Swedish-American Nat. Bank v. First Nat. Bank
| Decision Date | 09 April 1903 |
| Docket Number | Nos. 13,322, 13,323, 13,324-(257, 258, 259).,s. 13,322, 13,323, 13,324-(257, 258, 259). |
| Citation | 89 Minn. 98 |
| Parties | SWEDISH-AMERICAN NATIONAL BANK OF MINNEAPOLIS and Others v. FIRST NATIONAL BANK OF GARDNER and Others.<SMALL><SUP>1</SUP></SMALL> |
| Court | Minnesota Supreme Court |
The St. Paul & Kansas City Grain Company, a corporation, having, pursuant to the insolvency laws of the state of Minnesota, made a general assignment of all its property for the benefit of all its creditors to Fred C. Van Dusen and Peter B. Smith, the assignees obtained an order from the district court for Hennepin county requiring all persons and parties interested in the assigned estate to show cause before that court why the security claimed by defendants and others should not be recognized and the proceeds thereof paid to the creditors holding the same. An order was thereafter made by the court, McGee, J., directing the assignees to pay to such creditors the proceeds of the grain represented by the warehouse receipts respectively held by them as security. From an order denying a motion for a new trial plaintiffs, Swedish-American National Bank, Barnum Grain Company, First National Bank of St. Paul, Van Dusen-Harrington Company, American Exchange Bank of Duluth, Bank of Two Harbors, Charles M. Harrington and Fred C. Van Dusen, answering general creditors, severally appealed. Reversed.
Cohen, Atwater & Shaw, for appellants.
Koon, Whelan & Bennett, for respondents First National Bank of Gardner.
COPYRIGHT MATERIAL OMITTED
COPYRIGHT MATERIAL OMITTED
E. F. Merkle and Louis K. Hull, for respondent Security Bank of Minnesota.
Flannery & Cooke, for respondent Franklin L. Greenleaf.
George W. Buffington, for respondent Batavian Bank of La Crosse.
Wilson & Van Derlip, for assignees respondents.
The St. Paul & Kansas City Grain Company, a corporation formed under and pursuant to the provisions of the statutes of this state, having its principal place of business at the city of Minneapolis, owned and operated a large number of grain elevators and warehouses at different places in the states of Minnesota, Iowa, South Dakota, and Nebraska, and received in store grain belonging to others, and purchased and stored therein grain of its own; the different varieties, wheat, oats, and corn, being separately commingled in common mass. It shipped out, as occasion required, various quantities of such grain, receiving in place thereof other grain of like character. Its business was quite extensive, reached considerable proportions, and it became necessary from time to time to borrow money to enable it properly to conduct its affairs; as security for the repayment of which warehouse receipts were issued, and delivered to the persons of whom loans were made, specifying a quantity of grain then owned by the company, and by it stored in its elevators, which it intended to pledge as security. These receipts will be more particularly referred to later on, but for present purposes the statement just made is sufficient.
On October 4, 1901, being heavily in debt, not only to secured, but to unsecured, creditors, and unable to meet its obligations, the company made a general assignment under the laws of this state for the benefit of all its creditors. At the time of the assignment it owned a large quantity of grain, wheat, oats, and corn, which was in store in the different elevators owned and operated by it in the states named, all of which, without objection by the receipt holders, the assignees took possession of, and converted into money, in the due administration of their trust. The warehouse receipts above referred to are not all alike in form, though similar in substance. That held by the Gardner National Bank is as follows:
ST. PAUL & KANSAS CITY GRAIN CO
No. 1779. Minneapolis, Minn., Aug. 30th, 1901
Received in store in our system of elevators and warehouses
seventeen thousand bushels of White Oats, subject
to the order hereon of ourselves, on return of this receipt
properly endorsed
The grain represented by this receipt is fully covered by
fire insurance for the benefit of the holder, and all charges
are paid to February 28th, 1902
ST. PAUL AND KANSAS CITY GRAIN CO.
Grain Buyers and Warehousemen.
Elevators in Iowa, Nebraska,
South Dakota and Minnesota,
Countersigned,
E. W. Folsom,
Secretary.
