Robinson v. Baugh

Decision Date03 November 1900
Citation61 S.W. 98
PartiesROBINSON et al. v. BAUGH et al.
CourtTennessee Supreme Court

Appeal from chancery court, Franklin county; T. M. McConnell, Chancellor.

Bills by J. H. Robinson and others against J. L. Baugh and others. The cases were consolidated. From a decree for complainants, defendants appeal. Modified.

Geo. E. Banks, for appellants. Lynch & Lynch and Embry & Taylor, for appellees.

NEIL, J.

In these consolidated cases there were four bills attacking as fraudulent a mortgage and a trust deed made by J. L. Baugh, a merchant of Winchester, — the first to S. M. Alexander for the benefit of the Home Bank, of that city, and the second a trust deed to George E. Banks for the benefit of sundry creditors. The chancellor sustained the bills, and the defendants, Home Bank, S. M. Alexander, J. L. Baugh, and George E. Banks prayed and obtained an appeal, and have assigned errors.

The mortgage for the benefit of the bank is as follows: "Whereas, I am indebted to Home Bank, Winchester, by note dated March 25th, 1899, and due July 22nd, 1899, for the sum of $1,500.00: Now, for the purpose of making said bank safe and secure in the payment of said note, and for any other I may owe said bank hereafter, I, J. L. Baugh, have this day bargained, sold, transferred, and conveyed unto S. M. Alexander, cashier of Home Bank, the following described storehouse and lot; being the storehouse where I am doing business, on the corner of the public square, Winchester: Bounded on the north by street, east by Lawing, west by street, and south by hotel property and S. A. Billingsley. To have and to hold said storehouse and lot to the said S. M. Alexander, cashier Home Bank, his assigns and representatives, forever. I covenant that I am lawfully seised and possessed of said property, and I will warrant and defend the title to the same against the lawful claims of all persons whomsoever. I also transfer and convey my entire stock of goods in said storehouse to said S. M. Alexander, cashier Home Bank, as further security for the payment. Said goods consist of clothing, boots, shoes, hats, caps, dry goods, and notions. But all of the property in said building is transferred, but the said J. L. Baugh has the right to sell any of said goods at retail. I warrant the title to all of said personal property to the said S. M. Alexander, cashier Home Bank. Witness my hand this 25th day of March, 1899. J. L. Baugh." The trust deed to George E. Banks is in form a special deed in trust conveying to Mr. Banks the same storehouse and lot described in the first instrument; also J. L. Baugh's stock of goods, and furniture and fixtures in his store; also his book of accounts marked "A." It secures by name 21 creditors in an amount aggregating $5,273.28, — among others, the Home Bank in the sum of $1,500. This trust deed contains the following directions: "The said Geo. E. Banks, trustee, will take immediate possession of said property. He will make an immediate inventory thereof as described and required by law. He will sell said property to the best advantage of the beneficiaries of this trust, either in wholesale, in bulk, or in lots, or at retail, at public auction or private sale, for cash or on credit, taking notes at six months, with two good, solvent securities on each note. He will sell said storehouse and lot, as he may deem to the best advantage, on not longer than six and twelve months' time, taking notes with good and solvent securities, and taking a lien on the property; and said trustee will be empowered to make the purchaser a deed. Out of the proceeds of the said storehouse and lot he will first pay the mortgage debt and interest due the Home Bank. He will collect all of said accounts on the book marked `A,' and the proceeds of all of said property, after paying the Home Bank debt and the interest, he will apply as follows: First, to the expense of this trust, including clerk hire, trustee's and attorney's fees, and other necessary expenses; second, he will pay the debts in full of the creditors heretofore specified in this deed of trust, and the balance, if any remains, he will pay to me. The trustee will execute his trust and wind up as speedily as possible, but he will close up all of said business within eighteen months of this date." It should be stated that in this trust deed the following reference is made to the mortgage: "Said storehouse and lot is conveyed subject to a mortgage executed to the Home Bank, at Winchester, Tennessee, on the 25th day of March, 1899, for the sum of $1,500." At the time the mortgage to the bank was executed, Mr. Baugh executed a note for $1,500, maturing at four months after date. This note, on its face, refers to the mortgage as collateral. Interest was paid on this note from time to time to July 25, 1900. It should be stated that the bank filed a cross bill to enforce the collection of the above-mentioned note by a sale of the property under its mortgage through the agency of the court. It is observed that by the terms of the mortgage in favor of the bank the right to retain and sell the stock of goods was reserved to J. L. Baugh. The testimony shows that he exercised this right, and remained in possession of the goods after that mortgage was executed in the same way as before, replenishing and selling at retail as is the custom of retail merchants. In short, the mortgage made no change in his control of the goods, or his appropriation of the proceeds as he deemed his own interests required. This mortgage was not put to registration until the date of Mr. Baugh's failure, and then was registered but an hour prior to the making of the trust deed. After the trust deed was made, Mr. Banks, as trustee, employed agents, and had an inventory made. This inventory shows that the total value of the property, real and personal, is $7,441.85. Of this sum, about $1,800 is fixed in the testimony as the value of the storehouse, the rest is the value of the goods and the book of accounts; the latter containing accounts estimated to be worth $120. The debts amounted to $5,273.28, on the face of the trust deed. As to the mortgage, there is no evidence of a fraudulent purpose, except such as may be inferred from the clause therein contained authorizing the retention of the stock of goods and its use and appropriation by Mr. Baugh, and his actual use of the property in accordance with the reservation in his favor in that instrument, and the further fact that this mortgage was withheld from registration up to the day of Mr. Baugh's failure. The bank, however, qualifies this latter circumstance by showing in the testimony that at the time the mortgage was taken the officials of the bank were informed by Mr. Baugh that he owed only $1,500, and that this money was procured for the purpose of paying that indebtedness. The officials of the bank did not know until about the time the trust deed was executed that Mr. Baugh owed any other debts. It now turns out that at the time he executed the mortgage he owed debts amounting to about $2,000; that after the mortgage he incurred debts amounting to about $1,800 over and above the debt to the bank itself.

