Estes v. German National Bank

• Decision Date: 08 February 1896
• Citation: 34 S.W. 85,62 Ark. 7
• Parties: ESTES v. GERMAN NATIONAL BANK
• Court: Arkansas Supreme Court

34 S.W. 85

62 Ark. 7

ESTES v. GERMAN NATIONAL BANK

Supreme Court of Arkansas

February 8, 1896

Appeal from Prairie Circuit Court in Chancery, Southern District JAMES S. THOMAS, Judge.

Decree affirmed.

Rose Hemingway & Rose and Thos. C. Trimble for appellant.

1. There was no sale or conveyance of the lands to Echlin, and hence there was no vendor's lien. The pretended sale was never authorized by the board of directors. It was intended as a sham--a scheme. The grantee never entered into possession, never claimed the land, never paid taxes on it nor received any rents, and the pretended deed was never delivered to him. Delivery of the deed was essential; and even if the bank were conceded to be the agent of Echlin to accept the deed, the rights of appellant under their attachment antedated the filing of the deed and could not be impaired by relation. 1 Devlin on Deeds, sec. 285; 11 Bush, 34; 21 Am. Rep. 205; 105 Mass. 560; 7 Am. Rep. 554; 58 Ill. 310; 11 Am. Rep. 67. It has been said that a deed of a corporation is valid without delivery. 1 Devlin, Deeds, sec. 344. But it has long since been overruled. 9 East, 360; 102 U.S. 397; 5 Am. & Eng. Enc. Law, p. 446; 5 id. p. 445, note 3. The deed does not purport to be attested by the corporate seal, and without it it is void. 1 Jones, Mortg. sec. 81; 18 Ark. 279; 23 id. 439; 2 Black, 715; 3 Sawyer, 90; Waite, Insolvent Corp. sec. 488; 105 N.C. 131; 18 A. 1063; 10 Allen, 251. There was no meeting of the directors or stockholders to authorize the making of the deed. Directors have "no authority to act, save when convened in a board meeting." 54 Ark. 50; 55 id. 475.

2. Even conceding that the sale and deed are valid, the appellee has no vendor's lien. (a) The notes do not purport to reserve a lien; and, if they did, they would be inoperative in that respect. 7 Ark. 254; 33 id. 393; 31 id. 597; 34 id. 81; 30 id. 600; 51 id. 436. (b) Our statute only passes the lien to an assignee, when expressed upon the face of the deed or conveyance. Sand. & H. Dig. sec. 490. The equitable lien does not pass to the assignee. 18 Ark. 172; 25 id. 132; 30 id. 155; 33 id. 80; 32 id. 250; 31 id. 14.2; ib. 250; 27 id. 230.

Ratcliffe & Fletcher for appellee.

1. No question is made by appellants as to the form of the deed to Echlin, and none can be made. 1 Devlin, Deeds, sec. 468; 93 U.S. 710; 78 Mo. 482; 77 id. 180; 25 Mich. 74; 1 Am. & Eng. Enc. Law, 159, 160; 43 N.H. 343; 51 Md. 508; 63 Tex. 91; 23 id. 480; 70 Mo. 290.

2. The evidence is sufficient to show a valid sale and delivery of the deed. The presumptions are that the deed was executed and delivered on the day of its date, and was regular. 14 Ark. 29; 62 Wis. 380; Wait, Insolv. Corp. sec. 490; 37 Cal. 544; 93 id. 300. The answer admits that the corporate seal was attached, and the decree so recites. But in those states where private seals are abolished, the corporate seal is no longer essential. Wait, Insolv. Corp. secs. 10, 488; 43 N.J.L. 325; 60 N.Y. 96; 58 Ga. 547; 62 Ala. 392. The evidence shows that the deed was filed before the levy was made.

3. No meeting of the board was necessary. It was composed of three persons. The deed was made to one, and was signed by the other two. Here was a meeting of the minds of all the board concurring and acting in the same transaction. The rule seems to be that where there is a customary usage for the directors to adopt a certain course of transacting business by consultation and agreeing upon such course, no formal meeting is necessary, in the absence of statute or by-law requiring a different mode. 11 Col. 551; 19 P. 508; 12 N.H. 227; 23 id. 556-7; 55 Am. Dec. 215-16. All presumptions are in favor of the regularity of the sale. 12 Wheat. 70; 131 U.S. 371; 47 Me. 55; 57 Ark. 355; 1 Beach, Priv. Corp. 296.

4. The articles of association do not contemplate the necessity of any authority from the board of directors to enable the president to act in cases like this. The sale of land and the signing of papers was entrusted to him. But if a formal meeting was necessary, the subsequent conduct of the board is a sufficient ratification. 131 U.S. 371, 390; 77 id. 604; 101 id. 181; 66 F. 22; 67 id. 49; 91 U.S. 592; 67 F. 464; 28 Ark. 59; Mechem on Agency, secs. 118, 153-155; 55 Ark. 240; 159 Mass. 505; 12 Wheat. 70.