On the back of which appears the following indorsement, which must be treated, though not expressly referred to in the body of the receipt, as a part of the contract:
ST. PAUL & KANSAS CITY GRAIN CO.,
By J. Q. ADAMS, Pt.
Evanston, Ia. ............................... 2,500
Laurel, Neb. ............................... 2,000
Waltham, Minn. .............................. 2,000
Tea, S. D. .................................. 2,500
Lester, Ia. ................................. 3,500
Alvord, Ia. ................................. 1,500
Dixon, Neb. ................................. 1,500
Plainview, Neb. ............................. 1,500
______
17,000
The receipts held by the Security Bank of Minnesota and the First National Bank of South Weymouth are similar to the Gardner receipt, with the exception that in the body thereof are the words, "As per list on back," following the words, "Received in store in our system of elevators," etc. Those held by the Batavian Bank and F. L. Greenleaf on their face cover the quantity of grain therein stated "in our system of elevators and warehouses," without designation of particular warehouses where the same was stored. That held by the Cape Cod National Bank covers a stated quantity of grain in an elevator located in the state of Iowa. At the time of the assignment there were in store in the company's elevators the quantities of grain specified in the several receipts, and at the places named therein; but there is no evidence that the identical grain on hand at the time they were issued was in store at the time of the assignment. The receipts held by the Batavian Bank, F. L. Greenleaf, and the Security Bank secure the payment of promissory notes payable at Minneapolis, this state, while the other notes thus secured were payable in Boston, Massachusetts.
All of the creditors, including those holding such receipts, none of whom reside in the states of Iowa, Nebraska, or South Dakota, presented their claims to the assignees, and they were duly allowed as valid obligations of the insolvent company. The unsecured debts amount to about $450,000, and those secured by the receipts to about $140,000. The receipts cover the bulk of grain owned by the company at the time of the assignment, and its assets are insufficient to pay its debts in full. The creditors holding the receipts made claim to the assignees of a preference over and above the general creditors to the extent of the grain represented by the respective receipts, which were called to the attention of the court below, whereupon issues were ordered made up, and the matter brought to trial, resulting in a judgment confirming their right to a preference, and from an order denying a new trial the general creditors appealed. The whole controversy is between the receipt holders, asserting a right of priority, on the one hand, and the general creditors, disputing the right, on the other; and the question to be determined is whether the former are entitled, in the distribution of the insolvent company's estate, to their asserted right, either partially or to the full extent of the grain represented by their respective receipts. The receipts relied upon are claimed by the holders thereof to constitute pledges of the grain named in each, and the decisive question is, by what law is their validity to be determined? A large number of errors are assigned, but, without referring specially to them, we come at once to a consideration of the merits of the case.
1. It may be well first to consider briefly the duties of an assignee under our statutes, and the relation he bears to the creditors in respect to an application of the property of the assignor to the payment of their claims. If the assignees in this proceeding, as to any portion of the pledged grain, as contended by counsel for receipt holders, occupy the position of the assignor, with no greater rights or duties, and are required to apply the property coming into their hands precisely as the assignor would have been required to do by law had no assignment been made, and on the basis that contracts entered into between the assignor and his creditors must be performed because valid and enforceable between the parties, some of the other questions presented would be very much simplified.
The general rule of the common law is that an assignee for the benefit of creditors stands in the shoes of the assignor; represents him; takes the assigned property subject to all transfers and incumbrances, whether fraudulent as to creditors or not, and subject also to all equities existing between the assignor and any particular creditor. But this rule has been changed in this state by our statutes on the subject of assignments, and the assignee represents the creditors, and not the assignor. Walsh v. St. Paul S. F. Co., 60 Minn. 397, 62 N. W. 383; Thomas Mnfg. Co. v. Drew, 69 Minn. 69, 71 N. W. 921; Kellogg v. Kelley, 69 Minn. 124, 71 N. W. 924. He receives the property belonging to the insolvent estate, converts it into money, and pays and discharges the debts by equal proportional distribution among the creditors, recognizing valid and subsisting contracts theretofore entered into by the assignor, and instituting proceedings to set aside all such conveyances and transfers as are fraudulent or void as to creditors. Being clothed with this authority by express legislative enactment (G. S. 1894, § 4233), it becomes a duty,...
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