Yellow Mfg. Acceptance Corp. v. American Taxicabs

• Citation: 130 S.W.2d 601,344 Mo. 1200
• Decision Date: 07 July 1939
• Docket Number: 35539
• Parties: Yellow Manufacturing Acceptance Corporation, a Corporation, Appellant, v. American Taxicabs, Inc., a Corporation, William J. Brown, Ruth Maloney, Elizabeth J. Denton, Robert O. Cathcart, Joseph R. Cathcart and Agnes Cathcart
• Court: United States State Supreme Court of Missouri

130 S.W.2d 601

344 Mo. 1200

Yellow Manufacturing Acceptance Corporation, a Corporation, Appellant, v. American Taxicabs, Inc., a Corporation, William J. Brown, Ruth Maloney, Elizabeth J. Denton, Robert O. Cathcart, Joseph R. Cathcart and Agnes Cathcart

No. 35539

Supreme Court of Missouri

July 7, 1939

Appeal from Circuit Court of City of St. Louis; Hon. Granville Hogan, Judge.

Affirmed.

Thompson Mitchell, Thompson & Young, Richmond C. Coburn, R. Forder Buckley and H. L. Harvey for appellant.

(1) The plaintiff, as a simple contract creditor of the American Taxicabs, Inc., could bring this action for an accounting against the officers of the company, for the appointment of a receiver of the company, and for a money judgment against the company. As a general rule a simple contract creditor cannot maintain a creditor's bill for an accounting against the officers and directors of a corporation and for the appointment of a receiver for the corporation. Coleman v Hagey, 252 Mo. 102, 158 S.W. 829; Davidson v Dockery, 179 Mo. 687, 78 S.W. 624; Harkin v. Drundage, 276 U.S. 36, 48 S.Ct. 268, 72 L.Ed. 457; Lion Bonding & Surety Co. v. Karatz, 262 U.S. 77, 43 S.Ct. 480, 67 L.Ed. 871; Pusey & Jones Co. v. Hanssen, 261 U.S. 491, 43 S.Ct. 454, 67 L.Ed. 763; Hutson v. Long-Bell Lbr. Co., 1 F.Supp. 468. An exception to this rule exists, however, where the debtor is insolvent at the time of the commencement of the action, and in such case the creditor is not first required to obtain a judgment and issue execution thereon. Bewes, Inc., v. Buster, 108 S.W.2d 66; Farmers & Traders Bank v. Kendrick, 108 S.W.2d 62. Another exception to the requirement of the general rule exists where the plaintiff's debt is admitted by the debtor. The words "any creditor," used in Sections 4959, 4960 and 4961 of the Revised Statutes 1929, include a simple contract creditor as well as a lien creditor. The words "any creditor," found in a Delaware statute permitting the appointment of a receiver of a corporation under certain circumstances on a creditor's bill (Section 4407, Revised Code of Delaware of 1935), include a simple contract creditor as well as a lien creditor. Jones v. Mutual Fidelity Co., 123 F. 506; Mackenzie Oil Co. v. Omar Oil & Gas Co., 14 Del. Ch. 36, 120 A. 852. (2) The court should have entered a judgment requiring the defendants Ruth Maloney and William J. Brown, as officers and directors of the American Taxicabs, Inc., to account to the corporation for the disbursement of $ 3000 in cash to Ruth Maloney on December 21, 1934. A corporation cannot, as against its creditors, apply its assets in satisfaction of the debt of another person which it is under no obligation to pay. Shields v. Hobart, 172 Mo. 491, 72 S.W. 669; Schufeldt v. Smith, 139 Mo. 367, 40 S.W. 887; Hall v. Goodnight, 138 Mo. 576, 37 S.W. 916; National Tube-Works Co. v. Ring Refrig. & Ice-Mach. Co., 118 Mo. 365, 22 S.W. 947; McCullum v. Buckingham Hotel Co., 198 Mo.App. 107, 199 S.W. 417. A preference by a corporation of a debt owed to a director or officer is presumptively fraudulent as to creditors of the corporation. State ex rel. Grimm v. Manhattan Rubber Mfg. Co., 149 Mo. 181, 50 S.W. 321; Schufeldt v. Smith, 131 Mo. 280, 31 S.W. 1039; Pitman v. Chicago Lead Co., 93 Mo.App. 592, 67 S.W. 946. (3) The assets of a corporation which is insolvent, or has gone out of business, or is about to go out of business, become a trust fund for the benefit of the creditors of a corporation, and the officers and directors are the trustees of the fund. Roan v. Winn, 93 Mo. 503, 4 S.W. 736; Sweeney v. Heap O'Brien Min. Co., 194 Mo.App. 140, 186 S.W. 739; Warren v. Mayer, 163 Mo.App. 451, 143 S.W. 861; State ex rel. Moll v. Brockman, 39 Mo.App. 131; Morawetz, Law of Private Corporations (2 Ed.), sec. 787. Under Section 3117, Revised Statutes 1929, if a conveyance is made by a debtor with the intent to hinder, delay or defraud his creditors, the transfer is void as to creditors, whether the debtor was insolvent or not. Klauber v. Schloss, 198 Mo. 502, 95 S.W. 930; Rupe v. Alkire, 77 Mo. 641; Graff v. Continental Auto Ins. Underwriters, 225 Mo.App. 85, 35 S.W.2d 926. Where a debtor conveys his property with the intent to hinder, delay, or defraud his creditors, and the vendee purchases the assets with the knowledge of the vendor's fraudulent purpose, the sale is void as to the vendor's creditors, even though the vendee paid the full value of the property. Emlet v. Gillis, 63 S.W.2d 12; Barber v. Nunn, 275 Mo. 565, 205 S.W. 14; Gust v. Hoppe, 201 Mo. 293, 100 S.W. 34. A test of whether a conveyance was made with the intention of defrauding creditors in violation of Section 3117, Revised Statutes 1929, is whether a donation was such as a prudent man, actuated by an honest purpose and having due regard to the rights of his creditors, would have made under all of the circumstances. Johnson v. Murphy, 180 Mo. 597, 79 S.W. 909. The plaintiff in this case proved various contrivances or devices which are known to the law as badges of fraud. It is a badge of fraud for a debtor to transfer his property in anticipation of a suit against him. This is especially true if it leaves the debtor without any substantial property. Farmers Bank of Higginsville v. Handly, 320 Mo. 754, 9 S.W.2d 880; 27 C. J. 488. It is a badge of fraud for a debtor to transfer substantially all of his property. Benne v. Schnecko, 100 Mo. 250, 13 S.W. 82; Ward v. Stutzman, 212 S.W. 65; 27 C. J. 493. It is a badge of fraud for a debtor to convey his property at a time when he is heavily indebted. State ex rel. Pierce v. Merritt, 70 Mo. 275; McRea v. Branch Bank of Alabama, 19 How. 376, 15 L.Ed. 688; 27 C. J. 492. Inadequacy of the consideration for the assets conveyed is another badge of fraud. Cole v. Cole, 231 Mo. 236, 132 S.W. 734; State ex rel. Salomon v. Mason, 112 Mo. 374, 20 S.W. 629; Ames v. Gilmore, 59 Mo. 537; 27 C. J. 484. Where part of the consideration for a conveyance is fictitious, the entire transaction is fraudulent as to creditors and will be voided. New England Natl. Bank v. Montgomery, 192 S.W. 941. The organization of a new corporation and the conveyance to it of substantially all the assets of a debtor corporation which involves the destruction of the debtor corporation and abatement of its purposes is a fraud on its creditors. Cole v. Mercantile Trust Co., 133 N.Y. 164, 30 N.E. 847; Hibernia Ins. Co. v. St. Louis & New Orleans Co., 13 F. 516; Strahm v. Fraser, 32 Cal.App. 447, 163 P. 680. (4) By Section 4960, Revised Statutes 1929, the circuit court is expressly given jurisdiction to appoint a receiver for a corporation in aid of relief to which the plaintiff is entitled under Section 4959, Revised Statutes 1929. The appointment of a receiver pursuant to the Missouri corporation statutes cannot be the primary relief in the case, but can be secondary to some other primary equitable relief to which the plaintiff is entitled. Laumeier v. Sun-Ray Products Co., 330 Mo. 542, 50 S.W.2d 640. Where the officers or directors of a corporation have been guilty of acts of misconduct in the management and disposition of the funds and property of a corporation, a receiver should be appointed pursuant to Section 4960, Revised Statutes 1929, in aid of the accounting to which the officers should be subjected and to institute any suits which may be necessary to recover the property or moneys of the corporation. Welden v. Stephens Farm Loan Co., 213 S.W. 54; Clay v. Union Wholesale Pub. Co., 200 Mo. 665, 98 S.W. 575; Glover v. St. Louis Mut. Bond Inv. Co., 138 Mo. 408, 40 S.W. 110; Slattery v. St. Louis & New Orleans Transportation Co., 91 Mo. 217, 4 S.W. 79, 60 Am. Rep. 245.

