Woodard v. Mastin

• Decision Date: 30 June 1891
• Citation: 17 S.W. 308,106 Mo. 324
• Parties: WOODARD v. MASTIN et al.
• Court: Missouri Supreme Court

17 S.W. 308

106 Mo. 324

WOODARD v. MASTIN et al.

Supreme Court of Missouri, Division No. 2.

June 30, 1891.

FRAUDULENT CONVEYANCES — EVIDENCE — RIGHTS OF CREDITORS.

1. The real and personal property of a mining corporation, which was heavily indebted, was sold under a deed of trust, given by the company to secure a debt of about $4,500. The president of the company, who owned or controlled about two-thirds of the stock, was present at the sale, and induced his brother to become a bidder. The land was bid in by the brother for about the amount of the debt secured by the deed, but, on the advice of the president, he afterwards refused to complete the purchase, because the sale did not also include the personal property of the corporation. The trustee then resold the land; the brother again becoming the purchaser, at a price about $300 less than the debt due under the deed. The personal property, consisting of the entire plant of the corporation and ore on hand, worth about $40,000, was then offered for sale by the trustee, and the brother purchased it for about $300. After the sale the purchaser turned over the entire mine to another brother, who had been a director and large stockholder in the corporation, under an arrangement whereby the brother was to pay all the expenses of operating the mine, and to retain all the profits realized therefrom. In an action by a judgment creditor to set aside the sale as in fraud of his rights, the superintendent of the corporation testified that the sale under the trust-deed was procured by the president so as to enable the corporation to reorganize, and get rid of its debts. This testimony was corroborated by the cashier of the corporation, who also testified that the purchaser at the sale had never inspected the works before buying; that he had never been present at the works, except on the day of the sale; that the works were operated the same after the sale as before, the ore produced after the sale being mingled with that produced before; that neither witness nor any of the workmen at the mines entered into a new contract of employment with the purchaser, and that the salaries of employes for work performed both before and after the sale were paid in a lump sum out of moneys furnished by the purchaser's brother, who had assumed control. Held, that the sale under the trust-deed was clearly fraudulent as to creditors, and the fact that the deed itself was valid and bona fide did not relieve the purchaser and his brothers of the effect of their fraudulent conduct.

2. A subsequent purchase of the land at execution sale by the fraudulent purchaser at the trustee's sale does not validate his title, as against a bona fide judgment creditor of the corporation.

3. In Missouri, lands fraudulently conveyed may be sold on execution by a judgment creditor of the grantor; and the purchaser, on proof of the fraud, is entitled to a decree vesting the title in him.

4. Inadequacy of consideration is no defense in an action by a purchaser at execution sale to set aside a prior conveyance by the judgment debtor as fraudulent, where the inadequacy is due to the efforts of the debtor and his grantees to place the property beyond the reach of creditors.

5. A creditor, who had obtained a judgment for about $2,500, purchased at execution sale for $50 land which the judgment debtor had previously conveyed away in fraud of creditors, and which was worth about $50,000. Held, in an action by the creditor to set aside the fraudulent conveyance and vest the title in him, that equity, having obtained jurisdiction of the action, would retain it, to do complete justice between the parties; that the fraudulent conveyance would be set aside; that the execution sale would also be disregarded; and that the judgment creditor was entitled to a lien against the land for the full amount of his judgment and costs, together with all the costs and expenses which he had incurred in the litigation to set aside the fraudulent conveyance.

Appeal from circuit court, Greene county; C. V. BUCKLEY, Judge.

Action by Harry Woodard against David C. Mastin and others to set aside sales under a deed of trust and on execution as in fraud of creditors. From a decree in plaintiff's favor defendants appeal. Modified.

C. H. Montgomery, for appellants. Phelps & Brown and C. O. Tichenor, for respondent.

THOMAS, J.

