Henderson v. Indiana Trust Co., Assignee

• Decision Date: 25 April 1895
• Docket Number: 17,474
• Citation: 40 N.E. 516,143 Ind. 561
• Parties: Henderson v. The Indiana Trust Co., Assignee
• Court: Indiana Supreme Court

40 N.E. 516

143 Ind. 561

Henderson v. The Indiana Trust Co., Assignee

No. 17,474

Supreme Court of Indiana

April 25, 1895

Petition for Rehearing Overruled January 29, 1896.

From the Marion Circuit Court.

Judgment reversed, with instructions to the court to restate its conclusions of law and render judgment in accordance with this opinion.

Harding & Hovey, Miller, Winter & Elam and C. M. Cooper, for appellant.

C Martindale, for appellee.

OPINION

Monks, J.

Appellee, as assignee of the D. E. Stone Furniture Company, filed its petition in the court below against appellant for the purpose of setting aside an assignment of certain accounts receivable of the D. E. Stone Furniture Co., which had been assigned to appellant to secure an indebtedness of $ 6,000.00, evidenced by the note of the corporation, payable to appellant. To this petition appellant appeared and filed a general denial. At the request of the parties the court made a special finding of the facts, and stated its conclusions of law thereon.

It appears from the special finding, that the D. E. Stone Furniture Company was a corporation organized in 1889, under the laws of this State, to manufacture furniture in the city of Indianapolis, with a capital stock of $ 50,000.00, which was afterwards increased to $ 75,000.00. On January 30, 1892, the corporation borrowed from appellant $ 6,000.00 and gave its note to him for that amount, payable six months after date at the Capital National Bank with six per cent. interest, on which $ 180.00 interest was paid July 30, 1892. At the time another note was executed as collateral security to appellant, dated January 30, 1892, payable one year after date at the Capital National Bank for $ 6,000.00, with eight per cent. interest after maturity; said collateral note was signed by D. E. Stone Furniture Company, per D. E. Stone, president, and countersigned by C. B. Clark, secretary, and endorsed by D. E. Stone, C. B. Clark, John Picken, A. H. Gladden, John J. Cooper, J. H. Murray, Charles A. Murray and John E. Christian; that the collateral note was endorsed by said endorsers for the accommodation of said corporation and to enable it to procure said loan from appellant, and all of said endorsers were, at the time, directors of said corporation, except J. H. Murray, Charles A. Murray and A. H. Gladden, who were, at the time and until the trial below, stockholders of said company; that J. H. Murray, John E. Christian and A. H. Gladden endorsed such collateral note upon the representation and agreement made to and with them at the time by D. E. Stone, the then president, and C. B. Clark, the then treasurer of said corporation; that the property of said corporation would be put up as security and exhausted before they should be called upon to pay any part of said debt; that on June 23, 1893, the board of directors held a meeting, at which the treasurer reported that appellant had made a demand for the payment, on July 1, 1893, of the $ 6,000.00 note and interest owing to him by said corporation, and that there was no money on hand to pay the same, nor any resources from which the money could be realized by that time, and thereupon the board of directors authorized the treasurer to assign and deliver to appellant accounts owing to said company to an amount not exceeding $ 6,500.00, to secure the payment of said note and interest; that pursuant to such order the treasurer made out statements of accounts which were owing to said corporation from various parties, and on each of said accounts assigned the same in writing to appellant, which writing was signed by the president and treasurer of said corporation, and the same were delivered to, and accepted by, appellant, June 24, 1893. Appellant never demanded such assignment of accounts or any transfer or pledge of any of the property of the corporation, and had no knowledge of the purpose to assign the accounts to him, or that the assignment of said accounts had been directed or made until the delivery and acceptance by him of such accounts; that said accounts were not accepted as a payment but as collateral security, to be collected and the proceeds to be applied on said note of said corporation; that the board of directors, when they ordered the assignment of the accounts, knew of the financial condition of the corporation, and that the same was insolvent, and that unless a reorganization of said corporation could be speedily effected, or outside capital induced to invest, said corporation would be compelled to make a general assignment for the benefit of its creditors, but had not on said date determined upon or taken any legal steps in relation thereto; that on June 26, 1893, said corporation, being in embarrassed and failing condition, executed a general deed of assignment for the benefit of all its creditors under the laws of the State, to Smith H. Myers; that on the 14th day of August, 1893, the court removed said assignee and appointed appellee as assignee in his stead; that on the 23d day of June, 1893, the indebtedness of said corporation was $ 38,934.20, $ 23,000.00 of which was secured by mortgages on all the property of the corporation, except the accounts and bills receivable. The property of the corporation was appraised by the appellee as assignee, August 14, 1893, at $ 38,734.09, including the accounts and bills receivable, claimed by appellant, which were appraised at $ 4,023.24; that on the 23d day of June, the debts of said corporation exceeded the value of its assets, it had no cash on hand and was unable to raise or command any; its indebtedness was past due and many of its creditors were demanding payment of said corporation's indebtedness to them; that said corporation on said 23d day of June, was in embarrassed and failing circumstances and insolvent; that said accounts were so transferred to appellant by the board of directors for the purpose of protecting the endorsers on said collateral note held by appellant, and by way of preference in the payment of the debt so secured by said collateral note.

Upon the facts found the court stated conclusions of law:

That the law is with the petitioner, the transfer of said accounts is void and of no effect and should be set aside, and that the same constitute a part of the general assets of said trust estate, to be disposed of free from all liens of said appellee.

Appellant excepted to the conclusions of law and judgment was rendered upon the special finding in favor of the appellee.

Appellant assigns as error, that the court erred in its conclusions of law upon the facts found.

Counsel for appellee earnestly contends that the conclusions of laws stated by the court are correct; that the rule of law is, that "as soon as a corporation becomes insolvent, the property of the company becomes in the hands of the directors a trust fund for the payment of all its debts, and that the director who is also a creditor cannot take advantage of his superior means of information to obtain a preference of his own debt (or a debt for which he is an endorser) over the debts of other creditors." On the other hand, counsel for appellant contend that the assets of an insolvent corporation are not a trust fund in the hands of its directors for its creditors, that they only become impressed with the character of a trust fund when in a proper proceeding by proper parties they...