Kingman & Co. v. Cornell-Tebbetts Machine & Buggy Co.

• Decision Date: 15 February 1899
• Citation: 51 S.W. 727,150 Mo. 282
• Court: Missouri Supreme Court
• Parties: KINGMAN & CO. v. CORNELL-TEBBETTS MACHINE & BUGGY CO.

51 S.W. 727

150 Mo. 282

KINGMAN & CO. v. CORNELL-TEBBETTS MACHINE & BUGGY CO.

Supreme Court of Missouri.

February 15, 1899.

FRAUDULENT CONVEYANCES — TRUST DEEDS — ACCEPTANCE — DELIVERY — INSTRUCTION — INDORSER — PAROL PROOF — CORPORATIONS — PREFERRING STOCKHOLDERS.

1. Where a trust deed of a stock of goods is given to secure the separate, independent debts of several creditors, no trustee being named, it is good as to those who accept it before unsecured attaching creditors intervene, but subject to attachment as to those who have not accepted it.

2. Where a debtor attempts to prefer certain of his creditors by a mortgage, fraud in its execution cannot be predicated on the latter's failure to accept it, where the property has been attached by other unsecured creditors.

3. A charge is erroneous where there is no evidence on which to base it.

4. Where a person not the payee writes his name across the back of a note at the time of execution he is prima facie a joint maker, and, as between him and the payee, the character of his undertaking — whether as maker, indorser, surety, or guarantor — may be shown by parol.

5. An attaching creditor cannot object that such an indorser of the debtor's notes, secured by a deed of trust, is a maker, and not a guarantor, and hence not entitled to protection, as this is a matter between the payee and the indorser; and, where the payee has compelled the indorser to pay the notes, he becomes subrogated to the payee's rights under the deed.

6. His right to such security is not affected by the fact that he is a stockholder of the debtor corporation.

7. Delivery of a trust deed securing creditors, to the trustee named therein, is a good delivery, which inures to the benefit of the named beneficiaries; and, unless they disclaim within a reasonable time after notice, their acceptance will be presumed.

Burgess and Robinson, JJ., dissenting.

In banc. Appeal from circuit court, Jasper county; Edward C. Crow, Judge.

Action by Kingman & Co. against the Cornell-Tebbetts Machine & Buggy Company. There was a judgment for plaintiff and defendant appeals. Reversed.

Division No. 1 of this court, speaking through MARSHALL, J., — all of the judges concurring, — delivered the following opinion in this case:

"On November 17, 1893, plaintiff instituted suit in the circuit court of Jasper county against defendant upon five promissory notes. The answer was a plea of payment. On the 14th of February, 1894, the defendant executed and delivered to H. H. Harding, as trustee, a deed of trust covering its stock of merchandise in its store, at Carthage, Missouri, to secure its indebtedness, evidenced by promissory notes in favor of William Deering & Co. aggregating $2,979.50, all dated February 12, 1894, of Merchants' National Bank of Cincinnati, aggregating $1,452.56, all dated June 6, 1893, and of Fourth National Bank of Cincinnati, aggregating $726.63, all dated June 6, 1893. None of said notes were due when the deed of trust was made or when the attachment was sued out. The trustee on the same day caused the deed of trust to be recorded in Jasper county, and immediately took possession of the property covered by the deed of trust, and placed A. E. Tebbetts in charge of the goods, with directions to sell them, and render to him an account of sales on the 1st of each month. The deed of trust provided that the mortgaged property should remain in the possession of the mortgagor until default in the payment of some of the notes, but that the mortgagor should have no right to sell any part of the mortgaged property without the written consent of the beneficiaries in the mortgage, and, if done with their consent, the proceeds of sale should be immediately applied to the payment of the secured debts; that in case of a sale or any attempt to sell or remove the property without such written consent, or of any unreasonable depreciation in the value of such property, the trustee should take possession of the property, and sell it at public or private sale, at his option, in Carthage. The trustee, upon taking possession, at once proceeded to sell at private sale, and continued to do so for about a month, receiving all the proceeds of sale. On the 10th of March, 1894, the plaintiff sued out an attachment in aid of its suit previously begun on the 17th of November, 1893, and thereafter, on the 25th of October, 1894, filed an amended affidavit for attachment, alleging five grounds of attachment, to wit: `(1) That defendant on March 6, 1894, had fraudulently conveyed and assigned its property and effects so as to hinder and delay its creditors; (2) that the defendant had fraudulently concealed, removed, and disposed of its property and effects so as to hinder and delay its creditors: (3) that defendant was about fraudulently to convey and assign its property and effects so as to hinder and delay its creditors; (4) that defendant was about fraudulently to conceal, remove, and dispose of its property and effects so as to hinder and delay its creditors; (5) that the debt sued for was fraudulently contracted on the part of the debtor.'

