Woodard v. Mastin

• Decision Date: 30 June 1891
• Parties: Woodard, Appellant, v. Mastin et al
• Court: Missouri Supreme Court

17 S.W. 308

106 Mo. 324

Woodard, Appellant, v. Mastin et al

Supreme Court of Missouri, Second Division

June 30, 1891

Appeal from the Greene Circuit Court. -- C. V. Buckley, Esq. Special Judge.

Reversed and remanded.

C. H Montgomery for appellant.

(1) The court erred in dismissing plaintiff's bill and rendering judgment for defendants. The questions in this case have already been decided in favor of plaintiff. State v McBride, 81 Mo. 349; S. C., 15 S.W. 72. (2) Purchases at public sales with debtor's money are fraudulent and void. Bump on Fraud. Conveyances [2 Ed.] p. 255; Gutzweiler v. Lackman, 23 Mo. 168; Benne v. Schnecko, 100 Mo. 251. (3) Such public sales are fraudulent where the money is paid by others. (4) And may be void though valuable consideration be paid. Johnson v. Sullivan, 23 Mo. 482; Sexton v. Anderson, 95 Mo. 379; Allen v. Berry, 50 Mo. 90; Slatterly v. Jones, 96 Mo. 216. (5) Transactions between relatives are always subjected to more jealous scrutiny than when occurring between mere strangers. Leavitt v. LaForce, 71 Mo. 354; King v. Moon, 42 Mo. 551. (6) "Notice of fraud imputed to one who has sufficient information to put him on inquiry." Rupe v. Alkire, 77 Mo. 643; Leavitt v. LaForce, 71 Mo. 354; Stern v. Mason, 16 Mo.App. 478; 3 McCrary, 638; 11 F. 559; Machine Co. v. Clayborne, 6 F. 438; Harrall v. Beall, 17 Wallace, 590. (7) "Fraud may be presumed in equity, but must be proved at law. Therefore, courts of equity will grant relief, upon the ground of fraud established by presumptive evidence, which courts of law would not always deem sufficient to justify a verdict." King v. Moon, 42 Mo. 551. (8) The actual participants in the fraudulent conspiracy to wreck the North Center Creek Mining & Smelting Company, and to cover up its assets from the creditors, were all directors and officers of that company, and the company was affected by this fraud. "The fraud of an agent binds his principal." Wait on Fraud. Con. & Creditors' Bills [2 Ed.] sec. 198, p. 282. This principle applies with peculiar force to the case at bar, because a corporation only acts by its directors and officers. Their acts are the acts of the corporation. (9) The rules of law governing fraudulent conveyances apply to corporations the same as to individuals. Wait on Fraud. Convey., sec. 199. (10) Fraud may be inferred from circumstances, and failure on the part of persons charged with fraud to produce evidence in their power raises against them the presumption of fraud. Baldwin v. Whitcomb, 71 Mo. 651; Maybary v. McClurg, 74 Mo. 591; Eck v. Hatcher, 58 Mo. 239; Cass Co. v. Green, 66 Mo. 498; Henderson v. Henderson, 55 Mo. 534. (11) Resale without readvertisement of property at a trustee's sale is not permissible. Judge v. Booge, 37 Mo. 544; Barnard v. Duncan, 38 Mo. 170; Dover v. Kennerly, 38 Mo. 469; Sherwood v. Saxton, 63 Mo. 78. (12) Officers of an insolvent corporation cannot procure a fraudulent purchase of their company's property, and hold it against creditors. McAllen v. Woodcock, 60 Mo. 174; Bent v. Priest, 86 Mo. 475; Patrick v. Gas Co., 17 Mo.App. 462; State v. McBride, 15 S.W. 72. (13) Where the estate becomes reinvested in the original party to the fraud the original equity will reattach in favor of creditors. Wait's Fraud. Convey. [2 Ed.] p. 525. (14) The Mastins, being fraudulent grantees, acquired no title at the United States marshal's sale. (15) Property may be sold on creditor's execution, notwithstanding fraudulent conveyance. It is the settled law of Missouri that lands fraudulently conveyed may be sold on the execution of a creditor as though no such fraudulent conveyance had ever been made. Such conveyance as against creditors is clearly and utterly void. R. S. 1879, sec. 2499; State ex rel. v. McBride, 105 Mo. 365; Slatterly v. Jones, 96 Mo. 219; Ryland v. Callison, 54 Mo. 513; Bobb v. Woodard, 50 Mo. 95; Jacobs v. Smith, 89 Mo. 682; Lionberger v. Baker, 88 Mo. 447; Zoll v. Soper, 75 Mo. 460. Plaintiff is entitled to a decree divesting all the right, title and interest of defendants in the land in controversy and vesting it in plaintiff, and for an accounting of royalty since plaintiff's purchase in December, 1884. Courts of equity may in the same proceeding divest title out of a fraudulent grantee, and, also, invest it in the plaintiff. Ames v. Gilmore, 59 Mo. 537; Allen v. Berry, 50 Mo. 91.

