Slow v. Ohio Valley Roofing Company

• Decision Date: 29 June 1926
• Docket Number: 24,677
• Citation: 152 N.E. 820,198 Ind. 190
• Parties: Slow et al. v. Ohio Valley Roofing Company
• Court: Indiana Supreme Court

152 N.E. 820

198 Ind. 190

Slow et al. v. Ohio Valley Roofing Company

No. 24,677

Supreme Court of Indiana

June 29, 1926

1. RECEIVERS.---Transfer of property of an insolvent individual fraudulently, or a lien thereon must be shown to confer jurisdiction on court to appoint receiver therefor.---Courts do not have jurisdiction to appoint a receiver for the property of an individual and seize possession of it on allegations and proof that he is insolvent and has transferred all his business property to a trustee for the benefit of certain of his creditors, not including the plaintiff, without any showing that the plaintiff has a lien on the property transferred to the trustee or that there was fraud in making such transfer. p. 195.

2. FRAUDULENT CONVEYANCES.---Transfer by insolvent individual of all his property to secure pre-existing debts of certain creditors is not transfer within "Bulk Sales Law" and not ground for appointment of receiver.---The transfer by a debtor of all his property to a trustee for the benefit of a portion of his creditors as security for pre-existing debts, providing therein for redemption from the trust by the payment of the indebtedness secured thereby and for sale of the property and the application of the proceeds to the payment of the debts so secured, is not a transfer prohibited by 8052 Burns 1926, 7471a Burns 1914 (the Bulk Sales Law) without notice to creditors, and hence is no ground for the appointment of a receiver under 8054 Burns 1926, 7471c Burns 1914. p. 196.

3. FRAUDULENT CONVEYANCES.---Chattel mortgage of stock of goods is not transfer prohibited by the "Bulk Sales Law" without notice to creditors.---A chattel mortgage on a stock of goods for a bona fide indebtedness does not constitute a sale, transfer or assignment within the meaning of the "Bulk Sales Law" which is prohibited unless proper notice is given to all creditors as prescribed by the statute (8052 Burns 1926, 7471a Burns 1914). p. 196.

4. FRAUDULENT CONVEYANCES.---A mortgage for the benefit of a portion of the mortgagor's creditors is not invalid where it was given in good faith as security for bona fide debts actually owed by him. p. 198.

From Vanderburgh Probate Court; Elmer Q. Lockyear, Judge.

Application for the appointment of a receiver by the Ohio Valley Roofing Company against Harry Slow and others. From a judgment appointing a receiver, the defendants appeal.

Reversed.

James T. Walker, Henry B. Walker and Alvin F. Sutheimer, for appellants.

Ollie C. Reeves and William L. Mitchell, for appellee.

OPINION

Ewbank, J.

This is an appeal from an order appointing a receiver for property of Harry Slow, which he owned as an individual and was using in the operation of a business under the name of "the Harry Slow Lumber Company." The complaint alleged that appellant Slow was indebted to appellee for merchandise sold to him in the sum of $ 817.33, which amount was due and unpaid; that Slow was insolvent, and had created a large amount of indebtedness within the past two or three months and was engaged in disposing of his assets; that two weeks before the complaint was filed, he had executed a conveyance of all his property used in the business of the Harry Slow Lumber Company to a trustee for certain of his unsecured creditors, not including appellee, and that the trustee was threatening to sell such assets on the morning of the day when the complaint was filed; that some of appellant's creditors had claims secured by mechanics' liens, and the trustee threatened to pay the claims thus secured out of the proceeds from a sale of such assets, to the detriment of the unsecured creditors. And that the instrument of conveyance purporting to be a mortgage to a trustee for the benefit of certain creditors therein named was intended as a voluntary assignment for the benefit of all general creditors, though it did not name all of them as beneficiaries thereunder. The conclusion was stated that unless a receiver be appointed at once, the plaintiff and other creditors who had no liens or security would suffer irreparable damage. This complaint was duly verified. Appellant filed an answer of denial and there was a trial by the court.

The evidence consisted of a statement of agreed facts, and without conflict showed that appellant for many years had been engaged in the contracting business at Evansville; that for a few months, he had been a partner in the Meredith and Slow Lumber Company, which operated a lumber yard and sold builders' supplies, but more than three months before this action was commenced, had bought out the interest of his partner, and thereafter had continued the business of general contractor and the operation of the lumber yard as sole owner under the name of the Harry Slow Lumber Company, until the mortgage above referred to was executed; that being pressed for payment by some of his creditors, he had executed the written instrument referred to, purporting to convey to a trustee, for the sum of $ 1, that portion of his property used in the conduct of the business of the lumber company and in the general contracting business, "consisting of all mill machinery, lumber and office fixtures, outstanding accounts receivable, contracts, open accounts, choses in action, mechanics' liens or notes or bills," (many items of such property being enumerated), "as trustee for certain of general unsecured creditors of the mortgagor a list of which creditors is hereto attached with their addresses and the amount desired to be secured by this mortgage, all of which are made a part of this instrument." That it provided that any one of the creditors who should attempt to set the mortgage aside or refuse to accept benefits under it should not share in the benefits thereof, and that the mortgagor should keep possession of the property as agent of the trustee and sell the merchandise in the ordinary course of business, collect outstanding accounts, and account daily to the trustee for the entire proceeds. It also authorized the trustee to pay pro rata dividends to the creditors for whose benefit the mortgage was made until they should be paid in full, and provided that until the trustee should demand possession of such property, the mortgagor should remain in possession thereof as agent of the trustee, for his use and benefit, but that the trustee might be required to sell and dispose of any such goods and chattels on demand of a majority of the creditors in number and amount of their claims. Also that, upon payment by the mortgagor to the trustee of a sufficient sum fully to satisfy and discharge the claims of the creditors thereby secured, including costs and expenses in carrying out the trust, the conveyance should become void. A list of the creditors whose debts were to be paid and the amount of the debt secured on behalf of each, was attached to the instrument. It was shown that at the time he executed this instrument, appellant believed his assets were equal to or in excess of his liabilities, but did not know the amount of either. That said instrument was duly recorded in the county in which he resided on the next day after it was executed, being thirteen days before this suit was brought. That at the time he executed this instrument, appellant purposely omitted from the benefits thereof two creditors having claims of over $ 2,000, and, by mistake, omitted from such benefits three others who were general merchandise creditors. That he intended by this instrument to transfer for the purposes therein set out all of his assets except a piece of...