5. The bank took the notes in good faith, in the usual course of business, without any notice of any want of authority or irregularity, and the company received and used the money without objection or warning. This is enough to invoke the doctrine of estoppel. Even if it be true that the notes were given solely to enable Emonson to use them as collateral security, and that the deed was executed solely that he might exhibit the same to the bank, this would present a case of fraud, from which the company could take no advantage, and appellants can claim no greater right than the company. 101 U.S. 181; 58 N.W. 943; 56 F. 167; 64 id. 710; 159 Mass. 505; 59 F. 338; 117 U.S. 96; 35 Ark. 376; 57 id. 355; 65 F. 65; 12 N.H. 227; 7 Mo.App. 294; 70 Mo. 290; 78 N.Y. 187; 1 Watts, 385; 96 U.S. 640; 66 F. 104; 23 How. 469; 10 Wall. 604; 101 U.S. 347; 133 id. 431; 34 N.Y. S. R. 16; 78 N.Y. 131; 10 id. 66; 122 id. 188; 55 F. 1; 11 Wall. 482; 2 Moraw. Corp. secs. 610, 611. The company has never questioned the validity of the sale, and appellants should not be permitted to do so. 51 F. 1.

6. Appellants can claim no greater right than the company. Their levy was simply on such right as the company had in the land. If their levy was before the deed to Echlin was filed for record, it could not affect the bank's rights. The appellants were notified of the bank's claim before sale, and they could not claim to be bona fide purchasers at their own execution sale. 33 Ark. 621; Bigelow on Fraud, 407; 16 Ark. 559; 55 id. 122-3; 41 id. 370; 55 id. 542, 11 Wall. 482. It is no answer to the bank's claim for a lien that appellants credited the company without knowledge of the lien. 41 Ark. 186.

7. It is not necessary that a lien for purchase money be expressly reserved, in order to inure to the benefit of the assignee of the note. Sand. & H. Dig. sec. 490. It is enough if it appears from the face of the conveyance, and in this case it expressly appears that Echlin had given his notes for the purchase money. 37 Ark. 571; 17 Wall. 1-9. But, aside from the statute, appellant is entitled to assert the equitable vendor's lien, as the notes were assigned as collateral security. 24 Ark. 563; 28 id. 66, 70; 41 id. 292; 32 id. 250.

Thos. C. Trimble and Rose, Hemingway & Rose in reply.

1. The lien dates from the time the writ came to the sheriff's hands. Sand. & H. Dig. sec. 341.

2. There is no evidence of the delivery of the deed to Echlin, but everything to the contrary. The presumption of delivery only arises where the deed is found in possession of the grantee. 1 Devlin, Deeds, sec. 294. If the deed is found in the possession of the grantor, the presumption does not exist. 29 N.E. 870; 17 S.W. 319; 30 N.E. 1041; 50 N.W. 19; 55 Ark. 641; 54 N.W. 61; 17 S.W. 213; 22 id. 560; 36 N.E. 955; 35 id. 94. The mere fact that a deed was acknowledged will not warrant a finding that it was delivered. 35 N.E. 94. The burden in this case was upon appellee. 34 N.E. 1130. The mere fact that a deed has been recorded is no evidence of delivery. 13 A. 883; 11 N.E. 498; 73 Iowa 186. If the grantor keeps the deed, no title passes. 79 Me. 257; 11 N.E. 893. See, also, 1 Jones, Mortg. sec. 84; 1 McCrary, 578; 1 Jones, Mortg. secs. 85-6.

3. The lien claimed by appellee is a statutory one. Sand. & H. Dig. sec. 490. It is really a mortgage. 2 Jones, Mortg. sec. 1111; 1 Woods, 386. It was not therefore binding on attaching creditors until the deed was filed for record. 54 Ark. 179; 34 Iowa 499; 20 id. 440; 49 Mo, 64.

4. The deed was void, because made without any corporate action. The making of a deed is not a mere act of routine. The fact that some of the directors concurred is of no importance. If all the directors had joined in the execution of the deed, without a board meeting, it is void. 54 Ark, 60; 52 id. 515; 55 id. 480. Under a grant of general powers, the president has no authority to sell or convey lands. 4 Thomps. Corp. sec. 4647.

OPINION

BATTLE, J.

The German National Bank brought this action against the Emonson Mercantile & Manufacturing Company, G. M. Echlin, Z. N. Estes & Co., and other creditors of the Emonson Company, to foreclose a lien on certain lands lying in Prairie county, in this state. The pleadings in the case present the following state of facts:

1. In behalf of plaintiff, it was alleged that the Emonson Company, being the owner of the lands before mentioned, sold them in good faith to G. M. Echlin, for the consideration of $ 21,200, and conveyed them to him by a deed duly executed, acknowledged and recorded; that Echlin executed to the company seven notes for the purchase money, payable respectively at two, three, four, five, six, seven and eight years after date, which were described in the deed.

2. That these notes were transferred by the Emonson Company to the bank as collateral security for a large sum of money loaned, before maturity, for a valuable consideration, and "without any notice whatever of any irregularity, illegality or fraud in reference thereto by anyone;" and that of the sum loaned and secured, as stated, $ 11,400 was due by the company to to the bank at the commencement of the suit.

In behalf of Z. N. Estes & Co., they being the only defendants who answered, it was alleged:

"1. That on the 6th of January, 1891, they began a suit in the circuit court against the Emonson Company to recover a debt of $ 6,547.88, and sued out an order of attachment that was on that day levied on the lands in...