Smith v. Diplock
| Decision Date | 12 January 1929 |
| Parties | SMITH v. DIPLOCK. |
| Court | Maine Supreme Court |
Appeal from Supreme Judicial Court, Kennebec County, in Equity.
Suit by Horace H. Smith against Wallace Diplock. Decree for defendant, and plaintiff appeals. Appeal sustained, and case remanded.
Argued before WILSON, C. J., and DUNN, DEASY, BARNES, and PATTANGALL, JJ.
Geo. W. Heselton, of Gardiner, and Herbert E. Foster, of Winthrop, for appellant.
McLean, Fogg & Southard and Arthur F. Tiffin, all of Augusta, for appellee.
The issue between the parties in this case is as to the character of a transfer of property.
The parties for several years had each owned 99 of the 200 shares of a corporation engaged in the business of retailing furniture, and one-half, in common and undivided, of the store used in the business and the lot on which it stands, in Augusta.
The defendant had been in the business for 34 years, and engaged in the real estate business for 25 years at time of hearing.
In 1921, the Wallace Diplock Company, a corporation, was formed; Mrs. Diplock and Mrs. Smith each holding a share of stock. Defendant was president and a director; plaintiff, treasurer and a director; and Mrs. Diplock, the other director.
In the later years of the business, goods to the value of $75,000 were annually bought and handled in the store and two warehouses, the defendant purchasing and handling the financial side of the business, and the plaintiff selling and delivering over the countryside, operating two motortrucks. Plaintiff is termed the outside man.
Each drew from the business the sum of $70 weekly, denominated, in the record, "officers' salaries."
Practically all of the vending was by sales on open account, for not over $3,000 worth of accounts receivable are from sales upon lease.
Collecting was slow at the time of the transfer, and the corporation then owed heavily: $2,800 to banks and individual lenders, evidenced by its notes indorsed by both the parties hereto, and $7,500 secured by mortgage on the store and lot. Liabilities at this time for stock in trade, less "reserve for bad debts," totaled about $40,000.
Experience in the furniture business on the part of the defendant has been alluded to above. Prior to investing in this corporation, the plaintiff had been employed as a stationary engineer in a little village in Western Maine.
In the fall of 1926, the financial condition of the corporation was very bad, creditors were pressing their claims insistently, telegrams and night letters demanded payment, and threats of suits were received.
About the beginning of the year 1927, defendant began conversations with plaintiff to the effect that money must be put into the treasury.
Plaintiff owed money outside the business, one of his notes, for $1,500, being indorsed by defendant. He could furnish no funds, but suggested and attempted to interest others to invest in the corporation.
Conferences between the parties were almost daily occurrences, defendant offering to sell his stock and his interest in the real estate for lessening sums, finally as low as $10,000, but plaintiff could not purchase.
Finally, on February 9, 1927, plaintiff transferred to defendant 98 shares of the stock and gave him a quitclaim deed of half the store and lot; an agreement on the same date being signed that defendant would save plaintiff harmless from notes aggregating, $2,800 that had been given to replenish the corporation treasury, and plaintiff to indemnify defendant against the note for $1,500 which the latter had signed with him.
Plaintiff retained one share of the corporate stock, remained in his former position of director and treasurer, and continued in the same employment in the business as formerly, except that plaintiff testifies that on the day after the transfer defendant asked him if he could not take less wages until the company could get on its feet, and that he drew thereafter $40 instead of $70 a week.
The business went on until April 11, 1927, when plaintiff learned that defendant had sold half of the business to newcomers, and at the request of corporation counsel he resigned his office of treasurer.
Thirty days later this bill was brought, and a restraining order issued, after hearing, on May 31st. Hearing was had on the 15th day of March, 1928, and the decree of the justice was: "That the said plaintiff's bill be dismissed with costs to be taxed by the clerk of this court."
The contention of the plaintiff is that the transfer was made on the suggestion of the defendant that if he had all but three shares of the capital stock and a deed of plaintiff's undivided interest in the real estate in his name, for a time, defendant could the more easily raise funds to appease the clamoring of creditors and re-establish the credit of the concern, and that when this was accomplished, if plaintiff should tender and offer to pay to defendant one-half such sums as defendant had advanced in aid of the corporation, the shares of stock would be returned to plaintiff, and his interest in the real estate reconveyed to him; that to secure plaintiff in a measure defendant assigned to him a $10,000 real estate mortgage and the note secured thereby, the same to be returned to defendant when he received one-half his advances.
