State v. Fidelity & Deposit Co.

• Decision Date: 15 April 1902
• Citation: 67 S.W. 958,94 Mo. App. 184
• Parties: STATE ex rel. KENNEN v. FIDELITY & DEPOSIT CO. et al.
• Court: Missouri Court of Appeals

67 S.W. 958

94 Mo. A. 184

STATE ex rel. KENNEN v. FIDELITY & DEPOSIT CO. et al.

Court of Appeals of St. Louis, Missouri.

April 15, 1902.

FRAUDULENT CONVEYANCES — MORTGAGE OF STOCK IN TRADE — ESTOPPEL — BURDEN OF PROOF — INTEREST — INSTRUCTIONS.

1. A mortgage of a stock in trade, though providing that the mortgagors may remain in possession and continue to sell goods in the ordinary course of trade, is not fraudulent on its face; it being provided that the mortgagors shall account for, and pay over to the mortgagee, the proceeds of sale.

2. An attorney to whom a claim is sent for collection, and who reduces it to judgment, is not estopped from asserting against such clients a prior mortgage from the debtor, though he does not inform them of such mortgage; they not having been prejudiced by his withholding the information.

3. The giving of an instruction for plaintiff without explaining a phrase therein cannot be complained of by defendants at whose request an instruction using the same phrase in the same connection is given.

4. Defendants, sued on the statutory indemnity bond given by them on plaintiff's notifying the sheriff that he was the owner of the goods levied on by defendants, have the burden of proving that the mortgage given to plaintiff by the execution debtor was fraudulent; they having in their answer alleged that plaintiff claimed under the mortgage, and that it was fraudulent.

5. The measure of damages, where defendants levy on and sell goods on which plaintiff has a mortgage, is their value at the time of the levy, with interest from such date, in the discretion of the jury.

6. An instruction, "To which you may add 6 per cent. interest," leaves the allowance of interest to the discretion of the jury; and a party not satisfied that it sufficiently calls their attention to their discretion should ask for more definite direction.

Appeal from circuit court, Audrain county; Elliott M. Hughes, Judge.

Action by the state, on the relation of E. C. Kennen, against the Fidelity & Deposit Company and others. Judgment for plaintiff, and defendants appeal. Affirmed.

J. F. Woodson, for appellants. E. C. Kennen and Fry & Clay, for respondent.

BLAND, P. J.

