Nat'l State Bank of Terre Haute v. Sandford Fork & Tool Co.

• Decision Date: 28 May 1901
• Citation: Nat'l State Bank of Terre Haute v. Sandford Fork & Tool Co., 157 Ind. 10, 60 N.E. 699 (Ind. 1901)
• Parties: NATIONAL STATE BANK OF TERRE HAUTE v. SANDFORD FORK & TOOL CO. et al.
• Court: Indiana Supreme Court

157 Ind. 10

60 N.E. 699

NATIONAL STATE BANK OF TERRE HAUTE

v.SANDFORD FORK & TOOL CO. et al.

Supreme Court of Indiana.

May 28, 1901.

Appeal from circuit court, Vigo county; James E. Piety, Judge.

Suit by the National State Bank of Terre Haute against the Sandford Fork & Tool Company and others to set aside fraudulent mortgages. From a decree in favor of the defendants, plaintiff appeals. Affirmed.McNutt & McNutt and E. F. Williams, for appellant. Sidney B. Davis and Samuel R. Hamill, for appellees.

HADLEY, J.

This controversy is over a fund of $19,000, which resulted from the agreed sale of goods alleged to have been mortgaged by the appellee Sandford Fork & Tool Company to the appellee Vigo County National Bank. This is the second appeal. 141 Ind. 352, 40 N. E. 799. There are two mortgages, between them covering all the personal goods of the tool company, and each purporting to secure an indebtedness aggregating $28,000. The validity of these two mortgages is the only question presented, and it arises under an exception to the conclusions of law. The material facts exhibited by the special finding follow: The appellee Sandford Fork & Tool Company is a corporation organized under the laws of this state, and was doing a manufacturing business in the city of Terre Haute. Appellant and appellee bank were and are doing a general banking business in the same city. September 27, 1887, Robert Nixon was elected president of the tool company, and on February 4, 1890, Willard Kidder, who was at the time vice president of the appellee bank, was elected and succeeded Nixon as president, and continued in said office till the commencement of this suit. The finances and prudential affairs of the tool company from the election of Nixon as president, in September, 1887, continuously to the commencement of this suit, were managed and conducted through and by the president of said company, who was at all times held out to the public by the board of directors as the chief executive officer thereof, and during all of said time the president made the contracts for the company, executed notes, drew checks, and signed whatever instruments were necessary to be signed to borrow money and carry on the business of the company, all of which acts were acceded to and acquiesced in by the board of directors; and when Kidder was elected president February 4, 1890, the board of directors instructed him to manage the finances and prudential affairs of the company according to his best judgment, and to execute all papers and instruments deemed necessary thereto, which instructions Kidder carried out to the full approval and acquiescence of the board of directors. No order or resolution of the board of directors affecting the powers and duties of the president was entered of record in the minute books of the corporation, but a by-law provided that “all the instruments obligating the company shall be signed by the president and attested by the secretary.” On November 14, 1889, the tool company was indebted to appellee Vigo County National Bank by divers notes amounting to $43,000. Hudnut, president of the bank, had been instructed by his board of directors to demand security for a part of such indebtedness. On the date last named, upon his demand, the tool company, by Nixon, its president, attested by its secretary, executed to the bank two mortgages; one covering all and the other a part of the personal goods of the company, and both securing two notes, one for $12,000 and one for $15,000. At the time of the execution of these mortgages it was agreed that the same should be withheld from record until the last of the 10 days allowed by law for recording the same. On the same day (November 14th), Hudnut, president of the appellee bank, loaned the tool company, upon its note, $3,000 of his individual funds, and neither demanded nor received, then nor subsequently, any security or payment thereon, except the dividend paid by the receiver afterwards appointed. On December 13, 1889, appellee bank loaned the tool company $2,500, and again on January 31, 1890, loaned it $2,500, on the company's unsecured notes, and on the last-named date the further sum of $6,000, on its note secured by shares of its capital stock of the face value of $7,500, which said three notes are still unpaid, except the dividend paid thereon by the receiver. That between the dates of November 14, 1889, and March 27, 1890, appellee bank continued to trust and give credit to the tool company, and within that period discounted its commercial paper and acceptances to the amount of $26,000. That, after Kidder was elected president (February 4, 1890), to the commencement of this suit, in conducting the business of the tool company he received and disbursed on behalf of the company $60,000, $30,000 of which was paid out for labor and supplies and $30,000 on the unsecured indebtedness of the company, no part of which was paid on the indebtedness secured by the mortgages in controversy. That from and after November14, 1889, to the commencement of this action, the tool company was in embarrassed circumstances, and was unable to meet all its demands and obligations as the same fell due. That the managing officers and directors of the tool company, and the president and directors of the appellee bank, during all the time running from November 14, 1889, to the commencement of this suit, believed that said company was solvent, and that it would continue to be a going concern, and would be able to pay all its obligations in full. On and in the time intervening between November 14, 1889, and April 25, 1890, the original two mortgages were re-executed between the same parties 15 times at substantially 10-day periods, on about the same property, and to secure the same indebtedness, except that on March 18, 1890, the mortgage note for $15,000 was paid, and the indebtedness amounting to $16,000 remaining unsecured November 14, 1889, and which had been extended by renewals, was introduced into and secured by the mortgages executed on March 27, 1890. There was no agreement between the parties when the first mortgages were executed, and none at any time prior or subsequent thereto, that said mortgages should be renewed every 10 days. None of the mortgages executed prior to April 25, 1890, were recorded, but the two executed upon the last-named date were duly recorded in the recorder's office of the county on May 3, 1890. The mortgaged property and its locations were specifically described in the several mortgages. It was left in the possession of the mortgagor, and was labeled, or particularly set aside to the mortgagee, but was left in the same places where located at the time of the first mortgages, except 1,700 dozen finished forks and hoes, described only in the first mortgages, were removed to another warehouse. Without the knowledge or consent of the mortgagee the mortgagor filled some orders out of the finished mortgaged product, and manufactured some of the mortgaged raw material, but in each instance restored what was taken away with goods of like kind and value. The mortgages in controversy were executed in good faith to secure a bona fide indebtedness therein described, and without any fraudulent intent to cheat, hinder, or delay any creditor of the tool company. After November 14, 1889, and before the commencement of this suit, the tool company became indebted to appellant for money loaned in the sum of $18,552. Upon these facts the court below found the law to be with the appellee bank; that the mortgages executed to it by the tool company on April 25, 1890, are valid and subsisting mortgages; and that the fund derived from the agreed sale of the mortgaged property, now in the hands of a trustee, should be turned over to said appellee, to be applied upon the indebtedness secured thereby.

Appellant's counsel argue in...