National Bank of Goldsboro v. Hill

• Decision Date: 23 September 1915
• Docket Number: 365.
• Citation: 226 F. 102
• Parties: NATIONAL BANK OF GOLDSBORO et al. v. HILL. In re WAYNE FURNITURE CO.
• Court: U.S. Court of Appeals — Fourth Circuit

226 F. 102

NATIONAL BANK OF GOLDSBORO et al. v. HILL.

In re WAYNE FURNITURE CO.

No. 365.

United States District Court, E.D. North Carolina.

September 23, 1915

[Copyrighted Material Omitted]

H. B Parker, of Goldsboro, N.C., and A. W. Graham, of Oxford N.C., for plaintiffs.

W. W. Peirce, of Goldsboro, N.C., for trustee.

W. P. M. Turner, of Wilmington, N.C., for G. W. Waddell.

D. H. Bland, of Goldsboro, N.C., for Wayne Furniture Co.

CONNOR District Judge.

The facts, disclosed by the pleadings and proof, in respect to which there is no substantial controversy, are:

The Andrews-Waddell Furniture Company, a corporation, was engaged in buying and selling furniture in the city of Goldsboro, N.C., prior to January, 1912. The stock was sold to J. F. White and others, who organized the Wayne Furniture Company, with a capital stock of $5,000, taking over the assets and assuming the payment of the debts of the Andrews-Waddell Furniture Company. Said company was indebted to the Oxford Furniture Company in the sum of $2,200, evidenced by its note secured by a chattel mortgage on all of its property and assets, bearing date September 29, 1911, duly recorded. The Oxford Furniture Company was indebted to the First National Bank of Oxford, and, for the purpose of securing the payment thereof, and a line of credit, said furniture company, before its maturity, transferred and assigned said note and mortgage to the said Bank of Oxford. The Oxford Furniture Company transferred its property and assets to the International Furniture Company, which assumed the indebtedness of said company to the bank. The Wayne Furniture Company, during the year 1913, executed its notes in renewal, and for other purchases, to the said International Furniture Company, which said company, for value and before maturity, transferred and assigned said notes to said Bank of Oxford. Said indebtedness amounted, July 1, 1913, to about the sum of $2,400.

The Andrews-Waddell Company was indebted to the National Bank of Goldsboro in the sum of $1,500, evidenced by two notes. The charter of the Wayne Furniture Company authorized and empowered the corporation to issue bonds and to execute a mortgage on its property to secure the same in such amount and upon such terms as its board of directors should deem proper. On the 18th day of April, 1912, the board of directors of said company adopted a resolution authorizing, with the assent of the stockholders, the issue of bonds to the amount of $10,000, and the execution of a deed in trust to the National Bank of Goldsboro, for the purpose of securing the payment of said bonds, on all of its property and assets then owned or which should be thereafter acquired. The stockholders of said company, at a meeting held on the 18th day of April, 1912, approved the resolution of the board of directors, and directed the issue of said bonds and deed of trust, all of which is a matter of record. In said resolution it is recited that the board of directors desired to 'extend and enlarge its business,' etc.

Pursuant to the said resolution, the board of directors of said company caused to be prepared the bonds of said company, in denominations of $500 each, to the amount of $10,000, bearing interest at the rate of 6 per cent., payable semiannually and maturing in five years, and a deed of trust to said Bank of Goldsboro, in accordance with said resolution. The name of said company was signed to said deed and bonds by the president of the company, and attested by the secretary, who affixed the seal of said corporation thereto. The deed of trust was also executed by the First National Bank of Goldsboro, by its president, and attested by the cashier, as secretary, who affixed the seal of said bank thereto. There is attached to the said deed of trust a certificate in the following words and figures, to wit:

'State of North Carolina, Wayne County.

'The execution of the foregoing instrument, by the National Bank of Goldsboro, was this day proven before me by the oath and examination of George C. Kornegay, cashier of the above-named bank.

'May 14, 1912.

H. C. Smith, Notary Public.'

This certificate is pasted on the last sheet of said deed. Pasted below the foregoing is a certificate in the following language (printed, except date and signature):

'State of North Carolina, Wayne County.

'The foregoing instrument has been duly proven, as appears from the foregoing seals and certificates, which are adjudged to be in due form and according to law. Let the same, with said certificate, be registered.

'Witness my hand and official seal this the 15th day of May, 1912.

