Hasbrouck v. Rich

• Decision Date: 22 May 1905
• Parties: HOWARD HASBROUCK et al., Respondents, v. ALBERT RICH, Sheriff, Appellant
• Court: Kansas Court of Appeals

88 S.W. 131

113 Mo.App. 389

HOWARD HASBROUCK et al., Respondents, v. ALBERT RICH, Sheriff, Appellant

Court of Appeals of Missouri, Kansas City

May 22, 1905

Appeal from Jasper Circuit Court.--Hon. J. D. Perkins, Judge.

AFFIRMED.

Judgment affirmed.

H. W Currey and F. L. Forlow for appellant.

(1) Plaintiff's mortgage is void because it permits the mortgagor to sell the mortgaged property and appropriate the proceeds thereof to his own use and benefit; and because it provides that the mortgagor may sell the mortgaged property and substitute other property in lieu thereof. There are some decisions in this State which countenance a qualified right of substitution by the mortgagor in certain cases, such as are necessary to supply breakage, loss, or waste of the mortgaged property; but no case goes so far as to approve of an unlimited power of substitution. Jennings v Sparkman 48 Mo.App. 246; Scudder v. Bailey, 66 Mo.App. 40; State to use v. Busch, 38 Mo.App. 440; Goddard v. Jones, 78 Mo. 518; McCarthy v Miller, 41 Mo.App. 200. (2) The mortgagor was authorized by the terms of the mortgage, read in evidence, to withdraw from the operation of the mortgage as much of the property as it saw fit. And the mortgage was therefore for the use and benefit of the mortgagor, and hence void. Bank v. Bank, 171 Mo. 323; Walton v. Weimer, 24 Mo. 63; Stanley v. Bunce, 27 Mo. 269; Goddard v. Jones, 78 Mo. 518. (3) If a mortgage contains provisions which invest a power of compulsion which one of the several mortgagees may use for the benefit of the mortgagor, or if the instrument contains a provision which invests the mortgagor with a power of compulsion which he may use for his own benefit, then the instrument is fraudulent and void. Hamill v. England, 57 Mo.App. 106; Seeger v. Thomas, 107 Mo. 635; Gro. Co. v. Miller, 53 Mo.App. 107. (4) The Missouri Blanket Vein Zinc Company obtained its certificate of incorporation from the State of Delaware on the 29th day of June, 1899. The stockholders, so-called, held the first or organization meeting on June 30, 1899, in the city and State of New York, and there elected a board of directors. No other organization meeting was ever held. And it was the board of directors elected at this so-called meeting held in New York who authorized the execution of the mortgage relied on by plaintiffs. The first or organization meeting of the corporation must be held within the State issuing the charter. Camp v. Byrne, 41 Mo. 534; Railroad v. McPhearson, 35 Mo. 13; Duke v. Taylor, 35 Fla. 64; Miller v. Ewer, 27 Me. 509; Freeman v. Water Power Co., 38 Me. 343; Heath v. Mining Co., 39 Wis. 146; Hilles v. Parrish, 14 N.J.Eq. 380; Silver Co. v. Smith, 163 Mass. 262; Smith v. Mining Co., 64 Md. 85; Harding v. Glucose Co., 182 Ill. 551; Aspenwall v. Railroad, 83 Am. Dec. 389; Taylor v. Braham, 48 Am. St. 252; Walton v. Oliver, 49 Kan. 107.

Howard Hasbrouck and Howard Gray for respondent.

