Waggoner-Gates Milling Co. v. Ziegler-Zaiss Commission Co.

• Decision Date: 21 May 1895
• Citation: 128 Mo. 473,31 S.W. 28
• Parties: WAGGONER-GATES MILLING CO. v. ZIEGLER-ZAISS COMMISSION CO. et al.
• Court: Missouri Supreme Court

31 S.W. 28

128 Mo. 473

WAGGONER-GATES MILLING CO. v. ZIEGLER-ZAISS COMMISSION CO. et al.

Supreme Court of Missouri, Division No. 2.

May 21, 1895.

INSOLVENT CORPORATION — PREFERENTIAL MORTGAGE — VALIDITY — SIMULTANEOUS ASSIGNMENT FOR CREDITORS — EFFECT — INDORSEMENTS BY DIRECTORS.

1. An insolvent corporation which has possession and control of its property may, in the absence of fraud or statutory inhibition, prefer a bona fide creditor by mortgage on its property; and the execution of a general assignment of the same property immediately thereafter, and on the same day, will not invalidate the preference.

2. Bona fide creditors of a failing corporation, who are not stockholders or directors therein, are not debarred from taking security for their claims, though the paper held by such creditors was also indorsed by some of the directors individually.

Appeal from circuit court, Jackson county; John W. Henry, Judge.

Action by the Waggoner-Gates Milling Company against the Ziegler-Zaiss Commission Company and others. From the judgment the Ziegler-Zaiss Commission Company and others appeal. Modified.

On the 17th day of April, 1890, the Ziegler-Zaiss Commission Company, an insolvent corporation, intending to prefer some of its creditors to others, and then to make a general assignment for the benefit of their creditors not preferred, executed two chattel mortgages, — the first to the American National Bank and certain other parties, and the second to B. F. Coombs & Bro. Commission Company and Henry Albers, — and then a voluntary assignment for the benefit of all its creditors; the assignment being made subject to said mortgages. The mortgages and deed of assignment were all executed on the same day, delivered to an attorney of the Ziegler-Zaiss Commission Company, and by him taken to and deposited in the recorder's office of Jackson county, Mo., where the members of the company last named resided, for record, in the order above named, the space of time between their filing being about 5 minutes between the first two and 15 minutes between the last two. At the time of the execution of the mortgages and assignment the Ziegler-Zaiss Commission Company was indebted to the American National Bank in the sum of $2,000, as evidenced by two notes of $1,000 each, held by said bank; and said commission company was also indebted to said bank as indorser upon certain notes held by the bank, which the bank had discounted for it. The property included in said chattel mortgage to the defendant bank was a stock of goods, wares, merchandise, etc., contained in a store building Nos. 520 and 522 Walnut street, Kansas City, Mo., together with a certain vinegar factory owned by said commission company, and located in said city, and all accounts, books, notes, and evidences of debt owned by said commission company. The first mortgage also secured the payment of notes to the amount of $1,000, held respectively by Clara Zaiss and A. Schieferle, for which T. B. Buckner was trustee. As soon as the bank was notified of the execution of said mortgage, it at once took possession of the mortgaged property, which was before either of the mortgages or deed of assignment had been deposited in the recorder's office for record. When it took possession, it had no knowledge of the existence of the second mortgage or of the deed of assignment. A sufficient amount of the property was sold to satisfy the debt due the bank, and that which remained, including accounts, was turned over to the second mortgagees, from which the claim of the B. F. Coombs & Bro. Commission Company was also paid in full. Plaintiff and other creditors not included in either of the mortgages proved up claims before the assignee in the deed of assignment to the amount of about $13,000, but none of the parties secured by said mortgages presented their claims to the assignee, they having been before that time paid in full from sales and collections. This suit was brought to set aside said mortgages, and to compel the beneficiaries therein to pay over to the assignee the amounts of money received by them respectively from sales and collections of the mortgaged property, in order that the same may be distributed pro rata among all the creditors of the mortgagor. The court rendered a judgment and decree in accordance with the prayer of the petition.

