Roan v. Winn

• Decision Date: 20 June 1887
• Parties: Roan, Appellant, v. Winn, Appellant; Rubey, Assignee, Respondent
• Court: Missouri Supreme Court

4 S.W. 736

93 Mo. 503

Roan, Appellant, v. Winn, Appellant;

Rubey, Assignee, Respondent

Supreme Court of Missouri

June 20, 1887

Appeal from Moberly Court of Common Pleas. -- Hon. G. H. Burckharrt Judge.

Reversed and remanded.

R. S Matthews and R. J. Ebberman for appellant, Roan.

(1) The capital stock of a bank includes its money and property, and is a trust fund for all creditors who may do business with such bank. See Angell and Ames on Corp., sec. 600; Thomp. on Liability of Stockholders. The decisions of all the states are uniform on this question, and have been in American courts since 1824, when the law was first declared by Chief Justice Story. (2) Winn having been a stockholder and director of said bank from its organization, and was such in 1880, when the transfers of said property were made, he cannot be heard to say that he did not know the condition of said bank at the time he bought said property with his paid-up stock. 1 Greenl. on Evidence, sec. 207; Thompson on Liability of Officers and Agents of Corporations, p. 398 sec. 24, and cas. cit. (3) The assignee cannot maintain an action to recover property conveyed in fraud of creditors. Lemay v. Bicheau, 2 Minn. 291; Easterbrook v. Messersmith, 18 Wis. (4) The bank had no right to transfer its real estate. R. S. secs. 706, 743. But when purchased by a stockholder or director, he holds it subject to the rights of creditors. Thompson on Liabilities of Officers of Corporations, p. 398; Twinlick Oil Co. v. Marburg, 91 U.S. 587. (5) The transfer from the bank to Winn is not void, but voidable, and the first one who sues has the prior right. George v. Williams, 26 Mo. 190; Pullis v. Robinson, 73 Mo. 201; Jackson v, Robinson, 64 Mo. 289. (6) At common law, the assignee of an insolvent debtor for the benefit of creditors takes only such rights as the assignor or debtor had at the time of the general assignment, and if the assignor had no right of action the assignee has none. 2 Story's Eq., sec. 1039; Broom's Legal Maxims, p. 314; Hulbert v. Carter, 21 Barb. 223; 9 Mo.App. 594; 7 Mo.App. 236. A naked right to sue cannot be assigned. Smith v. Harris, 43 Mo. 557; Wait on Actions & Defences, 361.

Williams & Jones and Sears & Guthrie for appellant, Winn.

(1) Plaintiff's petition is fatally defective because it fails to state that he has ever reduced his claim against the Macon Savings Bank to a judgment. To maintain a bill in equity to set aside a fraudulent conveyance such action is an essential prerequisite. The plaintiff must establish his claim by a judgment, and thus secure a lien on the property. Crim v. Walker, 79 Mo. 335; Lionberger v. Baker, 88 Mo. 447; Zoll v. Soper, 75 Mo. 460; Martin v. Michael, 23 Mo. 50; Fisher v. Tallman, 74 Mo. 39; 2 Bump on Fraud. Con. [2 Ed.] 521, 2, 3, 4; Dunlevy v. Tallmage, 32 N.Y. 457; Van Hussen v. Radcliff, 17 N.Y. 580, 584; 12 F. 375. (2) And, even while an allowance of a claim by an assignee may pass such claim in rem adjudicatam between the assignee and claimant, and forever settle the claimant's right to participation in the assets in the hands of the assignee, it is not res adjudicata as between the claimant and the assignor. It can create no lien on the assignor's unassigned realty. It will not support an execution. If the assignor should be sued upon it, he would have every defence, and more than he could interpose to an action on a foreign judgment, as was the case in Crim v. Walker, 79 Mo. 335. It only adjudicates his relation to the assigned property. Eppright v. Kauffman, 90 Mo. 25. (3) But the petition even fails to allege that plaintiff's debt had ever been formally allowed by the assignee, or any steps taken to have a proper allowance of his claim before the assignee. Plaintiff could have obtained a judgment at law against the bank, and thus have established his debt and a lien, and if he then found the bank the owner of the land, but Winn's claim of such a nature as to obstruct his execution, he could have applied to a court of equity for relief. Lionberger v. Baker, 88 Mo. 447. But courts of equity do not sit to collect debts. Dunlevy v. Tallmage, 32 N.Y. 457-461. (4) The bank, the only real debtor, the real wrong-doer, and whose fraud is the sole subject of investigation in this cause, is not made a party, and no reason is alleged therefor in the petition. Randolph v. Daly, 16 N.J.Eq. 313; Gaylord v. Kelshaw, 1 Wall. 81; Sewall v. Russell, 2 Paige, 175; Bump on Fraud. Con. [2 Ed.] 534, cas. cit. in note 7. (5) Defendant, Rubey, by the assignment set up in his cross-bill, took no right, title, or interest in the land in controversy. He took the estate as his assignor held it at the time of the assignment. Phillips to use v. Rowse, 49 Mo. 586, 593; Henrich's v. Wood, 7 Mo.App. 236; Haeussler v. Leichman, 9 Mo.App. 594; Schultz v. Christman, 6 Mo.App. 338; Zoll v. Soper, 75 Mo. 460; Jackman v. Robinson, 64 Mo. 289; Merry v. Freeman, 44 Mo. 518; George v. Williamson, 26 Mo. 190; Brown v. Finley, 18 Mo. 375; Hall v. Callahan, 66 Mo. 316; Hawks v. Pretzloff, 51 Wis. 163; Campbell v. Whitson, 68 Ill. 240; S. C., 18 Am. Rep. 553; Van Husen v. Radcliff, 17 N.Y. 580; 20 F. 801. (6) Receiver of insolvent bank cannot follow property in hands of directors without aid of a statute. Van Dyck v. McQuade, 86 N.Y. 38.

