Holderman v. Hood

• Decision Date: 01 December 1904
• Docket Number: 13,064
• Citation: 70 Kan. 267,78 P. 838
• Parties: ELIZABETH HOLDERMAN v. CALVIN HOOD et al
• Court: Kansas Supreme Court

78 P. 838

70 Kan. 267

ELIZABETH HOLDERMAN v. CALVIN HOOD et al

No. 13,064

Supreme Court of Kansas

December 1, 1904

Decided July, 1904. [Copyrighted Material Omitted] [Copyrighted Material Omitted]

Error from Lyon district court; DENNIS MADDEN, judge.

STATEMENT.

THIS was an action sounding in tort, brought in May, 1901, by Elizabeth Holderman, plaintiff below, against Calvin Hood George W. Newman, Isaac E. Lambert, R. T. Battey, W. Martindale, and the Excelsior Mill Company, defendants below. Hood, Newman, Lambert and Battey demurred to the amended petition on two grounds, viz.: (1) That it did not state facts sufficient to constitute a cause of action; (2) that the several causes of action were improperly joined. The demurrer was sustained, and, plaintiff below electing to stand on her petition, judgment was entered against her for costs. The sole question is whether the demurrer was sustained rightfully. The petition with its exhibits is very long. We will state the substance of it.

It is alleged that in 1898 the Excelsior Mill Company and W. Martindale were indebted to plaintiff on a promissory note to the amount of $ 3104.89. She obtained judgment against them on November 4, 1899, for the amount, the same to draw seven per cent. interest. On March 20, 1900, there was paid on the judgment, by R. T. Battey, trustee, the sum of $ 577.79, out of the sale of Martindale's property, which is all that plaintiff ever received out of the proceeds of property turned over by Martindale to said trustee. The payment was received by plaintiff without knowledge on her part of the suit of Ford Harvey against R. T. Battey, hereafter referred to, and in ignorance of the fraudulent conspiracy and wrongful acts of Hood, Battey, Newman, and Lambert, set forth hereinafter. She learned of the wrongs complained of within sixty days before the petition was filed. On May 1, 1901, there was paid on her judgment, by the trustee in bankruptcy of the Excelsior Mill Company, the sum of $ 748.45, leaving a balance of $ 2089.01 still due. The mill company and Martindale were both insolvent. Martindale, being heavily involved financially, and indebted to the amount of about $ 165,000, and desiring to secure its payment, entered into a written agreement with the creditors mentioned in the stipulation as follows:

"THIS STIPULATION AND AGREEMENT, Made and entered into by and between William Martindale, party of the first part, and Morton Albaugh, receiver of the First National Bank of Emporia, Kansas, Ford Harvey, First National Bank of New York, Fourth National Bank of St. Louis, Eureka Bank, of Eureka, Kansas, Miss Lizzie Holderman, Mrs. H. M. G. Holderman, Osage County Bank, of Osage City, Kansas, Madison Bank, of Madison, Kansas, and Union National Bank of Kansas City, Missouri, and Central National Bank of Topeka, Kansas, creditors of said William Martindale, parties of the second part:

"WITNESSETH, In order to save unnecessary litigation, sacrifice of property, and expenses, said William Martindale will transfer and convey to a trustee to be selected and named by Honorable W. C. Hook, judge of the United States district court for the district of Kansas, all of his property, except that exempt by law from execution and forced sale under legal process, in trust, to be sold and converted into money by said trustee as speedily as may be without the unnecessary sacrifice of the same, the proceeds thereof to be applied as follows, after the payment of the necessary costs and expenses of executing the trust:

"(1) To the payment in full of all the just and lawful debts of said William Martindale.

"(2) If such proceeds are insufficient to pay such debts in full, then to the payment of such debts pro rata and in equal ratable proportion, without preference. And said parties of the second part consent to the creation of said trust and accept the same.

"In case of the death, resignation or other disability of the trustee, before the completion of the execution of the trust, the said Honorable W. C. Hook, judge of the United States district court, or his successor, shall appoint a trustee to succeed him. Such collateral securities, or liens, upon the bank-stock or other property as any of the creditors held on November 16, 1898, and still hold, are not to be disturbed, waived or in any way affected by this stipulation.

"After the application of the proceeds of said property to the purposes named herein, and the payment of said debts in full, whatever is left of said proceeds, and of said property, shall be conveyed by said trustee to said William Martindale.

