Vermillion v. Nat'l Bank of Greencastle

• Decision Date: 26 May 1914
• Docket Number: No. 8181.,8181.
• Citation: 105 N.E. 530,59 Ind.App. 35
• Parties: VERMILLION et al. v. NATIONAL BANK OF GREENCASTLE.
• Court: Indiana Appellate Court

59 Ind.App. 35

105 N.E. 530

VERMILLION et al.

v.NATIONAL BANK OF GREENCASTLE.

No. 8181.

Appellate Court of Indiana, Division No. 2.

May 26, 1914.

Appeal from Circuit Court, Putnam County; James M. Rawley, Special Judge.

Action by the National Bank of Greencastle against James E. Vermillion and another. Judgment for the plaintiff, and defendants appeal. Reversed and remanded, with directions.W. H. H. Miller, C. C. Shirley, Samuel D. Miller, and W. H. Thompson, all of Indianapolis, for appellants. Thomas T. Moore, of Greencastle, for appellee.

CALDWELL, J.

The complaint is in two paragraphs. By the first appellee seeks to recover on a promissory note in the principal sum of $2,420.23, executed by appellant Vermillion January 3, 1908, and to foreclose a chattel mortgage on a stock of goods and store fixtures securing said note. By the second paragraph appellee declares on two promissory notes in the respective sums of $800 and $400, executed by said appellant April 13, 1908, and March 28, 1910, respectively, and seeks to foreclose a chattel mortgage executed by said appellant on said property, on the 4th day of August, 1910, to secure said notes.

Appellant Heine was made a defendant by reason of a certain trust created in him in behalf of Vermillion's general creditors under a certain instrument dated August 22, 1910, and hereinafter described. By each paragraph of complaint appellee sought also injunctive relief against said Heine to restrain him from disposing of said property alleged to be in his possession. Each appellant filed a general denial to the complaint. Heine filed also a special answer of four paragraphs. By the second and fourth, facts are alleged to the effect that, by said chattel mortgages and the understanding and agreement between appellee and Vermillion, a secret trust was created in favor of the latter, thereby rendering said mortgages void as against the general creditors. By the third and fifth paragraphs, facts are alleged to the effect that certain funds received by said Vermillion from the sales or portions of said goods should, as against such creditors, equitably be deemed applied on said notes, and that by such application they should be held to be paid. Trial by the court, and finding and judgment in favor of appellee for the full amount of the notes, and decreeing the foreclosure of said mortgages as prayed for.

By request of the parties, the court made a special finding of facts and stated conclusions of law thereon. The material facts found are in substance as follows: That about January 1, 1908, appellant Vermillion, in the settlement of the estate of his deceased father, Isaiah Vermillion, became the owner of a merchandizing business, stock of goods, and store fixtures in Greencastle, Ind. That for many years said Isaiah Vermillion had conducted said business at said place, and that from January 1, 1908, to August 22, 1910, said appellant Vermillion conducted said business as such owner. That, in the settlement of said estate, appellant Vermillion assumed the payment of certain debts thereof, including a promissory note held by appellee in the sum of $2,420.23. That on the 3d day of January, 1908, said appellant executed to appellee in payment of said note a promissory note in said sum of $2,420.23, bearing 8 per cent. interest, running six months, and calling for reasonable attorney's fees, and to secure the payment of said note executed also a chattel mortgage on said stock of goods and fixtures, being the note and mortgage declared on in said first paragraph of complaint. That on April 13, 1908, said appellant executed to appellee a promissory note for $800, bearing 8 per cent. interest, running 90 days, and providing for reasonable attorney's fees, to secure a loan in said sum then made, and that on March 28, 1910, he borrowed an additional sum of $400, and executed to appellee a note therefor in said sum, running 10 days, interest and attorney's fees as aforesaid. That said two loans were procured by said appellant on his representation that said respective sums were necessary in order that he might be enabled to meet competition by increasing his stock of goods. That on August 4, 1910, said appellant executed to appellee a second chattel mortgage on said stock and fixtures to secure said two notes last described, which notes and mortgage are declared on in the second paragraph of complaint. That each of said chattel mortgages was duly recorded within 10 days after its execution. That said first chattel mortgage describes the property mortgaged as follows:

“Said mortgagor's general stock of merchandise, dry goods, cloaks, wraps, suits, notions, fixtures and personal property, and goods, wares and merchandise of every kind and character belonging to or used in any way in connection with the said mortgagor's general dry goods store, situated,” etc.