This finding, judgment, and decree of the court are as follows: "That on the 17th day of April, 1890, the defendant the Ziegler-Zaiss Commission Company was a corporation organized and doing business under the laws of the state of Missouri. That the stockholders of said corporation were Joseph Ziegler, Henry Zurn, Frederick Zaiss, and Adolph Zaiss, who were also its directors and officers. That one or two evenings prior to the 17th day of April, 1890, said directors and officers decided that the said corporation should execute two chattel mortgages for the purpose of securing and preferring certain creditors, and also a deed of general assignment for the benefit of all its creditors. That pursuant to said purpose it did, on April 17, 1890, execute a chattel mortgage, conveying all its personal property, including notes and accounts, to the defendants the American National Bank, A. Schieferle, Clara Zaiss, and T. B. Buckner as trustee, to secure a debt of $2,000 to the said American National Bank, and certain notes in said mortgage described, indorsed by it to said bank; a debt of $2,000 to A. Schieferle; a pretended debt of $4,400 to said Clara Zaiss; and a pretended debt of $1,000 to said T. B. Buckner, as trustee. That on said day it also executed another chattel mortgage conveying the same property to the B. F. Coombs & Bro. Commission Company and Henry Albers, to secure a debt of $947.72 to the B. F. Coombs & Bro. Commission Company and a pretended debt of $605.50 to secure Henry Albers. That on said day it also executed a general assignment, whereby it conveyed all its property to Phillip Doppler, as assignee, for the benefit of all its creditors. That said mortgages and said deed of assignment were all executed in the forenoon of the same day, at the same time, and were all recorded in the office of the recorder of deeds of Jackson county, at Kansas City, by the attorney of the Ziegler-Zaiss Commission Company, in the afternoon of the said day, they all having been taken to the said office at the same time, and the first described mortgage having been recorded at 1 o'clock and 10 minutes p. m., the second described mortgage having been recorded at 1 o'clock and 15 minutes p. m., and said deed of assignment at 1 o'clock and 30 minutes p. m. That on the 17th day of April, 1890, said defendant the Ziegler-Zaiss Commission Company was wholly insolvent, it being indebted to various parties in various amounts, aggregating a sum much larger than all its assets; and on said day said corporation ceased to do business, and has not since said date done any business. That the debt to the said bank, the debt to the said A. Schieferle, the debt to the said B. F. Coombs & Bro. Commission Company, and $2,500 of the debt to the said Clara Zaiss, described in said mortgages, were all bona fide debts of the Ziegler-Zaiss Commission Company, but that the other alleged debts described in said mortgages were not owing by the said Ziegler-Zaiss Commission Company. That one or more of said directors were securities or indorsers on all of said bona fide debts except said debt to the said B. F. Coombs & Bro. Commission Company. That said chattel mortgages were executed by the said Ziegler-Zaiss Commission Company for the purpose of cheating and defrauding all of the creditors of the said Ziegler-Zaiss Commission Company, except those mentioned in said chattel mortgages, but that the mortgagees in said mortgages were not parties to said fraud, and had no knowledge of the assignment, or of the intent to make such assignment, when they took possession under the mortgage, and such possession was taken before said assignment was recorded. That at the date of said mortgages and said deed of assignment said Ziegler-Zaiss Commission Company was indebted to the plaintiff in the sum of $7,960.98, and to various other parties not mentioned in said mortgages in sums aggregating about $6,000. That within two or three days after said April 17, 1890, plaintiff gave notice to one Charles E. Kollman, who had possession of said property for and on behalf of the parties described in said chattel mortgages, and before any of said property had been disposed of, that he, said Kollman, should hold the same, or, in case of sale, the proceeds thereof, for the benefit of the creditors; and that plaintiff would, as soon as its claim was allowed by the assignee, institute proceedings to have said property, or the proceeds thereof, applied for the benefit of the creditors of the Ziegler-Zaiss Commission Company. That said assignee, Phillip Doppler, duly qualified as assignee, but has heretofore resigned, and the defendant William S. Flournoy has been appointed by the court as assignee in place and stead of said Doppler, and is now the duly qualified and authorized assignee of the said Ziegler-Zaiss Commission Company. That the plaintiff's said claim was allowed by said assignee, Phillip Doppler, for said amount of $7,960.98, on August 6, 1890. That the property described in said chattel mortgages was turned over to said mortgagees, and by them sold, and out of the proceeds the said American National Bank has received the sum of $2,367.07, A. Schieferle the sum of $2,000, the said B. F. Coombs & Bro. Commission Company the sum of $947.72, said T. B. Buckner the sum of $1,000, and the said Clara Zaiss the sum of $4,400. That debts of the Ziegler-Zaiss Commission Company, aggregating about $13,000, have been allowed by said assignee, no part of which have been paid. That when the said $2,000 was paid by Kollman to Schieferle he delivered his note for that sum to Henry Zurn,...