The only points urged against the trust deed are that by its reference to the mortgage it incorporates the latter, and it is said that, inasmuch as the mortgage is fraudulent, it makes the trust deed likewise fraudulent. It is also urged that the trust deed allows too long a time for winding up. It is construed in the briefs as allowing a period of 18 months before there can be a final closing out, and it is said that then the property may be sold on 12 months' time. It is pointed out that the real estate is conveyed subject to the right of redemption, and it is suggested that there may be thus a period of three years before there can be any final settlement of the matter according to the terms of the trust deed, even after the expiration of the 18 months. It should be stated that the complainants acquit Mr. Banks of any intentional or actual fraud. Their allegations are based, as stated, upon the face of the instrument, in the manner just pointed out. However, they insist, and such is the fact, that Mr. Banks drew the mortgage in favor of the Home Bank, and hence knew its contents, and was also aware of the fact that Mr. Baugh was in possession of the goods, using and selling them as any other retail merchant; and this knowledge was possessed by him at the time he became trustee under the second instrument. It should further be stated, with regard to the amount we have set forth as the aggregate of the indebtedness secured in the trust deed, that there is included in this a debt of $683.95 to the Winchester Cemetery Company, and that the trust deed states on its face that this is subject to a reduction for services. The Winchester Cemetery Company is a party to...

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  • Hasbrouck v. LaFebre
    • United States
    • Wyoming Supreme Court
    • October 13, 1915
    ... ... Orton, 7 Or. 478, 33 A. R. 717.) Tennessee; ... ( Tennessee Nat. Bank v. Ebert, 9 Heisk. 153; ... McTeer v. Huntsman, 49 S.W. 57; Robinson v ... Baugh, 61 S.W. 98; Moore v. Wood, 61 S.W ... 1063.) Texas; ( Wilbur v. Kray, 73 Tex. 533, 11 S.W ... 540; Nat. Bank v. Lovenberg, ... ...

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