Phelps & Brown and C. O. Tichenor for respondents.

(1) Appellant's claim is inequitable. He seeks to secure property worth $ 50,000 for $ 50, and at the same time to reap the benefit of the $ 4,500 paid by D. C. Mastin to Wahl on account of the valid deed of trust. He who seeks equity must do equity. Randolph's Ex'r v. Quidnick Co., 135 U.S. 457. (2) Had D. C. Mastin actually entered into a contract with the company to buy in the property for the amount of the debt secured by the deed of trust, it would have been neither illegal nor fraudulent. O'Fallon v. Clopton, 89 Mo. 290; Wicker v. Hoppock, 6 Wallace, 94; Small v. Jones, 1 Watts & S. 128. (3) The fact that the property did not bring its full value does not render the sale void. Gordon v. O'Neil, 96 Mo. 355; Briant v. Jackson, 99 Mo. 399. (4) Fraud must be proved, and the burden was on appellant to do so. Keiser v. Gammon, 95 Mo. 224; Funkhouser v. Lay, 78 Mo. 458; Evans v. David, 98 Mo. 411. (5) Had J. J. Mastin been something more than a nominal director, taking no part in the affairs of the company, and had he bought at the sale under the deed of trust or under the judgment in the United States court, it would not have been void. Kitchen v. Railroad, 69 Mo. 224; Oil Co. v. Marbury, 91 U.S. 589; Ashhurst's Appeal, 60 Pa. 315. (6) The delay of appellant strikes even the counsel for appellant. He calls attention to it. D. C. Mastin purchased under the deed of trust, November 24, 1879. Appellant was present at the sale. He got his judgment December 15, 1880. He did not get an execution until October 28, 1884, the sale taking place December 11. Appellant waited over five years. Why did he delay this great length of time? He does not testify in his case. Mining property fluctuates in value more than any other kind of realty, and hence appellant was called upon to act quickly. He could not lie by and speculate upon the chances of the future. Oil Co. v. Marbury, 91 U.S. 592, and cases cited in opinion; Samuel v. Holliday, 1 Woolw. 416, and cases cited; 78 Pa. 394; Kitchen v. Railroad, 69 Mo. 264.

OPINION

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 Wm. 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, Missouri. On the twenty-seventh 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 northwest quarter of the northwest quarter of section 17; the undivided seven-twelfths of lot 1, of the northwest quarter, and the north half of the northeast quarter 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, three large boilers, two detached boilers, nineteen steam jigs, one crusher, four steam pumps, two 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 on hands, and it provided that, in case any sum of money remained unpaid after the expiration of ninety days, the trustee might, upon the usual terms, sell said land at the courthouse 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 twenty-fourth day of November 1879, sell all said land and personal property to D. C. Mastin, for $ 4,485. On the fifteenth 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 northwest quarter of the northwest quarter 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...