This is a bill in equity to set aside sales under deed of trust and execution as having been made in fraud of creditors. In 1877, John J. and Thomas H. Mastin organized a mining corporation known as the "North Center Creek Mining & Smelting Company." John J. Mastin was made president of this company when it was first organized. Thomas H. Mastin was, however, after the first year, its president, and William Toms was its superintendent. This company engaged in the business of mining and reducing zinc and lead ores, and for that purpose expended large sums of money in erecting buildings, furnaces, and other necessary appliances on lands it owned near Webb City, Jasper county, Mo. On the 27th day of January, 1879, the company, being indebted to John Wahl & Co. in the sum of about $2,800, executed a deed of trust to H. W. Ocker, trustee of said Wahl & Co., on the undivided half of the N. W. ¼ of the N. W. ¼ of section 17; the undivided seven-twelfths of lot 1 of the N. W. ¼, and the N. ½ of the N. E. ¼, of section 18, township 28, range 32, in Jasper county; and on all the personal property, machinery, tools, and fixtures used in and upon said premises, or in connection with the mining business of said company, and in part consisting of the following: One large engine, 3 large boilers, 2 detached boilers, 19 steam-jigs, 1 crusher, 4 steam-pumps, 2 steam-hoisters, and all belts, pulleys, rollers, and other appurtenances, as well as the blacksmith shop, office, and all the tools and furniture therein, — which deed of trust was made to secure to said Wahl & Co. the payment of the said sum of $2,800 and further advances to be made by said Wahl & Co. to said company, not exceeding in all the sum of $10,000 at any one time, over and above manufactured products actually in hands; and it provided that in case any sum of money remained unpaid after the expiration of 90 days the trustee might, upon the usual terms, sell said land at the court-house door in the city of Carthage, Jasper county, and the said personal property upon the premises, to satisfy such indebtedness. In pursuance of the power contained in this deed of trust, the trustee did, on the 24th day of November, 1879, sell all said land and personal property to D. C. Mastin for $4,485. On the 15th day of December, 1880, plaintiff obtained judgment in the circuit court of said county against said company for the sum of $1,564.68, with costs. In December, 1884, the interest of said company in the N. W. ¼ of the N. W. ¼ of section 17, township 28, range 32, was sold by the sheriff of said county, by virtue of an execution issued on said judgment, and plaintiff became the purchaser thereof for the sum of $50, and received the sheriff's deed therefor, dated December 11, 1884, and he brought this suit to cancel and set aside the sale, and also a deed made under said deed of trust to D. C. Mastin, averring that it was procured to be made by the president and the other officers of said company for the purpose and with the intent to defraud the creditors of said company, among whom was plaintiff; and averring further that D. C. Mastin, the purchaser at that sale, was cognizant of the purposes and designs of said officers, and that he did not furnish the money for the purchase, but that it was furnished by the president and officers of said company. Plaintiff also alleged that in further pursuance of said fraudulent design and conspiracy to cheat and defraud and hinder and delay this plaintiff and the various other creditors of said company out of their just claim and demands against said company, and to strengthen, if possible, the pretended and fraudulent claim of the defendant David C. Mastin to the undivided half of the N. W. ¼ of the N. W. ¼ of section 17, township 28, of range 32, in Jasper county, Mo., said Thomas H. Mastin, John J. Mastin, William Toms, the North Center Creek Mining & Smelting Company, and David C. Mastin, this defendant, on the 25th day of March, 1881, procured an undivided one-half of the N. W. ¼ of the said section 17, township 28, of range 32, in Jasper county, Mo., to be sold under an execution issued out of the circuit court of the United States for the western division of the western district of the state of Missouri on a judgment in favor of the Metropolitan National Bank of New York, and against the North Center Creek Mining & Smelting Company, John J. Mastin, and Thomas H. Mastin, defendants, to this defendant, David C. Mastin, for the grossly inadequate price and sum of $125, when in truth and in fact said property was well worth at the time the sum of $20,000. That said property was so purchased at said sale by said David C. Mastin for the purpose of hindering and delaying and cheating and defrauding said creditors and this plaintiff out of their just claims and demands. D. C. Mastin answered, denying the fraud on his part, and alleging his good faith in the two purchases of the property, and the payment for it by himself. He also alleged that since the institution of this suit he had sold the land in controversy to John J. Mastin, and that he and John J. Mastin, since said trustee's sale, had expended "the sum of $48,000 in removing liens upon said land and property." John J. Mastin filed a separate answer, in which he set up that the trustee's and marshal's sales to D. C. Mastin were made in good faith and for value, and that he and D. C. Mastin had paid $48,000 in removing liens and demands against the company. The suit was originally begun in 1884, in Jasper county, and was on stipulation transferred to Greene county, where a...