Wafer v. Harvey County Bank

Citation46 Kan. 597,26 P. 1032
PartiesWAFER et al. v. HARVEY COUNTY BANK et al.
Decision Date06 June 1891
CourtUnited States State Supreme Court of Kansas
Syllabus

1. An antecedent creditor, who knows that his debtor procured goods and merchandise by fraudulent means, cannot by a chattel mortgage secure a lien on such fraudulently procured goods adverse to the innocent vendors of such goods.

2. An antecedent creditor, who knows that his debtor has procured goods and merchandise by fraudulent means, when the sale of such goods is partially induced by the representations of such antecedent creditor as to the credit of his debtor cannot by a chattel mortgage secure a lien on such fraudulently procured goods, adverse to the innocent vendors of such goods.

3. The failure of a chattel mortgagee to have his mortgage recorded for 43 days, or to disclose its existence to other creditors when the financial condition of the debtor is being discussed, and who promised the debtor that he would not disclose its existence to other creditors who were demanding payment or security for their claims, is strong evidence tending to show a fraudulent intent to hinder and delay creditors.

Commissioners’ decision. Error from district court, Harvey county; L. HOUK, Judge.

J. D. Snoddy and Green & Shaver, for plaintiffs in error.

Bowman & Bucher, J. W. Ady, and Jetmore & Jetmore, for defendants in error.

OPINION

SIMPSON, C.

