Nelden-Judson Drug Co. v. Commercial National Bank

• Decision Date: 16 November 1903
• Docket Number: 1462
• Citation: 27 Utah 59,74 P. 195
• Court: Utah Supreme Court
• Parties: THE NELDEN-JUDSON DRUG COMPANY, a Corporation, IDA C. FEHRINGER and FRED P. WILSON, Appellants, v. THE COMMERCIAL NATIONAL BANK OF OGDEN, a Corporation, and R. T. HUME, as Administrator of the Estate of SHIRLEY P. ASH, Deceased, Respondents

74 P. 195

27 Utah 59

THE NELDEN-JUDSON DRUG COMPANY, a Corporation, IDA C. FEHRINGER and FRED P. WILSON, Appellants, v. THE COMMERCIAL NATIONAL BANK OF OGDEN, a Corporation, and R. T. HUME, as Administrator of the Estate of SHIRLEY P. ASH, Deceased, Respondents

No. 1462

Supreme Court of Utah

November 16, 1903

Appeal from the Second District Court, Weber County.--Hon. H. H Rolapp, Judge.

Action to have decreed fraudulent and void a certain chattel mortgage executed to the defendant bank by Shirley P. Ash since deceased, on certain goods, wares and merchandise. From a judgment sustaining defendants' demurrer to the complaint, the plaintiffs appealed.

REVERSED.

T. D Johnson, Esq., and Messrs. Stephens & Smith for appellants.

A. R. Haywood, Esq., for respondent bank.

H. H. Henderson, Esq., for respondent Hume.

BARTCH, J. BASKIN, C. J., and McCARTY, J., concur.

OPINION

BARTCH, J.

--This action was brought to have decreed fraudulent, null, and void a certain chattel mortgage executed to the defendant bank by Shirley P. Ash, since deceased, on certain goods, wares, and merchandise including the stock in trade of the drugstore of the mortgagor, and fixtures, furniture, etc., and to have it adjudged that the bank has no preferred lien or claim over other creditors because of the mortgage. It was alleged in the complaint, substantially, that Shirley P. Ash, the mortgagor, died intestate in the city of Ogden on April 8, 1899, and that letters of administration upon the estate were issued to the defendant Hume on April 28, 1899. Shortly thereafter three claims, aggregating about $ 11,000, were presented to the administrator, and by him and the court approved and allowed. One of these claims--being about $ 1,000 was that of the Nelden-Judson Drug Company, for goods and wares sold by it to the deceased between November, 1898, and the date of his death; another, held by Ida C. Fehringer, for about $ 8,000, consisting of two promissory notes executed by the deceased on January 2, 1899; and the third was that of Fred P. Wilson, which had been assigned to him by Gilbert F. Boreman, administrator of the Mercer estate. This claim consisted of a deficiency judgment of about $ 2,500, rendered against the deceased in September, 1895. The defendant bank had a claim of about $ 6,000 against the deceased, which was presented to and was approved by the administrator and the court. This indebtedness to the bank was secured by the chattel mortgage in controversy. The mortgage was executed originally about February 28, 1896, for $ 8,500, and was thereafter, on March 1, 1897, renewed for the sum of $ 7,500 of the original indebtedness. A similar mortgage, which was, in effect, a renewal of the former one, was executed on February 28, 1898, in the sum of $ 6,000, and this was renewed by affidavit of the cashier of the defendant bank on February 24, 1899, and is the one set out in the complaint. It further appears that the several mortgages were all given to secure the same indebtedness, or portions thereof, upon the same stock of goods, furniture, and fixtures, except in so far as such goods had been changed from time to time by sales thereof and additions thereto.

It still further appears from the complaint that by the terms of the mortgage the mortgagor was permitted to remain in possession of the mortgaged property, and to sell the stock in trade in the usual course of business as the agent of the mortgagee, and apply the proceeds of such sales, less expenses, in payment of the secured debt; that no such application of the proceeds of such sales was made by the mortgagor; that, instead of such application, such proceeds were used by the mortgagor for his own benefit in payment of his private expenses, etc.; that he deposited such proceeds to his own credit in a bank, and treated them at all times as his private property, and expended the same as he saw fit; that in the conduct of the business he in no wise acted as the agent of the mortgagee, and at no time accounted to the mortgagee for any proceeds of sales; that the defendant bank with full knowledge and consent, permitted all these things to be done by the mortgagor; that the bank accepted the mortgage set out in the complaint, and those of which it was a renewal, for the purpose of hindering and delaying the other creditors of the mortgagor in the collection of their claims; that it was not the intention or purpose of the bank to collect the notes secured by the mortgage, nor the intention of the mortgagor to pay the same when due; that it was understood between the mortgagor and the bank that the latter's indebtedness should not be paid when due, but that the mortgage should be renewed from time to time, so that thereby the bank would be protected by its apparent lien against the claims of other creditors, and the mortgagor should be protected and permitted to continue in the business without paying unsecured creditors; that the mortgage is void upon its face, because it is given upon a changing stock of goods, and upon goods of which the mortgagor was not the owner at the time of the execution of the instrument; that the mortgagor had no other property than that covered by the mortgage, and was insolvent; and that, if the mortgage should be held valid and be enforced, no other creditor would receive payment of any part of his claim. It is further alleged that the plaintiffs have requested the administrator to commence and prosecute this action to set aside the mortgage; that they have offered to pay the costs and expenses of the suit, and to give security for so doing; that he refused to bring the action; that thereupon they petitioned the court to remove the administrator and appoint some other proper person who would bring this action; that the court denied the petition; and that the plaintiffs brought this action in behalf of themselves and all other creditors of the deceased similarly situated.

To the complaint the defendants interposed a demurrer on three grounds, as follows: (1) That the cause of action is barred by the statute of limitations; (2) that the complaint does not state facts sufficient to constitute a cause of action; and (3) that there has been another action between the same parties for the same cause, which has gone to final judgment upon the merits. This demurrer was sustained as to the...