, but the assets in St. Louis were absorbed by the first attachment, that of defendant bank. The bank realized nothing from the Arkansas property, as that had been absorbed by other creditors.

The evidence further shows that J. H. Batchelder and Mark D. Batchelder, the president and secretary of the Egg Case Company, had, during the week prior to the failure, concealed the funds belonging to the company to the extent of at least $ 3,000; "they put it in their pockets." Part of the money so concealed by them was the proceeds of the draft which the bank had cashed for the company on the Friday preceding. The proceeds of the merchandise sold in Chicago, $ 3,000, were never accounted for.

The Egg Case Company made no defense to the attachment suit instituted by the bank, but plaintiff offered to show that it did defend the suits brought by the other St. Louis creditors. The testimony was excluded by the court.

On final hearing the bill was dismissed and plaintiff appeals to this court.

While it may be conceded that corporate assets are regarded as a trust fund for the benefit of all the corporation creditors the rule as announced by this court in Foster v. Planing Mill Co., 92 Mo. 79, 4 S.W. 260, is that a corporation may, when acting within the scope of the purpose for which it was incorporated, do any act in furtherance of those purposes, and, although insolvent, it may prefer some creditors to...