Levering v. Bimel
| Decision Date | 12 January 1897 |
| Citation | 45 N.E. 775,146 Ind. 545 |
| Court | Indiana Supreme Court |
| Parties | LEVERING et al. v. BIMEL et al. |
OPINION TEXT STARTS HERE
Appeal from superior court, Tippecanoe county; Frank B. Everett, Judge.
Petitions of intervention by Mortimer Levering, as trustee, and another, in an action wherein a receiver was appointed for the O'Brien Wagon Company, insolvent. Frederick Bimel and others intervened for the purpose of answering said petitions. From a judgment against them, petitioners appeal. Reversed.Stuart Bros. & Hammond and Kumler & Gaylord, for appellants. Wallace & Baird, Geo. B. Haywood, Caldwell & Caldwell, Geo. J. Eacock, and Corwin & Smith, for appellees.
The questions involved in this cause arise out of the proceedings of the trial and judgment in the lower court in adjudicating claims of the creditors of the O'Brien Wagon Company, a corporation organized under the laws of this state, and engaged in the manufacture and sale of wagons in the city of Lafayette. On August 10, 1893, this corporation, being insolvent, was placed in the hands of a receiver by order of the lower court. Appellant Levering, holder of a certain alleged note against said corporation, which he held as trustee of the First National Bank and the Merchants' National Bank of Lafayette, Ind., filed his intervening petition in the cause in which said receiver was appointed, wherein he averred that said note of $39,400, which he so held, was secured by a chattel mortgage executed by said company, and he asked that this mortgage be foreclosed, and that the proceeds of the sale of the mortgaged property be ordered by the court to be first applied to the payment of this claim. At the same time, his co-appellant, Lucy A. Kaull, filed a like petition, in which she alleged that she held a note against said company for $48,360, secured by a mortgage upon its real estate, and by a chattel mortgage upon certain personal property, etc. Appellees, being unsecured creditors of the corporation, were by the court permitted to appear and file answers to these intervening petitions, and to defend against said claims and mortgages. Upon these petitions, and the respective answers and replies of the parties, the issues were joined, and the cause was tried by the court. There was a special finding of facts; and, by its conclusions of law thereon, the court held that the note and mortgage held by Levering were illegal and void, and also that the note and mortgages held by Mrs. Kaull were illegal, and that the action of the corporation in assigning certain notes and accounts to her as collateral security was illegal and void, and judgment was rendered accordingly.
The facts material to the principal questions involved appear from the special finding to be substantially as follows:
On July 14, 1890, the O'Brien Wagon Company was duly incorporated at Lafayette, Ind., with a capital stock of $100,000, the object of said corporation being to manufacture and sell wagons at said city. Before the incorporation of this company, it operated and carried on its business at Tiffin, Ohio, as a partnership, but was induced to locate at Lafayette, where, as before stated, it was incorporated under the general laws of this state. On August 7, 1893, this corporation was indebted, as the court finds, to the First National Bank of the City of Lafayette, Ind., as follows:
+-----------------------------------------------------------------------------+
¦On ten notes executed by the wagon company to said bank for borrowed ¦$11,500¦
¦money ¦00 ¦
+---------------------------------------------------------------------+-------¦
¦On five notes executed by the wagon company to F. M. Ward, and ¦3,790 ¦
¦indorsed by him to said bank ¦40 ¦
+---------------------------------------------------------------------+-------¦
¦On one note executed by the wagon company to Frey, Reiff & Co., and ¦189 15 ¦
¦by them indorsed to said bank ¦ ¦
+---------------------------------------------------------------------+-------¦
¦All of which it is found, with interest, amounted on August 7, 1893, ¦$16,139¦
¦to ¦46 ¦
+---------------------------------------------------------------------+-------¦
¦On indorsement of other notes ¦9,396 ¦
¦ ¦83 ¦
+---------------------------------------------------------------------+-------¦
¦Total ¦$25,536¦
¦ ¦29 ¦
+-----------------------------------------------------------------------------+
On nine of the notes first mentioned, Burt J. Kaull was a surety for the company, and Richard Carpenter was a surety for the company on the other note of said ten; Carpenter and Kaull being at the time directors of said corporation, the former being the president, and the latter secretary.