Plaintiff contends that he carried out his part of the proposals of the defendant—surrendered all but one share of his stock, executed the agreement to pay his note indorsed by the defendant, and signed, executed, and secured the signature of his wife to a deed of the real estate, on which was written, after the description of the property conveyed, at the bottom of the first sheet of the deed, which was written on the form prepared and commonly used for deeds written on a typewriter: This deed plaintiff delivered to the counsel of the corporation, who was at the time as well counsel for both plaintiff: and defendant.
Plaintiff further contends that within three weeks of date of transfer, defendant collected substantial sums from accounts receivable, advanced $4,800 to the treasury from his own funds, and testifies that he then proposed he would raise and contribute a like sum, that they might "change things back." He says that defendant rejoined: That later, after he had observed strangers interested in the store and stock, about the 24th of March, defendant approached him and said:
Hence plaintiff contends that the purpose of the transfer was in fact but to try an expedient to tide over a period of insufferable indebtedness, which was to be followed, if successful, and if plaintiff met the terms of the agreement, by a reconveyance and redelivery of the property transferred.
He asks that the deed be decreed an equitable mortgage, and that he be allowed to redeem the 98 shares of stock, and proffers the sum that shall be found due from him to equal the amount contributed by defendant.
Defendant testifies that the transfer was in completion of a perfected agreement of sale, and denies many of the material allegations of the plaintiff.
As above the presiding justice made no finding of fact, so the court has not the advantage of a situation wherein it is evident that the statements of witnesses may have seemed reinforced by their appearance, demeanor, character, and delivery.
At the close of the presentation of testimony for plaintiff, a motion was made and argued that as a matter of law the bill should be dismissed. This was overruled. Apparently then the justice decided that the remedy sought was proper and the process conformable with our rules of pleading.
This decision seems to us correct. See Reed v. Reed, 75 Me. 264; Stinchfield v. Milliken, 71 Me. 567; Pierce v. Robinson, 13 Cal. 116; Freedman v. Avery, 89 Conn. 439, 94 A. 969; Deadman v. Yantis, 230 Ill. 243, 82 N. E. 592, 120 Am. St. Rep. 291; Campbell v. Dearborn, 109 Mass. 130, 12 Am. Rep. 671; McArthur v. Robinson et al., 104 Mich. 540, 62 N. W. 713; Porter v. Nelson, 4 N. H. 130; Rich v. Doane, 35 Vt. 125; Horn v. Keteltas, 46 N. Y. 605; Wilcox v. Bates, 26 Wis. 465.
The finding of the sitting justice being adverse to the plaintiff, he appeals, and thereby assumes the burden of proving that, the evidence will demonstrate that the deed given is in effect an equitable mortgage, and that the capital stock of the corporation was transferred as a pledge or as security and not by way of sale.
It is sometimes said that there is a presumption in favor of the decision of a single justice upon matters of fact in an equity case.
The rule in this state undoubtedly is that such a decision should not be reversed unless the appellate court is clearly convinced of its incorrectness. Sposedo v. Merriman, 111 Me. 530, 90 A. 387.
No matter what the form and phraseology of the written evidence of a conveyance, if the court is satisfied that, at its inception, the...
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...of the defendant's future interest in the cottage to secure his obligation on the promissory note. As we stated in Smith v. Diplock, 127 Me. 452, 457, 144 A. 383, 386 (1929). No matter what the form and phraseology of the written evidence of a conveyance, if the court is satisfied that, at ......
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...Court found an equitable mortgage where the parties' mortgage agreement was technically defective. Id. at 569-70. In Smith v. Diplock, 144 A. 383, 127 Me. 452 (Me. 1929), the Law Court imposed an equitable mortgage in the absence of a written mortgage agreement where a debtor gave an absolu......
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...and the agreement which makes it so may be oral." Braddock v. McBurnie, 152 Me. 39, 41, 122 A.2d 319 (1956) (citing Smith v. Diplock, 127 Me. 452, 144 A. 383 (1929)). Generally, the claim of homestead is sustainable in premises held by the claimant as equitable owner. See In re Soter, 26 B.......
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