Wilbur C. Schwartz and Irl B. Rosenblum for respondents.

(1) The court merely entered its order denying the plaintiff's petition. This was not sufficient. Moran v Plankinton, 53 Mo. 243; Freeman v. McCrite, 165 Mo.App. 1, 147 S.W. 1102; Lyons v. Rollinson, 109 Mo.App. 68, 82 S.W. 646. (a) The matter, being jurisdictional, can be raised at any time. In fact, if not raised at all, this court will do so on its own motion. State ex rel. K. C. Stock Yards Co. v. Trimble, 333 Mo. 51, 62 S.W.2d 473, quashing certiorari 48 S.W.2d 112; Polizos v. Furman, 116 S.W.2d 151. (2) The court did not err in dismissing the plaintiff's petition for the reason that plaintiff was not a creditor, judgment or otherwise, in a position to maintain this suit either for an accounting, a receiver or for a deficiency judgment. (a) The American Taxicabs, Inc., was not liable for any deficiency arising after foreclosure, since the blanket chattel mortgage, Exhibit H, contained no promise or agreement on the part of this defendant to pay such deficiency. Adams v. Moody, 91 Mo.App. 47; 11 C. J. 733; 42 C. J. 285, sec. 1963. (b) Neither plaintiff nor its corporate affiliate could purchase at the foreclosure sale, since the blanket chattel mortgage, Exhibit H, contained no such permission. At most, the defendant was not concluded by the price paid and was entitled to a credit for the reasonable value of the property, which, in this case, exceeded the balance of the debt due to plaintiff. Parker v. Roberts, 116 Mo. 657, 22 S.W. 916; Byrne v. Carson, 70 Mo.App. 126; Sinclair Coal Co. v. Mo. Hydraulic Min. Co., 207 S.W. 266; 11 C. J. 711. (c) Plaintiff failed to establish that it had used reasonable diligence to obtain the best possible price at foreclosure. Moreover, plaintiff failed to prove that it had complied with the terms of the mortgage requiring a sale at public auction and after due notice of said sale. Universal Credit Co. v. Uhri, 101 S.W.2d 501; Nichols & Shepard Co. v. Stokes, 196 S.W. 1075; Waltner v. Smith, 173 S.W. 526; First Natl. Bank v. Wright, 104 Mo.App. 242, 78 S.W. 686; Polliham v. Reveley, 181...