It is further found that, on the date last mentioned, the company was also indebted to the Merchants' National Bank of said city as follows:
+-----------------------------------------------------------------------------+
¦On four notes executed by the wagon company to said bank for borrowed¦$ 7,623¦
¦money ¦79 ¦
+---------------------------------------------------------------------+-------¦
¦On two notes executed by the wagon company to Frey, Reiff & Co., and ¦874 54 ¦
¦by them indorsed to said bank ¦ ¦
+---------------------------------------------------------------------+-------¦
¦On indorsements of promissory notes ¦7,572 ¦
¦ ¦12 ¦
+---------------------------------------------------------------------+-------¦
¦Total ¦$16,070¦
¦ ¦45 ¦
+-----------------------------------------------------------------------------+
On the four notes first named, said Burt J. Kaull was also surety for the company.
The court also finds: “That all the indebtedness from said corporation to said banks was for money on direct loans to said corporation, or for discount of commercial paper, governed by the law merchant, during the months of April, May, June, and July, 1893, and while said corporation was carrying on its business, and that all of said money was used by said corporation in the ordinary course of business.” On August 9, 1893, Lucy A. Kaull, appellee, it appears, held certain notes or claims against said corporation, which aggregated $48,360.10, part of it being for money advanced and loaned by her to the corporation. That all of the notes held by Mrs. Kaull were signed by said Burt J. Kaull, as surety, he being the son of the former, and a director of said company at the time the notes were executed by it to his said mother. As to these notes, the court finds that, on said 9th day of August, there was only due to Mrs. Kaull from said corporation the sum of $24,368.41, and no more. That, as to the remainder of her said claim, the company had received no consideration for the execution of the notes, and that the same were executed without authority from its board of directors. On the 7th day of August, 1893, the corporation, by its board of directors, authorized the execution of a note for all of the pre-existing indebtedness due from it to said banks, together with a mortgage on the personal property of the company to secure said note; and immediately thereafter the note for $39,400 and the mortgage to secure the same, as set out in Levering's petition, were executed to him by the president and secretary, and Levering thereupon executed a declaration of trust to both of said banks. That, before the execution of this note and mortgage, these banks surrendered to Levering all the notes held by them upon which the company was liable. That on August 9, 1893, the company, by its board of directors, authorized the execution of a note, and a mortgage to secure the same, to Lucy A. Kaull, for the indebtedness held by her against the corporation; and, in pursuance thereof, the note and mortgages set up in her petition were executed to her by the corporation. The execution of the notes and mortgages to Levering and Mrs. Kaull was authorized by the unanimous vote of all the directors, being five in number, and the execution of these notes was also approved by the stockholders of said corporation. Payments on the note to Levering were made after its execution, and before the trial of the cause, which reduced the amount due when the judgment was rendered to $31,667.95. At the time of the execution of the mortgages in dispute, Carpenter was insolvent, and Burt J. Kaull had no property in this state, but owned some outside of Indiana. It is also found: That the latter was the agent of Mrs. Kaull in obtaining the mortgage set out in her petition. That on the 7th and 9th of August, 1893, said corporation was insolvent, which fact was known to its officers, and that Mrs. Kaull also knew, at the time of the execution of the note and mortgage to her, of its insolvency. That on the 9th day of August, 1893, Eugene N. O'Brien, a stockholder and one of the directors, a few hours after the execution of the mortgage to Mrs. Kaull, filed a petition to have a receiver appointed for said corporation; and that it, on the next day, appeared by its attorneys, and consented to the appointment of a receiver; and that thereupon a receiver was appointed by the court; and that he duly qualified, and assumed the duties of his...
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