Prins v. American Trust Co.

• Decision Date: 05 October 1925
• Docket Number: (No. 144.)
• Parties: PRINS et al. v. AMERICAN TRUST CO. et al.
• Court: Arkansas Supreme Court

275 S.W. 914

PRINS et al. v. AMERICAN TRUST CO. et al.

(No. 144.)

Supreme Court of Arkansas.

October 5, 1925.

Rehearing Denied November 2, 1925.

Appeal from Chicot Chancery Court; E. G. Hammock, Chancellor.

Suit by A. J. Prins and others against the American Trust Company and others. From a decree for defendants, plaintiffs appeal. Reversed and remanded, with directions.

Coleman, Robinson & House, of Little Rock, and Church & Gannaway, of Memphis, Tenn., for appellants.

Cooley, Adams & Fuhr, of Jonesboro, for appellees.

WOOD, J.

The Holland Delta Company, hereafter called Delta Company, is a New Jersey corporation authorized to do business in Arkansas. It owns what is known as the Red Leaf and Eminence plantations, containing 7,563 acres in Chicot county, Ark., on which it conducted farming operations in the years 1922 and 1923. The Netherlands American Mortgage Bank, hereafter called Netherlands Bank, is a corporation of the Netherlands authorized to do business in the states of Arkansas and Minnesota. The American Bank & Trust Company, hereafter called Trust Company, is a banking corporation of Arkansas. On July 9, 1921, the Trust Company had obtained a judgment against the Delta Company in the sum of $20,081.48, which judgment was enrolled on the judgment docket in the office of the clerk of the circuit court of Chicot county on July 9, 1921. On the 8th of June, 1923, an execution was issued on this judgment and levied on the stock of goods in the store of the Delta Company on its Red Leaf plantation, and also on lumber that had been manufactured from timber cut from the lands of the Delta Company on the Red Leaf plantation.

The Delta Company was indebted to the Netherlands Bank in the sum of $300,000, evidence by a note for the principal sum dated September 1, 1920, with interest coupon notes attached, due annually thereafter on the 1st of February beginning with February 1, 1921, until the due date of the principal note in the year 1927. The interest due February 1, 1921, was $8,125, and the sum of $19,500 was due each year thereafter until 1927. These notes were secured by a deed of trust on the Red Leaf and Eminence plantations. The Delta Company was also indebted on the 27th of February, 1922, to what is designated in the record as the Hollam Company in the sum of $75,000 to secure which the Hollam Company had a mortgage on all the mules and horses and all agricultural implements on the above plantations, but not including the stock of merchandise in the store on the Red Leaf plantation. After the levy of execution on June 8, 1923, of the Trust Company above mentioned, one A. J. Prins instituted an action in the circuit court claiming to own the lumber upon which the execution had been levied; and he also instituted an action in the chancery court, in which he set up that he was the owner of the stock of goods on which the execution of June 8, 1923, had been levied. Prins sought by these actions to prevent the sale of the property, which had been levied upon as the property of the Delta Company, and to have the same declared his property.

The case at law was transferred to the chancery court, and the causes were there consolidated for trial. The Trust Company, the execution creditor, set up that the Delta Company was insolvent, of which fact Prins had knowledge at the time of his alleged purchase of the stock of goods from the Delta Company; that this pretended sale was fraudulent and made for the purpose of hindering and delaying the Trust Company in the collection of its debt; that Prins was but the mere dummy and agent of the Delta Company and acted for it in the pretended sale and transfer of the stock of goods, and, in fact, there had been no transfer of the control and possession of said store and stock of goods, but that the same remained in the possession of the Delta Company. The Trust Company further set up that the alleged purchase and transfer of the stock of goods was void, because it was in violation of the Bulk Sales Law of the state of Arkansas (Crawford & Moses' Dig. §§ 4870-4872).

The trial court found that "the said conveyances purported to be made to said A. J. Prins of the store and lumber were made at a time when said Holland Delta Company was insolvent, and with the intent and purpose to hinder, delay, defraud, and cheat the American Trust Company, and other creditors, and that said stock of merchandise and lumber were, at the time of the levy of said execution, the property of the Holland Delta Company, and not the property of the plaintiff, A. J. Prins; that the value of said stock of merchandise is the sum of $3,750, and the value of said 70,000 feet of cypress lumber is the sum of $2,100, and that the American Trust Company is entitled to recover from A. J. Prins, Holland Delta Company, and Fidelity & Deposit Company of Maryland the sum of $5,850," which with interest amounted to the total sum of $6,269.37, for which sum the court rendered a decree in favor of the Trust Company against Prins, his bondsman, the Fidelity & Deposit Company of Maryland, and the Delta Company. From that decree is this appeal.

1. The first question is, Was Prins the owner of the stock of goods in controversy? The Delta Company, in the fall of 1921, was unable to pay either the principal or interest on its accruing indebtedness; it could not pay its taxes for that year, and was unable to finance its farming operations for the next year. The proof tended to show that on February 27, 1922, the Delta Company was hopelessly insolvent. The Netherlands Bank, its largest creditor, was threatening to foreclose its mortgage. To prevent this, the Delta Company and the bank entered into an agreement by which the Delta Company was to lease its plantations in Chicot county for the year beginning March 1, 1922, and ending February 28, 1923, and also for the year 1923, to one A. J. Prins. The bank agreed to furnish, and did furnish, Prins approximately $100,000 for the necessary operation of the plantations. Under the agreement, Prins was to apply the gross proceeds of the plantations, first, to the repayment of the sums advanced by the bank for operating expenses; second, to the 5 per cent. of the net proceeds to be retained by Prins: third, to the sums advanced by the bank and the Hollam Company for the payment of the taxes on the real and personal property for the year 1921; fourth, to pay the accrued interest on the mortgage loan of the bank, and also the interest to become due February, 1923; fifth, to pay the taxes for the year 1922; and sixth, to pay the interest that would accrue on the Hollam debt due December 1, 1922.

At the time of the execution of the lease, February 27, 1922, the Delta Company had in its store, on the Red Leaf plantation, a stock...