Appellants are a mercantile firm doing business in the city of St. Joseph, Mo. The respondent is an attorney at law residing at Laddonia, Audrain county, Mo. J. G. Harley and M. G. Harley, composing the firm of J. G. Harley & Co., on and prior to January, 1900, were doing a small general mercantile business at the town of Laddonia, and were prior to January, 1900, indebted to the appellants in the sum of $415. On or about the 3d day of February, 1900, appellants, through their attorney, J. F. Woodson, at St. Joseph, transmitted their account against J. G. Harley & Co. to respondent for collection, with instructions to collect or sue immediately. Respondent received the account for collection, and made demand on Harley & Co. for payment. The account was not paid. Afterwards respondent procured the promissory note of J. G. and M. G. Harley for the amount of the claim, and brought suit in the Audrain circuit court thereon, and on the 12th day of June, 1900, obtained a judgment for the amount due on the note. On the 4th day of January, 1900, J. G. and M. G. Harley executed and delivered to respondent a chattel mortgage on their entire stock of merchandise, consisting in part of dry goods, boots and shoes, hats and caps, fancy goods, dress goods, notions, groceries and provisions, rubber goods, and boys' and men's clothing, as well as their store furniture and fixtures, located in the De Laporte storehouse, in block 5 of the original town of Laddonia, to secure their promissory note of even date for the sum of $988.82, payable to respondent, and due 10 days after date. The mortgage was made to include and cover all merchandise that thereafter might be from time to time added to the stock, and the mortgagors were permitted to remain in possession and sell from said stock in the usual and ordinary course of business, at retail only, upon the express stipulation and agreement that they should keep a true and accurate account of each day's sale, and sell only for cash, and that the proceeds of all sales made by them should at the close of each week's business be turned over to the mortgagee, and applied to the part payment of the debt secured, until the whole of the debt, interest, cost, and expense should be paid. This mortgage was duly acknowledged on the day of its date, and was filed for record on the 3d day of February, 1900. At the instance of appellants' attorney at St. Joseph, an execution was issued on their judgment against Harley & Co. on the 22d day of August, 1900, and delivered to the sheriff of Audrain county, who levied on the property described in the mortgage; being all the property then owned or possessed by Harley & Co. When the levy was made, respondent gave notice to the sheriff that he was in good faith the lawful owner of the whole of the property levied on, and that the defendants in the execution had no right or title whatever in said property, and that said claim was not made in collusion with the defendants for the purpose of delaying appellants in obtaining their rights, which notice was duly sworn to by respondent. Thereupon the appellants gave the statutory indemnity bond to the sheriff, on receipt of which the sheriff proceeded to sell all of the goods levied on under the execution. The suit is on this bond for the recovery of the value of the property levied on and sold by the sheriff. The answer was a general denial of the allegations of the petition, and especially set up as a defense the recovery of the judgment against Harley & Co., the issuance of the execution thereon, and the levy and sale by the sheriff under the execution. The answer further pleaded the execution of Harley & Co. of the chattel mortgage of January 4, 1900, to respondent, and alleged that said mortgage was fraudulent and void because given for the purpose of hindering, delaying, and defrauding creditors of Harley & Co., including the appellants, which fraudulent intent, the answer alleged, was known to the respondent; that the mortgage was fraudulent for the further reason that it was agreed at the time of its execution by and between the mortgagors and mortgagee that Harley & Co. might buy and sell merchandise in the usual course of business, at retail, and that the Harleys could retain the proceeds from the sale of the goods for their own use, and that they did keep and retain said proceeds of sales from the mortgaged stock with the knowledge and consent of the mortgagee; that respondent, knowing that the mortgage was fraudulent, was nevertheless acting as attorney for the appellants, and that the appellants, having no knowledge of the existence of the chattel mortgage, or of the fact that the same was fraudulent and void, relied upon the respondent, as their attorney, to take such action for the collection of the debt as was necessary, but that, unmindful of his duty to appellants as his clients, he took no action, at the time of the acceptance of his employment as the attorney of appellants, for the collection or protection of their claim, but continued to participate in the fraud of permitting Harley & Co. to sell the mortgaged goods, and to use the proceeds for their own use; that respondent, still acting as attorney for appellants, was also the attorney of Harley & Co., and failed and refused to have execution issued on appellants' judgment against the Harleys, by reason of which failure and refusal the appellants were defeated in the collection of their claim, and that respondent was estopped by his conduct to set up any claim to the goods levied upon, under the said chattel mortgage, as against the appellants; that the mortgage was void for the further reason that it was understood by and between the mortgagors and mortgagee that the mortgagors should remain in possession of the stock of merchandise, and buy and sell in the ordinary course of business, and that the mortgage was to cover all the goods added to the original stock, and that from and after the execution of the mortgage, by agreement, with the knowledge and consent of the mortgagee, the mortgagors did remain in possession of the stock of goods, and continued to conduct the business of buying and selling goods in the ordinary course of business; that they failed to pay over and account to said mortgagee for the proceeds of sale of said merchandise covered by the chattel mortgage; and that Harley & Co., by agreement and with the consent of the mortgagee, obtained the proceeds of the sale, and used and disposed of the same as they saw fit. The reply was a general denial. Plaintiff, to sustain the issues on his part, offered and read in evidence the chattel mortgage executed by J. G. and M. G. Harley to the plaintiff, and also the promissory note to secure which the mortgage was given. On the note were indorsed the following payments: "Paid on this note aggregate payments up to July 14, 1900, five hundred dollars, credit as of date April 4, 1900. Paid from July 17 to August 21, 1900, $70.00, which sum is credited of date August 18, 1900." Plaintiff testified that the payments indorsed on the note were all the payments that had been made on it.

The evidence tends to show that on January 4th the respondent had several claims against Harley & Co. for collection, two or three of which had been reduced to judgments in a justice court, and that he had paid part of two of them; that Mr. Robinson, an attorney, had a claim of $358, and one other claim of a less amount, upon which suits had been brought; that Harley & Co. went to the respondent and asked him to advance money to pay these claims, so that the firm could sell the goods themselves without a sacrifice; that respondent agreed to pay, and did pay, all the claims he had for collection against Harley & Co., as well as those...