Zimmerman v. W. L. Grush Produce Co.
| Decision Date | 15 May 1911 |
| Citation | 137 S.W. 642,156 Mo.App. 588 |
| Parties | JOSEPH U. ZIMMERMAN, Appellant, v. W. L. GRUSH PRODUCE COMPANY, Respondent |
| Court | Kansas Court of Appeals |
Appeal from Jackson Circuit Court.--Hon. W. O. Thomas, Judge.
Judgment affirmed.
Stubbs & Stubbs for appellant.
(1) The distinction is clearly drawn, in our authorities, between a preferred creditor who receives from an insolvent debtor enough goods to pay or secure his claim, and a volunteer purchaser from such insolvent. The preferred creditor is protected, provided he does not further participate in the fraud of the debtor than by accepting the goods with knowledge of his fraudulent intention. But the volunteer purchaser will be compelled to disgorge the goods purchased from such insolvent, provided he knew of his fraudulent intention, even though he did not further participate in the fraud; for in his case the purchase with such knowledge is a participation in the fraud, ipso facto; and this is true even though he has paid full value for the goods. Kurtz v Troll, 175 Mo. 506; distinguishing Sammons v O'Neill, 60 Mo.App. 530; Monarch Rubber Co. v Brown, 78 Mo.App. 55; Bank v. Fry, 216 Mo. 34; Gust v. Hoppe, 201 Mo. 300; Larrabee v. Bank, 114 Mo. 592; McDonald v. Hoover, 142 Mo. 484. (2) Taking over the assets of the old corporation, under these circumstances, was not a purchase at all. There was, in fact, no contract, no meeting of minds, no seller on one side and no buyer on the other. There was no separate entity or volition on the one side, opposed to a like entity or volition on the other. The same mind and will operated on both sides--if it may be said that there were two sides--in carrying out the one common purpose. There was only one will and purpose, and that was the will and purpose of Grush. (3) The purchasers who took stock, with full knowledge of the conditions existing and the results of thus lending their names (and possibly their money) to Grush, thereby put it in Grush's power to avoid and defeat his creditors, that is, the creditors of the old corporation; and hence, to that extent they participated in Grush's fraud. Balz v. Nelson, 171 Mo. 682; Bank v. Fry, 216 Mo. 46; Snyder v. Free, 114 Mo. 360; Larrabee v. Bank, 114 Mo. 592; McDonald v. Hoover, 142 Mo. 284; Rubber Co. v. Supply Co., 149 Mo. 538; Hall v. Goodnight, 138 Mo. 576. (4) It was not necessary for plaintiff to prove combination, or intentional, premeditated fraud. Fraud may be shown by circumstantial, as well as by direct evidence. Snyder v. Free, 114 Mo. 360; Burgert v. Borchert, 59 Mo. 80; Balz v. Nelson, 171 Mo. 682; Van Raalte v. Harrington, 101 Mo. 602, 20 Cyc. 450; Baldwin v. Whitcomb, 71 Mo. 602; Seger's Sons v. Thompson, 107 Mo. 635; Gentry v. Field, 143 Mo. 399. Anything out of the usual and normal course of business is a sign and badge of fraud. Benne v. Schnecko, 100 Mo. 250, citing Bump on Fraudulent Conveyances, pp. 34, 42, 51 and Baldwin v. Combs, 71 Mo. 651; Van Raalte v. Harrington, 101 Mo. 602; Snell v. Harrison, 104 Mo. 158; Gentry v. Field, 143 Mo. 399. (5) While the old doctrine that the assets of an insolvent corporation are a trust fund for the payment of its debts has been in part receded from, still the doctrine is firmly fixed in the decisions of our courts, that such assets are a trust for the payment of debts, when traced into the hands of stockholders or of fraudulent transferees. In other words, such assets are always a trust fund for the payment of debts unless they have gone into the hands of bona fide purchasers. And courts of equity will follow them and apply them to the payment of debts. 10 Cyc. 288, 653, 655, 1256, 1257; Sidel v. Railroad, 78 F. 724; Williams v. Jones, 23 App. 132; Shields v. Hobart, 172 Mo. 491; Roan v. Winn, 93 Mo. 503; Mo. Lead Co. v. Reinhardt, 114 Mo. 218. (6) In an equity suit like this, to follow assets, to follow property fraudulently conveyed, if it appears to the Appellate Court that upon the evidence the decree ought to have been for the plaintiff as prayed for, the court will reverse and remand the case with directions to the trial court to render the proper decree. Gust v. Hoppe, 201 Mo. 300; Bank v. Fry, 216 Mo. 24; Baldwin v. Whitcomb, 71 Mo. 651; Benne v. Schnecko, 100 Mo. 250; Snell v. Harrison, 104 Mo. 158; Seger's Sons v. Thompson, 107 Mo. 635; Snyder v. Free, 114 Mo. 360; McDonald v. Hoover, 142 Mo. 484; Berry v. Rood, 168 Mo. 316.
