Meyer v. American Folding-Chair Co.

• Citation: 32 S.W. 300,130 Mo. 188
• Parties: MEYER et al. v. AMERICAN FOLDING-CHAIR CO. et al.
• Decision Date: 11 October 1895
• Court: United States State Supreme Court of Missouri

32 S.W. 300

130 Mo. 188

MEYER et al. v. AMERICAN FOLDING-CHAIR CO. et al.

Supreme Court of Missouri, Division No. 2.

October 11, 1895.

CORPORATIONS — INSOLVENCY — TRUST FUND.

A corporation which is insolvent, but still retains dominion over and controls its property, does not hold it as a trust fund for the benefit of all its creditors, but may, in good faith, dispose of it so as to secure or pay one creditor in preference to others.

Appeal from St. Louis circuit court; James E. Withrow, Judge.

Suit by Otto Meyer and others against the American Folding-Chair Company and others to have a deed of trust set aside. Judgment for plaintiffs. Defendant American Exchange Bank appeals. Reversed.

Thos. E. Ralston and A. C. Church, for appellant. Paul F. Coste, for respondents.

BURGESS, J.

The American Folding-Chair Company was a corporation, engaged in the city of St. Louis in the manufacture and sale of toys, settees, and chairs, under letters patent of which it was the owner. Its authorized capital stock was $50,000, $35,000 of which had been paid in. In July and August, 1890, the company determined to add a wholesale and retail lumber business to its manufactory business. The company do their banking business principally with the defendant the American Exchange Bank, depositing its moneys and having its notes discounted there. From about July to October 16, 1890, the company was indebted to the bank in about the sum of $9,000. It was not able to pay its notes in full becoming due in September and October, and paid part of them as they became due, and secured a renewal of the same, either on time notes or notes payable on demand. Joseph G. Miller, who was a stockholder, director, and president of defendant company, was accommodation indorser on all of said notes. In the early part of said month of October, 1890, it became apparent that the chair company would need from $5,000 to $10,000 increase in its line of discounts. The company then applied to the defendant bank for the loan of the amount of money needed, offering said Miller as its indorser, but the bank declined to make the loan. It was finally agreed that the bank would take a deed of trust upon all of the property of the chair company, furnish them additional money not to exceed $10,000, and extend the payment of the five notes which the bank already had for the period of six months. In accordance with said agreement between the chair company and the bank, the attorney of the bank drew up a deed of trust covering all the tangible property of the chair company, not including its accounts, amounting to $1,500. At the time of the execution of the deed of trust, the chair company's account in the bank was overdrawn about $230. The deed of trust was acknowledged and delivered on the 16th day of October, 1890, but, by agreement between the bank and the chair company, was withheld from record until the 29th day of October, 1890. On the same day of its execution, however, the bank placed an agent to see that the chair company made no sales of the lumber, material, and manufactured articles mentioned in the deed of trust without his knowledge, to receive and control the proceeds thereof, and turn them over to the bank once a week, in payment of the debts and advances mentioned in said deed of trust. The bank, after the execution of the deed of trust, at once commenced to advance money to the chair company, — $1,000 on its notes, and the balance by allowing the chair company to overdraw its account, — and continued to advance money until about December 2, 1890, when it had advanced in all about $5,000. The chair company collected $1,500 from its open accounts. One thousand dollars of this was paid over to the bank before the 1st of December, 1890, and about $500 after the 1st of December. The chair company had on deposit in the bank to its credit at the time the receiver was appointed $330, which came from...