'(Seal.)

James R. Hatch, C.S.C.'

The certificate of the register of deeds of Wayne county shows that the deed was, on May 15, 1912, registered in Book 53, on page 539, in the office of the register of deeds for said county.

The deed and bonds bear date April 18, 1912. On May 10, 1912, the Wayne Furniture Company executed to the National Bank of Goldsboro its promissory note for $5,000, payable January 1, 1913, and, as collateral security therefor, deposited with said bank $5,000 of said bonds, of $500 each, numbered from 1 to 10, inclusive. The loan was made upon the faith of the deposit of said bonds. The proceeds of said note, less discount, were on May 14, 1912, deposited in said bank to the credit and subject to the check of said furniture company. It was drawn out soon thereafter. The notes held by the bank for $1,500 against the Andrews-Waddell Company, assumed by the Wayne Furniture Company, were paid from the proceeds of said note of $5,000. Payments amounting to $600 have been made on said note. The note was indorsed by J. F. White, who was president, and T. A. Henly, who was secretary, of said Wayne Furniture Company

Immediately after their execution, six of said bonds, numbered 11 to 16 inclusive, were delivered to the International Furniture Company, of which the said J. F. White was president, to secure its indebtedness to said furniture company, evidenced by notes held by said company, which had been assigned to the First National Bank of Oxford. Said bonds were immediately delivered by said furniture company to said bank to secure the indebtedness of the furniture company to said bank and to furnish a further line of credit to said International Furniture Company. One of said bonds of $500 was delivered to the Bank of Wayne as collateral security for a note of $350 held by the bank, and is now owned by said bank.

Defendant E. S. Waddell, guardian, holds three notes, of $389.67, executed by the Wayne Furniture Company August 24, 1912. On the . . . day of . . ., 1913, being more than four months prior to the filing of the petition in bankruptcy against the said Wayne Furniture Company, the said company, pursuant to an order of the superior court of Wayne county, assigned as security for said notes three of said bonds, of $500 each, and he now holds said bonds as collateral security for said notes.

On September 23, 1913, the Bank of Goldsboro, trustee, caused the said deed of trust of April 18, 1912, to be admitted to probate and a certificate of the clerk of the court attached thereto, in the form prescribed by the statute in force May 15, 1912, in North Carolina, and the said deed was again recorded in Book 70, p. 268, in the office of the register of deeds of Wayne county.

On the 1st day of September, 1913, the Bank of Goldsboro instituted an action in the superior court of Wayne county against the Wayne Furniture Company for the purpose of securing possession of the property and assets of said company, pursuant to the provisions of said deed of trust, and George T. Norwood, Esq., president of said bank, was appointed receiver of said property by the judge of said court, and upon his qualification, in accordance with the terms of said order, took into his possession, said property and assets.

On the 1st day of October, 1913, upon the petition of certain of its creditors, the Wayne Furniture Company was adjudged bankrupt, and at the first meeting of its creditors defendant E. W. Hill was elected and qualified as trustee, and as such claims to be entitled to the possession of said property and assets, including the amount collected by said receiver from said assets and held by him.

On May 6, 1913, T. A. Henly, secretary of said company, made a statement of the financial condition of said company to the 'Bureau of Credits,' showing assets amounting to $25,675 and liabilities amounting to $12,300, showing net worth $13,375. Among the assets were, 'Accounts and notes outstanding which are good,' $21,000.

There is no evidence that this statement was incorrect, except in respect to the value of the notes and accounts. The indebtedness stated included the amount due the banks, for which the bonds were assigned as security. T. A. Henly, secretary, says:

'At the time we negotiated the loan at the national bank, the concern was insolvent; but I did not know it. On the day we got the money, we bought a car load of goods, but didn't pay for them.'

There is no evidence showing that either the Bank of Goldsboro, the Bank of Oxford, or the Bank of Wayne, or E. S. Waddell, guardian, had knowledge or cause to believe that the Wayne Furniture Company was insolvent at the time that they took the bonds. There is evidence showing that the defendant Bank of Goldsboro had knowledge that said furniture company was insolvent on the 23d day of September, 1913. There is no evidence that the Bank of Oxford, the Bank of Wayne, or E. S. Waddell, guardian, knew of the insolvency of the furniture company on said day. The defendant, E. W. Hill, trustee, insists:

(1) That the certificate of probate, upon which the deed of trust was admitted to...