"The not uncommon condition is present in this case of a direct and irreconcilable conflict between counsel as to whether the record shows that the beneficiaries in the deed of trust accepted it before the attachment writ was levied. Appellant's counsel says: `William Deering & Co., one of the beneficiaries whose debt was secured by said deed of trust, accepted under the same within two or three days after its execution, and about a month before the levy of the attachment in this action. The other two beneficiaries had not formally accepted under the deed at the time the property was seized by the sheriff. Lewis B. Tebbetts, however, who was surety on all the notes held by said Merchants' National Bank and said Fourth National Bank, secured to be paid by said chattel deed of trust, and to whose benefit as such surety the conveyance inured, did accept under the same immediately after the execution of said deed; and subsequently, and after the levy of the attachment, he took up and paid said notes, and became subrogated to the rights of said banks under said conveyance.' Respondent's counsel, on the other hand, says: `The record shows that neither of the beneficiaries knew of the execution of said chattel deed of trust until after the making and recording of same, and that neither of the beneficiaries accepted or attempted to accept the benefits of said chattel deed of trust until after the levy of the attachment in this cause.' The printed record in this case covers 180 pages, and this contrariety of contention of counsel has imposed upon the court the necessity of reading it to settle this question of fact. The testimony of Craig, Harding, and L. B. Tebbetts shows that Deering & Co. were trying to procure the security before it was given, and that after it was given they accepted it within a few days, and before the attachment was levied. L. B. Tebbetts was an indorser on the notes held by the two banks, and guarantor for the debt to Deering & Co.; and, immediately after the deed of trust was executed, he notified the banks and Deering & Co. of the fact, and he approved of and accepted the deed of trust. It does not appear that the banks accepted the security. None of this testimony was controverted at all by the plaintiff. It must therefore be taken as true in this case. The trustee took possession of the mortgaged property with the consent of the debtor company and of Tebbetts, and his action in this regard was approved by Deering & Co.

"At the request of the plaintiff, the court instructed the jury as follows: `(1) The court instructs the jury that if they believe from the evidence that the defendant, by its officers, in executing and having executed the chattel deed of trust read in evidence intended thereby to hinder, delay, or defraud any one or more of its creditors, they will find the issue for the plaintiff on first ground alleged in the affidavit for attachment. (2) The court instructs the jury that, while fraud is not to be presumed, yet it is rarely susceptible of being proved by direct and positive testimony, and may be proved by facts and circumstances; and if the jury believe from all the facts and circumstances detailed in evidence that the officers of defendant intended by the execution of the chattel deed of trust read in evidence to hinder, delay, or defraud any one of its creditors, they will find the issue for plaintiff on the first ground of attachment alleged in the affidavit. (3) The court instructs the jury that if they believe from the evidence that the officers of the defendant company executed the chattel deed of trust read in evidence without the knowledge of the Merchants' National Bank of Cincinnati, Ohio, the Fourth National Bank of Cincinnati, Ohio, and Wm. Deering & Co., the beneficiaries therein, or either of them, and either of said parties did not accept said chattel deed of trust before the levy of the attachment in this cause, then said chattel deed of trust was fraudulent as to other creditors of defendant company, and the jury will find the issue for plaintiff on the first cause for attachment. (4) The court instructs the jury that if they believe from the evidence that defendant company had a stock of over $6,000 about January 1, 1894, and that when the attachment was levied, March 10, 1894, their stock did not amount to more than about $2,500, and said defendant company, officers, and agents have failed to account for the difference in the value of the stock, then the jury may take such facts, together with all the other facts and circumstances in evidence on the question as to whether defendant had concealed, removed, or disposed of its property and effects with intent to hinder, delay, or defraud its creditors, or any of them; and if the jury believe from all the facts and circumstances in evidence that defendant, by its...