Peabody v. Lloyds Bankers

• Decision Date: 05 June 1896
• Citation: 68 N.W. 92,6 N.D. 27
• Parties: PEABODY, State Examiner, et al. v. LLOYDS BANKERS et al.
• Court: North Dakota Supreme Court

6 N.D. 27

68 N.W. 92

PEABODY, State Examiner, et al.

v.LLOYDS BANKERS et al.

Supreme Court of North Dakota.

June 5, 1896.

Syllabus by the Court.

1. Where A., who furnished the money to buy a stock of goods, bought them in the name of B., and thereafter carried on the business in B.'s name as manager, ordering and paying for goods in his name, signing his name to checks, making credit statements in his name, having his name printed on the paper on which letters were written to merchants who sold goods to the business, and in every way created the false appearance that B. was the owner of the stock and the business; and where it appeared that certain attaching creditors, who seized the property as B.'s property, had sold the goods for the unpaid portion of the purchase price of which they attached, relying upon the appearance of B.'s ownership of the stock and of the business so created by A., a portion of the goods being the identical goods so sold by them to B.,- held, that A. was estopped, as against such creditors, from setting up ownership of the goods.

2. Held, further, that the same estoppel was operative against a receiver of a creditor of A.'s who accepted a pledge of the goods from A. as his property before the attachments were levied, no value having been parted with by the pledgee at the time of accepting the pledge, and it appearing that he knew at that time that A. had created this false appearance of B.'s ownership of the property, so that he, the pledgee, was chargeable with knowledge of the fact that, owing to A.'s conduct, estoppels might have arisen in favor of B.'s creditors.

3. As a general rule, estoppels bind privies as well as those who create them.

Appeal from district court, La Moure county; Roderick Rose, Judge.

Action by Kemper Peabody, as state examiner, against Lloyds Bankers. F. M. Kinter, as receiver of the Duluth Dry Goods Company, and others, intervened. From the judgment the interveners appeal. Reversed.Newman, Spalding & Phelps, for appellants. C. W. Davis, for respondents.

CORLISS, J.

The strife in this cause is between the pledgee of a stock of goods and certain attaching creditors. As we view the case, it presents neither complicated questions of fact nor perplexing legal problems. Prior to January, 1889, E. H. Wilson was engaged in the mercantile business with a Mr. Dewey under the firm name of Wilson & Dewey. Becoming financially embarrassed, in January, 1889, they made a general assignment for the benefit of their creditors. In August, 1890, the assignee sold this stock of goods at public auction. On the sale the stock was purchased by Wilson in the name of M. R. Isham. As a matter of fact the goods were purchased by Wilson for his own benefit, and the business was thereafter conducted in his own interest, Isham being only the nominal proprietor of the business. The motive for this is obvious. Wilson was so involved that he feared that his creditors would break up his business at any moment by seizure of the property to obtain payment of their demands, if it was supposed that he himself was carrying it on as proprietor. Therefore to the world he deliberately created the appearance that Isham was the owner of the stock of goods and the proprietor of the business, and that he was only a manager of the store. This appearance was false, and the motive which prompted Wilson to create it was fraudulent. For several years the business was conducted by him under this cover. He had exclusive charge of it, and from the beginning to the moment he turned over the stock of goods to the receiver of one of his creditors as pledgee he was responsible for every act which would naturally induce, and which did in fact induce, wholesale dealers to assume that Isham was the owner of the stock and the proprietor of the business. Wilson had Isham's name printed on the paper on which letters were written to wholesale merchants. The account in the bank was kept in Isham's name. All checks were signed in his name. His name was subscribed to all letters written to those who sold goods to be used in the business. The goods were ordered in his name. In fact every thing possible was done by Wilson to cause the public to believe that his connection with the store was simply that of manager, and that the stock and business belonged to and were being managed in the interest of Isham. Relying upon these appearances, created by Wilson, certain wholesale dealers sold Isham goods from time to time on credit, and some of these goods constitute a portion of the stock, on which they claim a lien by attachment superior to the lien of the pledgee. When Wilson purchased in the name of Isham the old stock of Wilson & Dewey at the assignee's sale, he borrowed of Lloyds Bankers, a firm engaged in the banking business in this state, the necessary sum of money to pay the purchase price, and gave his notes therefor. This banking business was subsequently transferred to a banking corporation of the same name. As part of this same transaction Isham executed to one of the Lloyds brothers an instrument which was obviously intended as a chattel mortgage to secure the amount of this loan. As such instrument was not placed on record until just before the attachment was levied, and as the attaching creditors extended credit to Isham between the time of the execution thereof, and the date of filing it, it is obvious that no rights can be claimed by the receiver of Lloyds Bankers under it as against such attaching creditors. Bank v. Oium, 3 N. D. 193, 54 N. W. 1034. The action in which these rights are being contested was originally brought by the state examiner against the Lloyds Bankers, a state banking corporation, to wind up its affairs, and annul its charter under the statutes of this state. In this action F. M. Kinter was appointed receiver. Finding among the assets of the corporation the notes given by Wilson and the chattel mortgage executed by Isham, Mr. Kinter made efforts to secure possession of the stock of goods, and finally succeeded in obtaining such possession. It is a controverted question of fact whether he took possession under this chattel mortgage, void as to creditors of Isham, or as pledgee. We will assume the theory of the case most favorable to the receiver, and, in our judgment, it is the one which the evidence requires us to accept. After he had obtained possession as pledgee to secure the notes held by him as receiver for the bank against Wilson, the creditors who claim a lien on this stock of goods as against him (the receiver) attached the property, permission to attach it having been granted by the court. When the receiver accepted the stock as pledgee it was delivered to him as the property of Wilson, and not as the property of Isham. Mr. Wilson at that time informed him, the receiver, that Isham had not then, and had never had, any interest in the stock or the business, but that he (Wilson) was the real owner and proprietor. By an amicable arrangement between the parties, the stock was sold, and the proceeds were placed in the hands of the receiver to abide the decision of this case. The attaching creditors intervened in the action, and the receiver was made a party. No questions of practice are raised, and we are asked to settle these conflicting claims in this action, all the parties interested...