That said second mortgage repeats said property description and in addition specifically mentions the furniture, showcases, safe, counters, and cash register. Each of said mortgages contains the following provisions:

“It is agreed that this mortgage shall hold and cover all new goods purchased and placed in said stock, to take the place of any goods sold out of said stock under the terms of this mortgage.”

“It is agreed and understood by the parties hereto that said James E. Vermillion shall retain the possession of, and have the use of, said property until said note hereby secured becomes due, and, if said note is not promptly paid at maturity, said First National Bank shall then have the right to take and keep possession of said property wherever it may be found, without any process of law, and the same shall become the absolute property of said First National Bank, and the said James E. Vermillion hereby expressly agrees not to sell or remove said property from the place where it now is without the consent in writing of said First National Bank, nor shall he assign or lease the same without such consent, but it is agreed, however, that said mortgagor may sell such goods in the usual course of trade or business upon the express condition that he shall account to said bank for said sales, and that, after deducting from the gross amount thereof the costs and expenses of making such sales, the residue thereof shall be applied to the debt hereby secured. If, in the course of the business of selling such stock to provide funds to pay said debt hereby secured, it shall be necessary, in order to keep up the stock and sell other goods, that new goods shall be bought to fill up the stock and supply broken lines, said mortgagor, with the consent of said bank, may invest such of the proceeds as may be agreed upon in new goods to fill up the broken lines, and, in such case, it is agreed that new goods shall be paid for and shall take the place of the goods so sold, and the said goods so purchased shall pass under the lien of this mortgage, and be subject to sale to satisfy the same in like manner as the goods so sold.”

There is a further provision to the effect that, if said property shall come into the hands of any assignee or trustee, etc., to be sold, the mortgagee may take possession of it, and sell at public or private sale on notice.

The court further finds: That appellant Vermillion paid no part of the sum due on said notes except the interest. That, after the execution of said first mortgage, he continued to carry on said business with the knowledge and consent of the mortgagee, selling said mortgaged goods in regular course, buying new goods with a part of the proceeds, and adding them to the stock, and that he so continued up to August 22, 1910. That during said time said appellant had no means of support for himself and family other than what he derived from said mortgaged goods and the proceeds of the sale thereof. That within said time he used of said goods and of the said proceeds thereof, for the maintenance of himself and family, the following amounts: In 1908, $1,766.43; in 1909, $1,250.31; in 1910, up to August 22, $864.59-total $3,881.33. That after the execution of said second mortgage, on August 4, 1910, up to said August 22, 1910, Vermillion received in cash from the sale of goods $979.24. That he paid for expenses within said time $211.78. That he used, in the support of himself and family, $63.70. That within said entire period he expended of said proceeds in the purchase of new fixtures which he placed in said store, and used in connection with such business, $280. That during said time from January 3, 1908, to August 22, 1910, said appellant, with the knowledge and consent of said appellee, sold goods on credit, and that on said later date there was due him, from divers persons for mortgaged goods sold on credit, accounts aggregating $2,400. That the net proceeds of the sales of said goods, except said amounts used by appellant Vermillion for support as aforesaid, and except also the sum of $280 invested in fixtures, were with the knowledge and consent of appellee reinvested in goods which were added to said stock to take the place of goods sold. That said appellee had no knowledge that any part of said net proceeds was used for any purpose other than to buy new goods. That said mortgages cover $759.09 worth of fixtures that have not been sold or changed since the execution of said first mortgage. That there was no agreement or understanding between said appellee and said Vermillion that any part of the proceeds of the sale of said goods should be used or applied by said Vermillion in the support of himself or family, and that such use of such proceeds was without the knowledge or consent of appellee. That during said entire time from January 3, 1908, to August 22, 1910, appellant Vermillion worked in said store as a salesman, and that his services were worth $100 per month. That, during the greater part of said time, Vermillion's wife also worked in said store as clerk, and that neither...