National Tube-Works Co. v. Ring Refrig. & Ice-Mach. Co.

• Decision Date: 19 June 1893
• Citation: 118 Mo. 365,22 S.W. 947
• Court: Missouri Supreme Court
• Parties: NATIONAL TUBE-WORKS CO. v. RING REFRIGERATING & ICE-MACH. CO.

22 S.W. 947

118 Mo. 365

NATIONAL TUBE-WORKS CO. v. RING REFRIGERATING & ICE-MACH. CO.

Supreme Court of Missouri, Division No. 1.

June 19, 1893.

FRAUDULENT CONVEYANCES BY CORPORATIONS — SECURING DEBTS OF OFFICERS — INSTRUCTIONS.

1. An instruction that mortgages were not in fraud of creditors, if made to secure actual loans of money, is erroneous, in that it ignores the intent with which the mortgages were made; and such error is not cured by another instruction, that intent, in making the conveyances, to conceal, remove, or dispose of property so as to delay creditors would make them fraudulent, as it might be inferred from the instructions, taken together, that no fraudulent intent could exist if the mortgages were made to secure bona fide debts.

2. A mortgage by a corporation is fraudulent as to creditors where part of the amount secured thereby is a loan to one of its officers, and it is immaterial that the officer applied the money loaned to the payment of his indebtedness to the corporation, or that part of the amount secured was a bona fide indebtedness of the corporation.

3. An instruction that if the money was loaned to the officers, and used by the latter in the business of the corporation, then the mortgage was valid, was misleading, and should have been modified so as to require a finding by the jury that the money was borrowed by the officer for the use of the company, and not for his individual use in liquidating his indebtedness to the company.

Barclay, J., dissenting.

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

Suit by the National Tube-Works Company against the Ring Refrigerating & Ice-Machine Company. From a judgment for defendant, plaintiff appeals. Reversed.

The other facts fully appear in the following statement by MACFARLANE, J.:

This is an appeal by plaintiff from a judgment in favor of defendant on a plea in abatement to an attachment suit. Plaintiff commenced its suit on the 25th day of October, 1890, on several notes and bills made and accepted by respondent between August 6, 1890, and October 4th, thereafter, and in aid thereof filed an affidavit, and sued out an attachment, which was levied upon the property of defendant, and to which the plea in abatement was filed. The grounds of the attachment were that the defendant had fraudulently conveyed and assigned its property and effects, and was about fraudulently to convey its property and effects, so as to hinder and delay its creditors, and also that the debt sued for was fraudulently contracted on the part of the defendant. The evidence tends to prove that John Ring owned three letters patent of the United States. Early in the year 1879, Ring and his associates, John H. Tracy, Frank K. Ryan, A. R. Payinghaus, and James J. Campbell, organized defendant corporation, with a capital of $100,000, and themselves constituted the first board of directors. The agreement among these promotors was that said letters patent should be transferred by Ring to the corporation for $60,000 of the full-paid stock of the company, and in full for said patents. Of the remaining $40,000 of the capital stork, $20,000 was to be sold for cash, and $20,000 was to remain in the treasury of the company. No cash was paid into the hands of the board of directors when the corporation was organized, though the certificate filed showed that the whole capital stock had been paid up in lawful money of the United States. The evidence tended further to prove that, after the organization of the corporation, $80,000 of the paid-up capital stock of the company was issued to Mr. Ring in consideration of the assignment of the letters patent, and $20,000 was placed in the treasury of the company for sale, and which was to provide the operating capital. Part of this was afterwards sold. From its organization, John Ring was president and general manager of the company. The evidence tended to prove, though conflicting, that in December, 1889, Ring, representing defendant, with a view of obtaining a line of credit with plaintiff, stated that there was $20,000 in cash in the treasury of the company, when in truth there was nothing; that, on the faith of this representation, plaintiff gave defendant the credits which are the foundation of the suit. The evidence also tended to prove that Ring borrowed of Tracy the sum of $10,000, for which he gave his individual note, and a portion of his stock in the corporation, as collateral security, and that the money borrowed went into the corporation, to the credit of Ring, and was applied in liquidation of his indebtedness to the company. On August 6, 1880, the $10,000 so borrowed from Tracy was included in a note made to Tracy by defendant; and this note, amounting to $20,000, was secured by the deed of trust on the property of defendant. The note from Ring to Tracy was thereupon canceled. This deed was not recorded until October 6, 1890. A mortgage was also given to Tracy on the letters patent to secure a note of $5,000. At the request of the plaintiff the court gave the usual instructions in such cases, to the effect that if, at the date of the attachment, defendant had concealed, removed, or disposed of its property or effects with the intent to hinder and delay its creditors, or was...