State Sav. Bank v. Buck

• Decision Date: 18 June 1894
• Parties: STATE SAV. BANK OF ST. JOSEPH v. BUCK et al.
• Court: Missouri Supreme Court

27 S.W. 341

STATE SAV. BANK OF ST. JOSEPH v. BUCK et al.

Supreme Court of Missouri.

June 18, 1894.

FRAUDULENT CONVEYANCES — WITHHOLDING DEED FROM RECORD — SUBSEQUENT CREDITORS.

Absolute deeds given by one banking house to another as security for loans and discounts, and withheld from record for three years, so as not to injure the debtor's credit, are, as a matter of law, fraudulent as to subsequent creditors.

In banc. Appeal from circuit court, Clinton county; James M. Sandusky, Judge.

Action by the State Savings Bank of St. Joseph against Harvey S. Buck and others to foreclose two mortgages. There was a judgment for plaintiff, and defendants appeal. Reversed.

Huston & Parrish, for appellants. Casteel & Haynes, M. A. Reed, Porter & Woodson, and Chas. E. Pratt, for respondent.

BLACK, J.

The plaintiff is a banking corporation doing business at the city of St. Joseph. The defendants Harvey S. Buck and Thomas G. McCrosky were partners, and as such carried on a private banking business at Stewartsville, in Dekalb county, having a reported capital in that business of $25,000. They also dealt largely in lands and live stock. In November, 1884, Buck executed, acknowledged, and delivered a deed conveying to plaintiff a parcel of land in Stewartsville for the recited consideration of $9,000; and in November, 1885, he conveyed to the plaintiff another lot in the same place, and also 111 acres of land adjoining the town. The town property so conveyed included the banking house of Buck & McCrosky and a block of buildings known as the opera house property. The lots and land have an estimated value of about $13,000. Though the deeds were absolute in form, they were accepted and held by the plaintiff as collateral security for any advances it might thereafter make to Buck & McCrosky, either by way of loan and overdrafts or rediscounts. The deeds were not recorded until the 6th November, 1887, two and three years after their respective dates. On that day Buck & McCrosky failed; and Buck, who had recently acquired the banking interest of McCrosky, made a voluntary assignment for the benefit of his creditors. On the 7th December, 1887, the defendant King attached the property in suit, and thereafter obtained judgment against Buck & McCrosky for over $12,000. The property was sold under this judgment, and under a judgment obtained by the defendant Coberly, and another one obtained by Thomas Allen, and King and Coberly and the defendant Ransom became the purchasers. These judgment creditors were all depositors of Buck & McCrosky, and their judgments were recovered upon unpaid deposit accounts. The plaintiff commenced this suit in 1890, to foreclose the two deeds before mentioned, treating them as mortgages, making Buck defendant. King, Ransom, and Coberly were made defendants on their own motion. In their answers they set up title acquired in the manner before stated, and pray for a decree setting aside the deeds on the ground that the deeds were fraudulent as to the creditors of Buck & McCrosky. They make the failure to record the deeds for three years in one case and two years in the other a leading factor in their prayer for affirmative relief.

The record discloses the following further facts: From 1882 to the 5th December, 1887, the plaintiff loaned Buck & McCrosky large sums of money, and during that time rediscounted notes which the latter had taken in the course of their banking business. On the last-mentioned date Buck & McCrosky owed the plaintiff $78,613. This indebtedness consisted of notes of Buck & McCrosky to the amount of $50,000, an overdraft of $19,363, and rediscounts collected by them to the amount of $9,250. In addition to this indebtedness, the plaintiff held rediscounts to the amount of $50,000, payment of which had been guarantied by Buck & McCrosky. Mr. France, the president of the plaintiff bank, testified that he received a letter from a bank at Kansas City, on the morning of the 5th December, 1887, making inquiry as to the financial standing of McCrosky. He says Buck came to his bank on that day and asked for a further loan. Mr. France then learned for the first time that McCrosky had withdrawn from the firm of Buck & McCrosky. Upon further inquiry, he found Buck was in a failing condition. He refused to make further advances, and demanded a settlement. He and Buck then made a settlement, whereby Mr. France, for his bank, took the following property at the following prices: Maple avenue farm, $22,000; Cowley county land, Kansas, $4,800; Kingman county land, Kansas, $2,500; lot in Stewartsville, $700; McCrosky notes, $42,000; other notes, $3,370. This left a balance of over $3,000 due on the $78,613, which balance was then canceled. The plaintiff still retained the two deeds now in question as security for the rediscounts, amounting to $50,000. The trial court found, — and the finding is not questioned here, — that Buck & McCrosky were indebted to the plaintiff in the sum of $27,819.71 by reason of the insolvency of the makers of some of the rediscounted notes. After the settlement had been concluded, and on the same day, Buck made the voluntary assignment.

As showing the course of business between the plaintiff and Buck & McCrosky, it may be stated here that at the time of the settlement the plaintiff held deeds for the Maple avenue farm, the Cowley county land, and the Kingman county land. These deeds were out and out conveyances in form, though they had been previously taken and were held as collateral security. They were made absolute conveyances by the terms of the settlement. The McCrosky notes, amounting to $42,000, were notes given to Buck for lands conveyed by him to McCrosky a few days before the settlement. These notes were secured by liens on the lands so purchased by McCrosky. The evidence shows that plaintiff from time to time obtained deeds from Buck & McCrosky, other than the two now in question, which were absolute in form, but taken as security, and were never recorded. They were, however, surrendered, and other security taken in their stead. With respect to the failure to record the two deeds now in dispute, Mr. France testified that there was no agreement that they should not be recorded; that he simply took them and made advances on them whenever he saw fit to do so. On cross-examination he said he did not record them sooner because he did not know Buck was in financial straits; that he believed Buck & McCrosky were honest, and would not sell or incumber the property while he held the deeds. On reexamination he said he did not record them because he relied upon the declarations of Buck & McCrosky that they would not incumber the property without paying off the indebtedness or substituting other collaterals, and for the further reason that to record them would lead to considerable trouble, in this, that he would have to call a meeting of the board of directors to have releases executed. The defendant called L. F. Henry, who testified that he was a depositor with Buck & McCrosky; that after the failure he was appointed one of a committee to look up the condition of the bank affairs; that he saw and had a conversation with Mr. France. He says he told Mr. France he could not understand why the deeds had been kept off the record, to which Mr. France replied: "Well, Buck asked me not to put them on record; that it might injure his business." It appears the defendant King examined the records in the recorder's office of Dekalb county about a month before the assignment, to see what property Buck & McCrosky owned. This examination was made in a hasty way, by running over the...