"Dividends are to be paid by the trustee on the claims of the creditors as speedily and as often as the proceeds will permit.

"The creditors shall, within sixty days, unless further time be granted by the trustee, present their claims and demands against William Martindale to the trustee, who shall file and allow the same upon ordinary proof by affidavit, or oral proof, if not controverted.

"William Martindale, or any of his creditors, shall have the right to controvert any such claim, and if controverted the same shall be determined by the judgment of a competent court, in the usual and ordinary course of legal proceedings.

"IN TESTIMONY WHEREOF, the parties hereto set their hands and seals, this 7th day of June, A. D. 1899."

(Signed by all the parties named in the first clause.)

On June 29, 1899, Judge Hook did select, designate and appoint defendant R. T. Battey as the trustee provided for in said agreement, requiring that he enter into bond for the faithful performance of his duties in the sum of $ 50,000. The order of appointment reserved the right to Judge Hook to substitute another trustee in Battey's stead in case of the latter's death, resignation, or any other cause deemed sufficient to authorize such substitution. The trustee qualified and entered into the discharge of his duties, but never made a report to any court, or to plaintiff, or to the creditors of Martindale.

In pursuance of said agreement, Martindale and wife duly transferred to Battey, as trustee, all of the former's non-exempt property, both real and personal. The lands in Greenwood county consisted of 7127 1/2 acres (described), and were of the actual value of $ 107,000; also lots in Madison, in said county, with their improvements, valued at $ 5000; land in Lyon county valued at $ 3200; lots in Emporia valued at $ 400; land in Chase county valued at $ 5600; land and lots in Barton and Edwards counties worth $ 10,500; lands in Bent county, Colorado, and lots in Cascade, Colo., of the value of $ 4800; also an interest in certain lots in Parsons, Kan., valued at $ 1000; personal personal worth $ 4000, consisting of stock in several corporations--the real estate being of the actual value of $ 137,500, and the personalty $ 4000; in all, $ 141,500.

The First National Bank of Emporia was a creditor of Martindale to the amount of $ 110,000. Its affairs were in the hands of Morton Albaugh, as receiver. Isaac E. Lambert and the law firm in which he was a partner were, during all the time covered by the transactions set out, the attorneys for Albaugh, getting a large compensation therefor, to wit, $ 3000 per annum. Lambert and his law firm were also attorneys for R. T. Battey, as trustee, charging the latter compensation therefor. As such attorney, it was the duty of Lambert to aid and assist the trustee in the honest discharge of his duties in effecting a sale of the property mentioned for as large a sum as possible, to persons who would pay the highest price. It was also his duty not to accept employment from any prospective bidder, or represent such bidder, or do anything which would prevent the fullest competition in bidding. Defendant Battey was also under obligations to administer his trust honestly, and sell the property in his hands for the highest price, and not show partiality to any bidder. Defendants Lambert and Battey, in violation of their duty, illegally confederated and conspired together with defendants Hood and Newman, with the object and intent that the latter might purchase all said property from the trustee for a grossly inadequate sum, much less than its actual value, and much less than could have been obtained had an honest effort been made to sell it. In furtherance of the plan, the four defendants named proceeded as follows: About November 23, 1899, Battey caused to be published in the Emporia Gazette and other newspapers the following notice:

"The real estate of William Martindale, as conveyed to me for his creditors, is hereby offered for sale for the highest and best price offered. Bids will be received by me for this property as a whole up to and including December 23, 1899. Those who desire to purchase may see description at office of the receiver of the First National Bank, Emporia, Kansas, or of the undersigned, at Florence, Kan. Bids must be accompanied with certified check for five per cent. of bid."

The notice provided for a sale in bulk, with no "upset" or minimum price fixed. The real estate was situated in different counties of Kansas and Colorado. A better price could be had by selling it in separate parcels, and by disposing of the personalty apart from the real estate. The trustee notified persons desirous of bidding that no bids would be received after December 23, 1899; that he would take until January 1, 1900, to determine what should be done, and if the best bid should be satisfactory to him the land would be sold; otherwise, he would take a different course to dispose of the property. The trustee failed and refused to furnish abstracts until December 15, 1899, and then allowed prospective bidders three days only to examine them, although there were twenty-seven abstracts...