Wright v. Fergus Falls Nat. Bank

• Decision Date: 18 January 1892
• Citation: 48 Minn. 120,50 N.W. 1030
• Parties: WRIGHT v FERGUS FALLS NAT. BANK ET AL.
• Court: Minnesota Supreme Court

48 Minn. 120

50 N.W. 1030

WRIGHTvFERGUS FALLS NAT. BANK ET AL.

Supreme Court of Minnesota.

Jan. 18, 1892.

(Syllabus by the Court.)

1. A Judgment obtained by a creditor against an insolvent debtor in contemplation of insolvency, under a collusive understanding between them that the creditor shall thereby obtain a preference over other creditors, is a “security given” with intent to give a preference, within the meaning of section 4 of the insolvent act of 1881.

2. Evidence held not to justify the findings.

Appeal from district court, Otter Tail county; BAXTER, Judge.

Action by Charles D. Wright, assignee in insolvency of the Page Flour-Mills, against the Fergus Falls National Bank and others, to set aside a certain judgment. Judgment for defendants. Plaintiff appeals. Reversed.

John B. & W. H. Sanborn, for appellant.

Mason & Hilton and H. F. Woodard, for respondents.

MITCHELL, J.

This action was brought by the plaintiff, as assignee of the Page Flour-Mills, under the fourth section of the insolvent law of 1881, to set aside, as an unlawful preference, a judgment obtained by the defendant bank against the insolvent by default, and on the same ground to recover payments on the debt sued on, made by the insolvent after the commencement of the action and before judgment. Our views as to the weight and effect of the evidence are so at variance with those of the learned judges who tried the case that it becomes necessary to state the testimony somewhat at length. The insolvent was a corporation engaged in the milling business at Fergus Falls. Henry G. Page was its president and treasurer and principal financial manager. He was also president of the defendant bank, having his office in the bank building, and being evidently also the controlling spirit of its financial policy. The mill company was a customer and depositor of the bank, and also a large borrower from it, being on September 25, 1890, indebted to it in about $45,000 on overdue paper executed by Page, as president, in its behalf. Its account with the bank had also been continuously overdrawn, since the previous May, from $1,000 to $2,000, and was then overdrawn to the amount of $1,777. It was at this date (September 25th) hopelessly insolvent, as the bank officers well knew, its debts, mostly overdue, amounting to about $98,000, and its property, consisting principally of its mill-plant, not being worth to exceed $38,000 to $40,000. Two or three days previously Boyd, formerly the cashier, and still a stockholder, of the bank, had come down from West Duluth, for the express purpose of attending to the claims of the bank against the mill company, and had been during that time in frequent consultation with Page on the subject. As to the precise nature of these conferences and the conclusion arrived at, Boyd and Page somewhat disagree, but what confessedly followed leaves no room for any reasonable doubt on the subject. On September 25th Page sent for Wright, the president of the First National Bank of Fergus Falls, which was a creditor of the mill company in the amount of $5,000, and on his arrival at the bank told him that the mill company had been losing a great deal of money, and was in bad shape, and that he desired to protect the local creditors, and that Boyd would explain the details to him. Page then called Boyd into the room. Boyd then said to Wright that there was some trouble; that the mill company had got to fail, and that there had got to be a heavy loss; that he had a plan by which they could be protected as far as possible, but that under no circumstances would he disclose the plan to him without his giving his pledge of secrecy that he would not state it to any one else. Wright having given him this pledge, Page then (accepting as true his own version of it) “told him the condition of the bank so far as the mill company was concerned, and that the plan was to obtain a judgment if they could, and make a levy on the property, and from the proceeds of that levy and sale to divide with him, the Citizens' National Bank, (also a creditor of the mill company,) and their own bank, according to the amount of their claims.” Wright testified that Boyd said that they must keep the matter very quiet, because if it got out it would upset the whole thing. Boyd really does not deny this, as he admits that he said that in conducting the suit it was unnecessary “to get out a brass band,” and inform the public that they had commenced it. Page was present during all this time, and at least made no objection to what was agreed on. Wright having assented to this arrangement, Page then sent for Compton, the president of the Citizens' Bank, and when he arrived the same thing was repeated that occurred with Wright, Page also being present. Compton, in behalf of his bank, also assented to the plan. It may also be stated that Compton was secretary of the mill company. On September 24th or 25th Page took up one of the overdue notes which his bank held against the mill company, by giving the check of the mill company on the bank for the amount, which increased the overdraft of the mill company's account to $7,159.47. Immediately upon the conclusion of the arrangement between the three local banks, the defendant bank employed counsel and commenced suit against the mill company for its entire claim, including this overdraft. The complaint in the action was filed by the attorney, with an injunction to the clerk of the court to keep it out of the...