State ex rel. Peirce v. Merritt

• Decision Date: 31 October 1879
• Parties: THE STATE ex rel. PEIRCE, Appellant, v. MERRITT.
• Court: Missouri Supreme Court

70 Mo. 275

THE STATE ex rel. PEIRCE, Appellant,

v.MERRITT.

Supreme Court of Missouri.

October Term, 1879.

Appeal from St. Louis Court of Appeals.

AFFIRMED.

Merritt, Ronaldson & Co., on the 9th day of October, 1874, sued Brock, Rogers & Co., by attachment, and caused the writ to be levied on certain merchandise. A few days afterwards Peirce claimed this merchandise as having been sold to him on the 7th day of October, 1874, by Brock, Rogers & Co. On the 15th day of October, 1874, Merritt, Ronaldson & Co., with their sureties, gave bond to the State of Missouri in the penal sum of $58,000, conditioned that Merritt, Ronaldson & Co. should indemnify the sheriff and defend all claims brought against the merchandise on this bond. Peirce sued Merritt, Ronaldson & Co. and their sureties, claiming that the merchandise belonged to him absolutely, and was in his possession when taken by attachment. The damages were laid at $33,874.40.

The answer denied the sale to Peirce; alleged that it was a false and fraudulent contrivance between Brock, Rogers & Co. and Peirce to cheat the creditors of the former, to the profit of the latter, and set up their version of the transaction between Brock, Rogers & Co. and Peirce, which they averred to be grossly and utterly fraudulent. It was further alleged that on the 27th day of October, 1874, proceedings were commenced in the United States district court for the eastern district of Missouri, by the creditors of Brock, Rogers & Co., to procure an adjudication of bankruptcy against Brock, Rogers & Co.; that on the 14th day of November, 1874, Brock, Rogers & Co. were duly adjudicated bankrupts; that on the 17th day of December, 1874, Ronaldson was duly elected their assignee, and all the rights, credits and effects, goods, chattels, &c., of Brock, Rogers & Co., were transferred to said Ronaldson, assignee; that the sale to Peirce was in contemplation of bankruptcy; that it was fraudulently contrived by Brock, Rogers & Co., who were insolvent, to defeat the operation of the bankrupt law and cheat, &c., their creditors, a scheme to which Peirce was a party; that within three months of the sale Brock, Rogers & Co. were adjudicated bankrupts, and that the assignee of Brock, Rogers & Co. did, on the 31st day of December, 1874, demand from the sheriff the merchandise seized by Merritt, Ronaldson & Co., and the sheriff delivered the same to him in compliance with that demand; wherefore, defendant prayed judgment.

There was evidence at the trial, on the part of the plaintiff, tending to show that the sale was made for value and fairly, without notice on the part of plaintiff of any attempt or intention, on the part of Brock, Rogers & Co., to cheat their creditors. There was also evidence, on the part of defendant, tending to show that the sale was made out of the usual course of trade; that it was secretly made; that it was made in a hurry, with the palpable purpose of getting through certain forms in a short time; that the consideration was most inadequate, and consisted in part of wild lands, of the nature of which Peirce knew that Brock, Rogers & Co. were quite ignorant; and that there was no open, visible and notorious change of possession at the sale. It was in evidence that Peirce knew that the firm was embarrassed, and might have known more if he had not expressly refused to be informed of their condition. The merchandise sold remained, after the sale, in the store which Brock, Rogers & Co. had occupied; the clerks of Brock, Rogers & Co. did not know of the sale until the following day; the invoices were made out secretly and at night; the bill of sale was dated the 7th day of October; Brock went away the same evening, but Rogers remained about the store until the 9th, when the goods were seized and the store closed by the sheriff under the attachment.

It was in evidence that on October 27th, 1874, proceedings were commenced in the United States district court for Missouri by the creditors of Brock, Rogers & Co., by means of which they were adjudicated bankrupts on the 14th day of November, 1874; that on the 17th day of December, 1874, Ronaldson was elected their assignee, that all the rights, credits and effects of Brock, Rogers & Co. were duly transferred to said assignee, that on the 31st day of December, 1874, Ronaldson, assignee as aforesaid, claimed the merchandise seized and held by the sheriff as the property of Brock, Rogers & Co., and subject to be administered under the bankrupt law, and that the sheriff yielded up the property to the assignee without contest.