Dysart & Mitchell for respondent.

(1) Plaintiff is at fault in assuming that the transaction between the officers of the bank, whereby Winn swapped, or exchanged, his stock for the property of the corporation, was not void, but only voidable; that such exchange was good and valid, as between the bank and Winn, and assailable only by a creditor of the bank. No case has been cited, nor can be, that a corporation can surrender its assets and property for the shares it has already issued and sold for cash. The very purpose of selling the shares was to create a capital stock, and that capital stock at once became a sacred trust fund for creditors. R. S., secs. 902, 908, 913. (2) But even if this were an ordinary case of a fraudulent sale, without consideration, of the property from the bank to Winn, it is not admitted that Rubey, as assignee, could not claim and subject it to the payment of the debts of the bank. Our statute of assignments has made important changes in the common law. Now the assignor cannot prefer a creditor. The transfer is for the benefit of all the creditors in proportion to their claims. Alexander v. Relfe, 74 Mo. 495. (3) The petition is not fatally defective in failing to allege that plaintiff had first reduced his claim to judgment. The corporation was insolvent. State ex rel. v. Kellogg, 52 Mo. 583; Moore v. Whitcomb, 48 Mo. 543; Hotel Co. v. Sauer, 65 Mo. 279; Slee v. Bloome, 19 Johns. 456; Dryden v. Kellogg, 2 Mo.App. 88. Besides, it is claimed by Roan that he had his claim allowed, which is a judgment. Eppright v. Kauffman, 90 Mo. 25.

Norton C. J. Black, J., concurring in the result.

OPINION

Norton, C. J.

It is substantially alleged by the petition in this case, that the Macon Savings Bank, on the sixteenth day of February, 1882, made an assignment for the benefit of its creditors, to the defendant, Web. M. Rubey; that, at the time of the failure and assignment by the said bank, the bank was indebted to the plaintiff in the sum of $ 1,333.78; that, previous to said assignment, on the eleventh day of February, and on the second day of March, 1880, said bank conveyed by deed to defendant, Winn, two parcels of land, the property of said bank, in consideration of said Winn (who was then, and had been since 1874, a stockholder and director in said bank) surrendering to said bank twenty-seven hundred dollars of his paid-up stock; that, at the time these deeds were made, the bank was insolvent and in failing circumstances, of which it is alleged defendant, Winn, had knowledge. The prayer of the petition is, in effect, that the property so conveyed be subjected to sale for the payment of plaintiff's debt as a creditor of said bank.

The answer of defendant, Winn, is a general denial; defendant, Rubey, answers, and in effect admits the facts set up in the petition, and by way of cross-action, sets up the assignment made to him by the bank, and as the representative of the creditors, asks the court to deny the prayer of the plaintiff, and grant a decree in his favor, declaring the rents and profits of the land conveyed to his co-defendant, Winn, trust property for the benefit of the creditors, and that Winn be required to re-convey the land to him as assignee of the bank. The court found that the deeds to Winn were void, and decreed that the title to the premises be vested in defendant, Rubey, to be administered by him under the deed of assignment, and that he pay plaintiff out of the proceeds of the premises two hundred dollars, assessed by the court in his favor for an attorney's fee in bringing the suit. The case is before us on cross-appeals from this judgment taken by plaintiff, Roan, and defendant, Winn, Roan complaining that the court erred in not decreeing the land to be sold for the satisfaction of the debt, and Winn complaining that it erred in holding the deeds to be void.

It is conceded that the relation of defendant to the bank as stockholder and director was such as is stated in the petition; that Winn paid for the property in dispute by surrendering to the bank twenty-seven hundred dollars of his paid-up stock, and that the stock so surrendered was selling at par, and that twenty-seven hundred dollars was the fair and full value of the land, at the time of the sale, and it was agreed to be worth, at the time of the trial, twenty-two hundred dollars, and that the bank did not become indebted to plaintiff until fifteen months after the sale. The defendant Winn, over the...