Swentzel v. Franklin Inv. Co.

• Decision Date: 19 February 1902
• Citation: 168 Mo. 272,67 S.W. 596
• Court: Missouri Supreme Court
• Parties: SWENTZEL v. FRANKLIN INV. CO. et al.<SMALL><SUP>†</SUP></SMALL>

67 S.W. 596

168 Mo. 272

SWENTZEL v. FRANKLIN INV. CO. et al.^†

Supreme Court of Missouri, Division No. 1.

February 19, 1902.

FRAUDULENT CONVEYANCES — CORPORATIONS — DEED TO DIRECTORS — CONSIDERATION — ACTION — ISSUES.

1. Where a solvent corporation sold to two of its directors, who were also the principal stockholders, certain real estate, in consideration of such purchasers assuming certain of the corporate debts, to an amount equal or greater than the value of such property, the sale was valid, as against the other creditors of the corporation.

2. Where plaintiff's bill alleges that a certain deed was made by a corporation to its directors while it was insolvent, to hinder and defraud its creditors, and prays that the deed be set aside for that reason, he cannot object that the deed was not duly authorized by the directors, or signed by the proper officers.

3. Where certain directors of a corporation are guarantors of its notes, which are not due, an agreement by them to assume the payment of such notes, and relieve the corporation from all liability thereon, is a good consideration for the conveyance of property to such directors to the amount of such notes.

Appeal from circuit court, Jackson county; E. P. Gates, Judge.

Action by W. E. Swentzel against the Franklin Investment Company and others. From a judgment for defendants, plaintiff appeals. Affirmed.

This is a proceeding in equity by plaintiff, as execution purchaser of certain property in Kansas City, Mo., to have annulled and set aside a deed previously made thereto by respondent the Franklin Investment Company to its codefendants, James L. and B. Lombard, for the reason alleged that the Franklin Investment Company was at the time of the making and delivery of said deed insolvent, and that the respondents, grantees therein, knew that said company was insolvent, and that said deed was made for the purpose of transferring the assets of said investment company, to hinder and defraud its creditors, among whom was the plaintiff herein. It is further alleged that this deed to the defendants Lombard casts a cloud upon plaintiff's title, and prevents him from selling or getting possession of the property. At the trial the following facts were developed: The respondent Franklin Investment Company was organized in 1891 as a Missouri corporation, to be located at Kansas City, authorized by its charter to deal in real estate, and to buy, sell, and trade in notes and securities, with a capital stock of $100,000, certified as fully paid up. The respondents James L. and B. Lombard were the promoters of the organization, and owners of the stock of same, except a few shares issued in the names of clerks in the office of other corporations managed and controlled by the Lombards, for the purpose of effecting organization. At the time the deed in question was made, January 15, 1897, the respondents James L. and B. Lombard still owned all the stock of the company, except two shares held by one William P. Cherry and Mrs. Era S. Lombard to qualify them to act as directors and officers of the company; and when the deed was made and executed James L. Lombard was president of the company, his wife, Era S. Lombard, was secretary, and William P. Cherry was vice president. In the month of ____, 1895, the plaintiff purchased of the Lombard Investment Company certain notes, aggregating $3,600, given by the Franklin Investment Company, and secured by mortgage upon real estate in the state of Kansas. The Franklin Investment Company, through its real estate deals, became large involved, so that in January, 1897, it owed to various banks and to J. L. and B. Lombard about $20,000; and on most of its obligations to the different banks with whom it was doing business the defendants Lombard were either guarantors or indorsers for the Franklin Investment Company. In addition to this indebtedness the company also owed the above debt to the plaintiff, of $3,600, with the interest due them, and a small amount on other notes secured by mortgages upon real estate, about which there is no controversy here. On January 15, 1897, the Franklin Investment Company, acting through W. P. Cherry, its vice president, entered into a contract with J. L. and B. Lombard to sell them the real estate in controversy for $50,725, to be paid for as follows: The assumption of the payment of two notes secured by deed on the property in controversy, of the aggregate sum of $30,000, and the payment and cancellation of the $20,725 of notes above mentioned, due and owed by the company. Afterwards on the same day the company made a deed conveying to the Lombards the property in accordance with the terms of the contract, and said deed was on the 28th day of January, 1897, placed of record. The Lombards subsequently paid the $20,725 of indebtedness assumed by them to be paid, and are still liable for the $30,000 originally upon the property secured by deed of trust thereon. Some months after the conveyance of the property in question to the Lombards, the appellant, without taking steps to foreclose the mortgage securing his obligations against the Franklin Investment Company, brought suit against the company, and obtained a judgment therein for $3,873.40. On that judgment,...