Land Red-E-Mixed Concrete Co. v. Cash Whitman, Inc.

• Citation: 425 S.W.2d 919
• Decision Date: 08 April 1968
• Docket Number: No. 5574--5,RED-E-MIXED,No. 2,No. 52816,A,5574--5,52816,2
• Parties: LANDCONCERETE COMPANY, and Hugh A. Miner, Trustee of the Estate of Cash Whitman, Inc., Bankrupt,ppellants, v. CASH WHITMAN, INC., a corporation, Pauline Whitman, James C. Heyer, Judy Downey, Glenn L. Whitman, J. Whitman, Robert E. Douglas, Trustee for the American National Bank, and the American National Bank of St. Joseph, Missouri, Respondents
• Court: Missouri Supreme Court

Page 919

425 S.W.2d 919

LAND RED-E-MIXED CONCERETE COMPANY, and Hugh A. Miner Trustee of the Estate of Cash Whitman, Inc. Bankrupt, No. 5574--5, Appellants, v. CASH WHITMAN, INC., a corporation, Pauline Whitman, James C Heyer, Judy Downey, Glenn L. Whitman, J. Whitman, Robert E Douglas, Trustee for the American National Bank, and the American National Bank of St. Joseph, Missouri, Respondents.

No. 52816.

Supreme Court of Missouri, Division No. 2.

April 8, 1968.

Miner, Martin & Speiser, St. Joseph, for appellants.

Dale, Potter & Flynn, Whitney W. Potter, St. Joseph, for respondents.

BARRETT, Commissioner.

This is a suit by a creditor and Hugh A. Miner, trustee in bankruptcy of the estate of Cash Whitman, Inc., to set aside deeds to a certain tract of land in Buchanan County as in fraud of creditors (RSMo 1959, § 428.020, V.A.M.S.) and to subordinate a deed of trust to the American National Bank of St. Joseph to the claims of creditors. Originally only the creditor, Land Red-E-Mixed Concrete Company, was plaintiff, Miner was appointed trustee on September 20, 1965, and thereafter intervened in the suit. Originally Cash Whitman, Inc., was a defendant, the other defendants are Pauline Whitman, widow of Cash Whitman and the last president of Cash Whitman, Inc., James C. Heyer, bookkeeper, and one-share officer of the company, Judy Downey, daughter of Cash and Pauline, also a shareholder-director, and Glenn L. and J. Whitman, son and daughter-in-law of the Whitmans and the grantees in the deeds involved here. Glenn and Janet were neither stockholders nor directors of Cash Whitman, Inc., and had no connection with the company. The other defendants are Robert E. Douglas, trustee in a deed of trust, and American National Bank, the holder of a $20,000.00 note from Cash Whitman, Inc., and the beneficiary in the deed of trust upon the land involved here.

As stated, the purpose of the suit was to set aside as conveyances in fraud of creditors two deeds by which a building and lot, 2401 North Belt Highway, formerly the property of Cash Whitman, Inc., were transferred to Glenn and Janet Whitman. The original deed, in fact the basic conveyance and the true subject matter of this litigation, is a conveyance from Cash Whitman, Inc., to 'J' (Janet) Whitman, dated October 31, 1963, recorded November 1, 1963. The other deed to Janet, dated May 6, 1964, was a mere deed of correction 'to correct a typographical * * * omission of the corporate name above the signature of the president (in the October 31st deed) Pauline Whitman.' There is no question as to the fact and purpose of the second deed and hereafter the case will be treated as if it involved only the deed of October 31, 1963.

Upon the trial of the cause in December 1966 there were no findings of fact, the court simply found 'the issues in favor of the defendants and against the plaintiffs,' and the plaintiffs have appealed. The plaintiffs' motion for a new trial was overruled on January 25, 1967, and on the same day their notice of appeal to this court was filed. Unfortunately, the official court reporter died on December 28, 1966, and no one has been able to transcribe her notes. Thus a full transcript of this court-tried case is not possible and the parties have agreed that the cause may be submitted upon their narration of 'the substance and pertinent parts of the testimony' together with the preserved exhibits and depositions.