The court refused an instruction offered by the defendants at the close of the plaintiff's case, that he could not recover. At the end of all the evidence the court gave several instructions for the plaintiff, and following, among other, for the defendants:

3. If the jury believe from the evidence that at the date of the sale of the goods in question Brock, Rogers & Co. were insolvent or contemplated insolvency or bankruptcy, and that Peirce, or any person acting for him in the matter, had reasonable cause to believe them to be insolvent, or to be acting in contemplation of insolvency, and knew that said sale was made with a view to prevent their property from being distributed under the bankrupt act, or to evade any of the provisions of said act, then the said sale is void, and the jury will find for the defendants. And if the jury believe from the evidence that said sale was not made in the ordinary and usual course of business of Brock, Rogers & Co., such fact is prima facie evidence that said sale was fraudulent.

The court refused the following instructions asked by the defendants:

4. Unless the jury are satisfied from the evidence that Peirce had actual possession of the goods in question, and that the change of possession was visible, continued and exclusive against Brock, Rogers & Co., such a change of possession as to indicate to purchasers at large that said Brock, Rogers & Co. no longer had possession or control of said goods, then the sale was fraudulent and void as against creditors, even though the jury believe from the evidence that the said sale from Brock, Rogers & Co. to Peirce was made in good faith and for a valuable consideration.

7. If the jury believe from the evidence that Peirce, or his agents, either examined the books of account of Brock, Rogers & Co., or had an opportunity to examine them and failed to improve it, and that said books showed the fact that said Brock, Rogers & Co. were indebted to various parties beyond their means of payment, then, in contemplation of law, Peirce had notice that Brock and Rogers were insolvent, and that in making a sale of their goods, which would put their property beyond the reach of their creditors, if the jury believe from the evidence that they did make such sale, they were acting with intent to hinder, delay and defraud creditors.

8. If the jury believe from the evidence that the sale of the goods in question was made by Brock, Rogers & Co. with intent to hinder, delay or defraud their creditors, and that Peirce had knowledge of such intent, or could have ascertained by reasonable investigation or inquiry such facts as would lead a prudent man to believe that such was the intent of Brock, Rogers & Co., then said sale was fraudulent and void as against creditors, and they will find for defendants.

9. If the jury believe from the evidence that Thomas and Richard Bainbridge were the partners of Peirce, at Lafayette, Indiana, composing the firm of O. W. Peirce & Co.; that the goods purchased of Brock, Rogers & Co were purchased on account of O. W. Peirce & Co., and paid for by them, then the plaintiff is not entitled to recover, even though the bill of sale was taken in the name of O. W. Peirce.

There was a verdict and judgment for the plaintiff in the sum of $22,244.27, from which defendants appealed to the court of appeals, where the judgment was reversed. Plaintiff then appealed to this court.

Cline, Jamison & Day with G. S. Van Wagoner for appellant.

1. The instructions on the subject of delivery and possession of goods under the 10th section of the statute concerning fraudulent conveyances, were correctly given. How v. Taylor, 52 Mo. 592; Wright v. McCormick, 67 Mo. 426; Bishop v. O'Connell, 56 Mo. 158; Claflin v. Rosenberg, 42 Mo. 439; Lesem v. Herriford, 44 Mo. 323.

2. The petition in the suit of the assignee against Peirce, in the United States district court, was competent evidence to show that the creditors had disaffirmed the sale and wore not suing Peirce, as they might have done, for the unpaid purchase money.

3. The State courts did not lose jurisdiction over this case because of the subsequent filing of the petition in bankruptcy against Brock, Rogers & Co., the suit being to recover on a bond of indemnification given by respondents to the State of Missouri, to which bond, not to the property itself, appellant must look for the just compensation awarded him in the verdict of the jury.

4. Defendants' seventh instruction was properly refused, because: a. The law does not impose a duty on the purchaser to inquire or know if the vendor is indebted or free from debt. b. The law does not make a sale void when made by an insolvent vendor. c. The law does not infer an “intent to hinder, delay and defraud creditors,” from insolvency. Buckner v. Stine, 48 Mo. 407; Sibly v. Hood, 3 Mo. 290; Little v. Eddy, 14 Mo. 160. A debtor may prefer one creditor to another, and may transfer all of his property to one and leave the others wholly unpaid, even though he be in failing circumstances. Sibly v. Hood, 3 Mo. 290; Murray v. Cason, 15 Mo. 378.

George P. Strong for respondents.

1. The sale has all the badges of a fraudulent transaction. It was a secret sale. It was hastily made. The consideration of wild land for nearly one-half the amount was most unusual. The discount was eight times the usual and customary discount. It was not made in the usual course of...