(1) It will also be noticed that all the parties attacking this instrument, through the sheriff defendant, are creditors whose demands accrued long after the execution of the instrument. Landers v. Ziehr, 150 Mo. 403; Grocery Co. v. Smith, 74 Mo.App. 419; Krueger v. Vorhauer, 164 Mo. 156; Fehlig v. Busch, 165 Mo. 144; Zeliff v. Schuster, 31 Mo.App. 493; Ziekel v. Douglas, 88 Mo. 382. (2) The defendant stands in the shoes of the subsequent creditors and can only make such defense as they could make. Antram v. Burch, 84 Mo.App. 256. (3) The creditors cannot say that the Missouri Blanket Vein Zinc Company was not duly organized because they contracted with it as such and have sued it as such, and say that it was organized under the laws of Delaware, and the defendant sets up in the answer herein that he is holding this property under writs of attachment issued in such cases. Land Co. v. Railroad, 161 Mo. 595; Hotel v. Hunt, 57 Mo. 126; Finch v. Ulman, 105 Mo. 255; Mercantile Co. v. Needles, 52 Mo. 17; Ins. Co. v. Brown, 60 Mo. 252; Light Co. v. St. Louis, 84 Mo. 202; Trust Co. v. Railroad, 82 F. 642; Trust Co. v. Railroad, 95 F. 497. (4) The only other question to be discussed is what, if any, effect it had upon the validity of the mortgage above mentioned by paragraph fourth thereof, relating to the sale or exchange of certain of the real or personal property subject to the mortgage. This discussion is raised by section 3397 of the Revised Statutes. (5) Cases in which the mortgage covers a stock of goods, and the mortgagor reserves the right to retain possession thereof and to sell in the usual course of business without being obligated in any way to turn over the proceeds of such sales to the mortgagee. Such a mortgage violates the statute and is void. Barton v. Sitlington, 28 Mo. 164; White v. Graves, 68 Mo. 218; Billingslee v. Bunce, 28 Mo. 547; Sauer v. Behr, 49 Mo.App. 86; State v. Jacob, 2 Mo.App. 183. (6) Cases in which the mortgage covers a stock of goods and in which the mortgagor reserves the right to retain possession and to sell in the usual course of trade, but with the obligation to turn over the proceeds of such sales to the mortgagee. Such a mortgage does not violate the statute and is valid. Bank v. Powers, 139 Mo. 432; Hubbell v. Allen, 90 Mo. 574; Metzner v. Graham, 57 Mo. 404; Manhattan Co. v. Webster Co., 37 Mo.App. 145. (7) Cases in which the mortgage contains a provision for substitution of the mortgaged property by the mortgagor when such substitution, through disuse, breakage or obsoleteness becomes advisable, especially if the property mortgaged includes a manufacturing or mining plant. Such a mortgage does not violate the statute and is valid. Jennings v. Sparkman, 48 Mo.App. 246; Thompson v. Foerstel, 10 Mo.App. 290.

OPINION

ELLISON, J.

The plaintiffs are trustees in a deed of trust in the nature of a mortgage given by a mining corporation known as the Missouri Blanket Vein Company, whereby an issue of bonds of certain denominations was secured. Defendant is the sheriff of Jasper county, and as such had seized certain property (covered by the mortgage) under a writ of attachment sued out by certain creditors of the company. The plaintiff trustees brought this action in replevin against the sheriff and they prevailed in the trial court.

The only question presented by the record is whether the provisions of the mortgage render it void as to creditors as a matter of law. Among the provisions which it is urged make the mortgage void is one which makes it mandatory on the trustees to sell any of the mortgaged property on the written request of the company whenever the latter deemed that it could not be further advantageously used. But it is provided that before a sale, the trustees must have the property appraised. And upon a sale at not less than appraisal the money realized shall be paid to the trustees and held as security for the bonds, until the company shall thereafter have acquired property of equal value to stand instead of the property sold. The provision reads:

"Fourth. So long as the company shall not be in default in the payment of any interest or principal or in the exchange of, any of the bonds issued, as herein provided, any of the real or leasehold property, subject to this indenture, which cannot be advantageously used in the proper and judicious operation and management of the business of the company, or the sale of which shall become necessary for any cause, may be sold or exchanged for other property; and it shall be the duty of the trustees, or either one of them, upon the written request of the company, to execute suitable instruments releasing the same from the lien, and effect of this indenture. But in case of any such sale or exchange the company covenants and agrees as follows:

"(a) That before any sale or exchange of property shall be made such property shall be appraised by the trustees, or either one of them, or by an appraiser chosen or approved by said trustees, or either one of them.

"(b) That in case of a sale of any of said property or of any interest therein, the price or proceeds of such sale, not less than the appraised value of such property or interest, sold, shall be paid to the trustees, or either one of them, and held for the further security of the said bonds, until the company shall thereafter have expended money in the erection of buildings, or other permanent improvements on the property of the company, subject to this indenture, or in the purchase of other real property or mining leases, free from encumbrance, or of leasehold property, at a price not exceeding its or their appraised value, which appraisal shall be made by said trustees, or either one of them, or by an appraiser chosen and approved by said trustees, or either one of them, and until such property shall have been conveyed to the trustees, to be held by them hereunder, as part of the mortgaged premises; whereupon the trustees, or either one of them, on being certified of such facts, shall pay to the company out of any money received and held by them, or either one of them, as the proceeds of property sold as aforesaid, an amount equal to the expenditures so made by the company in order to reimburse it therefor.

"(c) That in case of an exchange of real property, other property free from incumbrances, and of an appraised value, which value shall be determined by the trustees, or either one of them, or by an appraiser chosen and approved by the trustees, or either one of them, equal to the appraised value of the property conveyed, shall be received by the company, and conveyed to the trustees, to be held by them hereunder, as part of the mortgaged premises.

"The company shall be permitted to alter, remove or otherwise dispose of any buildings, fixtures, plant, machinery boilers, tools, pumps or other...