These, in brief, are the background circumstances of the appeal. In March 1957 Mr. Cash Whitman formed and was the principal stockholder of the family-operated corporation, Cash Whitman, Inc. Other stockholders were a son, or sons, now deceased, Mr. Heyer and after Mr. Whitman's death, his wife, a defendant, Pauline became president of the company. In March 1957 the Whitman Construction and Engineering Corporation transferred to Cash Whitman, Inc., together with other property the building and lot involved here. On March 3, 1957, Cash Whitman, Inc. executed a deed of trust on this property securing a note of $20,000.00 to the American National Bank. Cash Whitman, Inc., was a general contractor, 'basically residential construction.' The company through Mr. Whitman's efforts had developed one or more residential subdivisions in the St. Joseph area. And after the formation of the corporation a large number of houses, ranging in value from $11,000.00 to $35,500.00, were built and sold, and when Mr. Whitman died in February 1962 there were 28 of these houses sold and financed through a building and loan company. In addition to the house-building project the company had a water-pipeline contract or two in Kansas. The company also owned a quantity of heavy construction machinery and equipment and the office and machine shop maintained at 2401 North Belt Highway. This building had been appraised at various sums, as high as $45,000.00, and, as stated was subject to a first deed of trust of $16,000.00.

Upon Mr. Whitman's death in 1962 the company, according to Mr. Heyer, began selling off its assets to pay its obligations and in fact 'to dispose of all the property.' The plaintiffs' evidence tended to show that the company could not pay its current liabilities but the defendants' proof was that 'there was then an equity in the properties,' the 28 houses, of $80,000.00 to $100,000.00. Mr. Heyer said, and others agreed with him, 'We felt that, if we could sell them in our own manner to what we felt that they were worth, based on appraised evaluations by realtors, that we had something like eighty to a hundred thousand dollars.' In all First Federal Savings and Loan advanced Cash Whitman, Inc., a total of $469,600.00 on 24 houses and on October 31, 1963, these had been reduced to $276,255.63. In the end, however, these mortgages were foreclosed and there was no 'excess paid over to the corporation.'

In any event, in September 1963, the board of directors met and duly authorized its president, Pauline Whitman, 'in her own best judgment and her own discretion, should be allowed to sell' the 2401 North Belt property 'for any terms that she should deem satisfactory.' The resolution recited a corporation note of $9,235.52 to Mrs. Whitman who 'as an individual, did advance and loan said money to said corporation' and it was recited that if there was an excess over the debt to American National Bank 'then the residue of said money should be paid to Mrs. Pauline Whitman.' Pursuant to this resolution Mrs. Whitman sold the property to her son and daughter-in-law, the deed was to the daughter-in-law, 'J' Whitman. The corporation deed recites a consideration of 'One Dollars and Other Valuable Considerations.' The son testified that he and his wife paid a consideration of $30,000.00 for the property. In the first place, they assumed the indebtedness to the American National Bank upon which there was then due $16,481.25. Thereafter Glenn and Janet made payments on this indebtedness of $6380.40 thus reducing the debt at time of trial to $15,417.96. They also assumed the payment of delinquent interest and taxes. On May 7, 1964 they gave the American National Bank a note for $2500.00 secured by a second deed of trust on the 2401 North Belt property and thereafter have made monthly payments of $41.44 reducing that debt to $1665.74 by November 1966.

Mr. Heyer testified to the sums Mrs. Whitman had loaned to the corporation, as reflected in its records: 'The first one that I show is a loan of twelve hundred dollars, dated two, twenty-eight, sixty two. I show another one for twenty-five hundred dollars on five, eighteen, sixty-two; four hundred dollars on five, thirty-one, sixty-two; nine thousand two hundred and thirty-five dollars and fifty-two cents on seven, eighteen, sixty-two.' There were other sums in 1963, $345.00, $10.00 and $4436.26. Mr. Heyer could not say what each sum was used for 'in every case,' the $1200.00 the month Mr. Whitman died was 'probably just operating capital,' so too the loans of $518.62 and...