T. L. Carns for respondent.
(1) A sale made in good faith by an insolvent for the purpose of paying creditors is valid. Gens, etc. v. D. G. Co., 56 Mo.App. 245; Dougherty v. Cooper, 77 Mo. 528. "To render a sale void as to creditors, the fraud intent must exist and the vendee have knowledge at the time of the sale." Hill v. Taylor, 125 Mo. 331; Goresche v. McDonald, 103 Mo. 1. While, as a general rule, the assets of the corporation are a trust fund for the benefit of its creditors, yet a corporation may dispose of the whole or any part of its assets for value and in good faith and the purchaser take such assets, discharged of any trust, in favor of the creditors of the selling corporation. Warren v. Fertilizer & Junk Co., 145 Mo.App. 558. The new company, defendant here, paid adequate, and the testimony tends to show, full consideration for the assets which it had received and took over. The purchase price went into the hands of the stockholders of the old company. If there was any fraud upon creditors, it was in the distribution of these assessments among the stockholders of the old company. Neither they nor the representitives of the old company are before this court in this proceeding. Warren v. Fertilizer & Junk Co., supra. (2) A debtor, whether solvent or insolvent, may prefer one or more of his creditors and to that end may, in good faith, by any suitable means appropriate the whole or any part of his property to the payment or part payment of his just debts to one or more of his creditors to the exclusion of the others. Drug Co. v. White, 165 Mo. 136. A debtor may give a preference to a particular creditor or set of creditors by direct payment or assignment, if he does so in the payment of their just demands, but not as a mere screen to secure the property to himself, and the pendency of the suit of another creditor is immaterial and the transaction is valid, though done to defeat that creditor's claim. Shelley v. Boothe, 73 Mo. 74; Wall v. Beedy, 161 Mo. 625; Sammons v. O'Neill, 60 Mo.App. 530. (3) Equity has no jurisdiction to compel a man to work for his creditors if he prefers to work for his wife and children and leave his honest debts unpaid. Bank v. Adair, 172 Mo. 156.
This is a suit in equity to impound assets which are charged to have been transferred in fraud of creditors, in contravention of the statute against fraudulent conveyances as contained in sections 2880 and 2881, Revised Statutes 1909.
The special object of the action is to recover from the respondent the sum of twenty-five hundred dollars and interest and costs, being the amount recovered by the appellant in a suit brought by him against the W. L. Grush Produce Company. It is charged in the petition that the plaintiff, in 1906, sued the W. L. Grush Produce Company for forty-five hundred dollars; that that company was a corporation organized and existing under the laws of Missouri with a capital stock of Ten Thousand ($ 10,000.00) Dollars ninety-eight per cent of which was owned by W. L. Grush, and that he had absolute control of the remaining two per cent; and that on the 5th day of November, 1907, the plaintiff recovered a judgment against that corporation for twenty-five hundred dollars, which has not been paid; that prior to October 26, 1907, that corporation became insolvent and that W. L. Grush went into voluntary bankruptcy on October 28, 1907. It is further charged that on about the 26th and 28th days of October, 1907, W. L. Grush, with the fraudulent intention to merge the W. L. Grush Produce Company into another corporation which might absorb and take over all assets and business and good will of the same, and that he intended to hinder, delay and defraud the creditors of that corporation, and especially the plaintiff, caused the respondent, W. L. Grush Produce and Commission Company, to be incorporated. The petitioner states the names of the several incorporators and the number of shares subscribed by each, and charges that said incorporators, with knowledge of the fraudulent intent of said Grush and for the purpose of aiding him in such fraudulent scheme, permitted their names to be used in incorporating the respondent, and that none of said incorporators paid for their stock or become bona fide stockholders in the respondent corporation. It is further charged in the petition that on the 26th day of October, 1907, the W. L. Grush Produce Company executed a certain bill of sale to J. E. Chandler for the named consideration of nineteen hundred and thirty-five dollars, but that, as a matter of fact, Mr. Chandler paid nothing for said bill of sale and did not, in fact, purchase the property therein described; and that said corporation did not, in fact, sell said property to Mr. Chandler; that on the 28th day of October, 1907, all of the assets, goods, wares and merchandise of the said W. L. Grush Produce Company were transferred into the possession of the respondent and that no consideration was paid therefor, and that the value of said property was about four thousand dollars; that when W. L. Grush went into voluntary Bankruptcy he was the owner of certain lots in Kansas City which he listed as a part of his assets and turned over to the trustee in bankruptcy, and that...
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