This is an action begun by the Harvey County Bank and R. M. Spivey as plaintiffs, against John F. Wafer, who was then sheriff of Harvey county. Wafer, as sheriff, had seized under various orders of attachment a stock of goods belonging to the attachment debtor, R. M. Hamill The bank and Spivey claimed to have the right to the possession of the attached property by virtue of a chattel mortgage thereon executed by R. M Hamill on the 20th day of March, 1884. The attaching creditors were made parties, and filed answers alleging that the chattel mortgage was fraudulent and void as against them. The case was tried to a jury at the March term, 1883, of the district court of Harvey county. The jury returned a verdict for the bank, and fixed the value of the goods at $21,896.17, and the value of the plaintiffs’ right of possession at $12,095.03. A motion for a new trial was overruled, and a judgment rendered on the verdict. The material facts disclosed at the trial are these: For many years prior to the commencement of this action the firm of Hamill Bros. had been engaged in merchandising in the city of Newton, and were a firm of good credit, and of high repute. As a matter of fact, on or before the 20th day of March, 1884, the firm, and especially D. Hamill, the principal partner, was largely indebted, both as a member of the firm and individually. D. Hamill was the active and controlling member of the firm, and his brother, R. M. Hamill, appears up to a certain date to have been subordinate. There is evidence tending very strongly to show that in October, 1883, the firm was dissolved, a notice of dissolution was published, and in the next issue of the paper after the publication of the notice of dissolution the card of the business firm was changed from Hamill Bros. to D. Hamill. The terms of this dissolution were such that D. Hamill assumed all the debts and liabilities of the firm, and alone had the right to collect all the claims and out standing accounts of the old firm. In January, 1884, a contract was entered into between D. Hamill and R. M. Hamill that reads as follows: "This agreement witnesseth that in consideration and as a full, final settlement of the respective rights, claims, accounts, and interests of D. Hamill and R. M. Hamill, recently partners as Hamill Bros., the said parties have agreed and do hereby agree upon the following: R. M. M. Hamill shall be solely liable for all goods purchased and put into the store situated upon the lot hereafter described from and after the first day of January, 1884, and said D. Hamill shall in no event be liable in any way for any portion of such goods, and has no interest therein except as herein specifically provided. Said R. M. Hamill may, for the purpose of establishing his own business interests, advertise said business interests, advertise said business as his own, and purchase and incorporate into said stock of goods such goods as he may desire, upon his own individual credit. Said R. M. Hamill shall contribute his own efforts towards the carrying on of said business in the same way and under the same conditions and restrictions that he has been since the first day of January, 1884. Until all the debts owing by the former firm of Hamill Brothers, as shown by the books of said firm, are fully paid, D. Hamill shall remain in charge of said business, as financial manager thereof, applying the net proceeds of all sales to the liquidation of said debts of Hamill Bros., until the same are fully paid. All goods in said store, whether they are goods formerly owned by Hamill Bros, or such as have since been or may in the future be put in said store by R. M. Hamill, shall be subject to sale in the ordinary course of business, and the net proceeds of such sale to be applied in liquidation of the debts of said firm, as above agreed upon. When all of said debts have been fully paid, as above indicated, then said R. M. Hamill shall be the absolute owner of all goods in the store, and said D. Hamill shall execute and deliver to him a bill of sale for all of his interest therein, and deliver to him the absolute and exclusive control of said business and all goods in said store. The store herein referred to is that kept in the building upon lot No. 8, in block No. 38, in the city of Newton, Harvey county, Kansas, and the said D. Hamill, being the owner of said lot and building, together with the fixtures and furniture in said store, agrees that when full control of said business is transferred to R. M. Hamill, as above contemplated, he will execute to said R. H. Hamill a lease of said store and fixtures and furniture used therein, at the rate of $50 per month, payable monthly in advance, from month to month, and said lease may be terminated by either party upon giving sixty days’ notice to the other party. This lease shall include only the store-room, ware-room, and cellar now used in the business, and free ingress and egress to and from the same over said lot. D. HAMILL. R. M. HAMILL." At this time this contract was entered into the firm of Hamill Bros. were indebted to various creditors in the sum of $4,800, and they owed the Harvey County Bank a note of $5,000. R. M. Spivey was then, and for a long time before had been, the vice-president and active manager of the Harvey County Bank, and was in the full charge of its business. Some time after the contract of January, 1884, was made, R. M. Hamill went to Chicago to buy goods with which to replenish the stock. He carried with him a letter from Spivey, as follows: "Harvey County Bank, Successor to the Harvey County Savings Bank. C. B. Schmidt, President. R. M. Spivey, Vice-President. Julius Simon, Cashier. Newton, Kansas, Feb’y 29, 1884. To whom it may concern: The bearer, R. M. Hamill, succeeds the firm of Hamill Bros., merchants of long standing in this city. Mr. R. M. Hamill is not indebted to this or any other bank, and with his long experience and general acquaintance in this country, believe he will do a good business, and with continued prosperity no doubt he will make prompt payment for any goods he may purchase. Respectfully, R. M. SPIVEY, V. Pt." While R. M. Hamill was in Chicago, Spivey wrote the following letter to a wholesale firm there, from whom R. M. Hamill bought goods: "Harvey County Bank. C. B. Schmidt, President. R. M. Spivey, Vice-President. Julius Simon, Cashier. Newton, Kans., March 8, 1884. Kahn, Schoenbrun & Co., Chicago, Ill.— Gentlemen: I had a telegram from R. M. Hamill yesterday, stating that Harvey Co. Bank reports him as owing $8,000. The statement which we sent you regarding his financial standing was intended to be confidential, but it seems you have not made the information confidential, but informed him the contents. Under the circumstances, I do not care to confide in you further statements, but will add that Mr. R. M. Hamill does not owe this bank but $200, and does not owe any bank, which I wired you last night. Yours, R. M. SPIVEY." On the 1st day of March, 1884, D. Hamill wrote to Norton & Cahill, salesmen for two large wholesale houses, from whom R. M. Hamill bought goods, the following letter: "Monarch Mills. D. Hamill, Proprietor. Newton, Kans., March 1, 1884. Messrs. L. R. Norton & J. H. Cahill, Chicago, Ill.— Gentlemen: Robert M. has just handed me your letter to him of the 27th ult. So far as the report is concerned to which you refer, I wish to say that there is not a word of truth in it. As a matter of fact Robert does not owe a dollar. So far as my own liabilities are concerned, they are a matter of record, and concern none but me personally, and I am fully able to take care of them. Gentlemen, Robert could have bought his goods several times since arrangements were made with you, and was strongly urged to do so, but his preference has been to buy of you. I only ask that you sell him goods at the right kind of prices, so that he can meet competition. I wish also to say, gentlemen, that the First National Bank of this city and myself have been, and are now, on anything but friendly terms. This feeling was brought about from the fact that I did not patronize that bank, but did my business through the Harvey County Bank. The First National Bank has lost no opportunity to injure my business whenever they had the opportunity. So far I have been able to come out ahead in every encounter, and I think I can manage to take care of myself. I did...

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