Ed V. Price & Co. v. Rouse Bros.

| Miss. | Oct 15, 1914

Cook, J.,

delivered the opinion of the court.

The bill of complaint filed in this case, together with the amendments thereto and the orders of the court permitting creditors of Rouse Bros. &. Smith, a mercantile corporation, to join in the litigation, was, in effect, a creditor’s bill to have certain collateral notes assigned to the Bank of Poplarville, and described in the agreed statement of facts, declared general assets of the said insolvent incorporation. It was contended by complainant that the assignment of the notes to the Bank of Poplar-ville was to all intents and purposes a preference of the directors by themselves, condemned by this court in Love Mfg. Co. v. Queen City Mfg. Co., 74 Miss. 290" court="Miss." date_filed="1896-10-15" href="https://app.midpage.ai/document/love-manufacturing-co-v-queen-city-manufacturing-co-7987932?utm_source=webapp" opinion_id="7987932">74 Miss. 290, 20 So. 146.

The cause was submitted to the court upon an agreed statement of facts, and we here copy same, viz.:

“Rouse Bros. & Smith bought block 10, fully described in the bill, for eight thousand dollars, in 1905, and paid about five hundred dollars in cash of the purchase price, and executed a deed of trust on the property to the Citizens’ Bank of Poplarville for the balance of the purchase money, being about seven thousand, five hundred dollars, and paid this amount over to the vendors. This deed of trust was executed the day Rouse Bros. & Smith bought the property. Afterwards, on the 29th day of January, 1907 Rouse Bros. & Smith borrowed seven thousand dollars from the Bank of Poplarville to take up the trust deed of the Citizens’ Bank. On the-day of September, 1907, the corporation of Rouse Bros. & Smith conveyed the property, block 10 as described in the bill, to H. K. Rouse, pursuant to a resolution of the board of directors reciting a consideration of one hundred dollars. On the 24th day of September, 1907, H. K. Rouse and his wife executed a deed of trust on that property to the Georgia State Building & Loan Association for a loan of four thousand, five hundred dollars. This sum was applied to the payment of the mortgage on this same property held by the Bank of Poplarville, on the 19th day of January, 1908, and the Bank of Poplarville then canceled its trust deed on this property, leaving the Georgia State Building & Loan Association holding a prior lien. On the date of the payment of the four thousand, five hundred dollars to the Bank of Poplarville, Rouse Bros. & Smith, corporation, executed its note to the Bank of Poplarville, indorsed by its board of directors, for the balance owing said bank after the application of the four thousand, five hundred dollars to its debts, which balance had been secured as aforesaid by a mortgage on this property. The Bank of Poplarville held this note, inodrsed by the board of directors of Rouse Bros. & Smith, until the-day of Augmst, 1909, when EL K. Rouse sold and conveyed the property (block 10 as fully described in the bill) to M. N. McCoy for eight thousand dollars, McCoy agreeing to assume the balance due the Georgia State Building & Loan Association secured by trust deed, and paid to H. K. Rouse sixty-five dollars in cash, and executed Ms promissory notes for the balance of the purchase price, as follows, to wit: One note for one thousand dollars, due September 1, 1910; one note for one thousand, seven hundred dollars, due September 1, 1911; and one note for one thousand, seven hundred dollars, due September 1, 1912. That H. K. Rouse deposited the purchase-money notes of McCoy with the Bank of Poplarville to secure the balance owing that bank, for which it had taken the note of Rouse Bros. & Smith, indorsed by the board of directors, when it canceled its lien on the property, said note being renewed by Rouse Bros. & Smith and indorsed by the board of directors, and the purchase-money notes of McCoy held as collateral security. This note has not been paid; neither has the collateral, consisting of the purchase-money notes executed by McCoy.

“When Rouse Bros. & Smith, corporation, conveyed block 10 to H. K. Rouse, it was for the purpose of executing a mortgage or trust deed on the property and borrowing four thousand, five hundred dollars from the Georgia State Building & Loan Association, the proceeds of which were to be applied to the payment of the debt owing the Bank of Poplarville, which debt was secured by a mortgage on this property. When Rouse took the title from Rouse Bros. & Smith to the block of land and storehouses in question, he was the trustee of the corporation, and held the title for the benefit of the corporation, and sold it for the corporation when he sold it to M. N. McCoy and took the purchase-money notes from M. N. McCoy to pay the debts of the corporation and used the notes as aforesaid.

“That at the time the Bank of Poplarville canceled its -mortgage on the property and accepted the note secured by indorsement of the said board of directors, it was orally agreed that a second mortgage should be executed to said bank on said property to secure said bal-anee; that a second mortgage was drawn up by the attorneys of the Bank of Poplarville, but afterwards an opportunity was secured to dispose of the said property to M. N. McCoy, and said notes were deposited with the bank as collateral, instead of said second mortgage being executed. While complainant’s counsel admit the truth of the statement with reference to the second mortgage to be taken by the Bank of Poplarville, they reserve the right to object to the same for irrelevancy and incompetency.

“All the exhibits referred to in the bill of complainant and the several answers thereto are considered as introduced and read in evidence at the trial of the cause. All the pleadings, exhibits, records and judgments in the suits by the several creditors against Rouse Bros. & Smith in the courts referred to or mentioned in the bill of complainant are considered, introduced, and read in evidence at the trial of the case and may be referred to.

“The names of directors who indorsed the note of Rouse Bros. & Smith to the Bank of Poplarville are as follows: H. K. Rouse, EL S. Smith, I. S. Kirkland, J. F. Padget. Some of these directors were solvent when they signed said note and renewal, and still are solvent. The corporation of Rouse Bros. & Smith had ceased to be a going concern when the notes of M. N. McCoy for the purchase-money of block 10 were placed with the Bank of Poplarville as collateral, which fact the Bank of Pop-larville knew to be true, and said corporation was then insolvent. M. N. McCoy knew nothing about the terms and conditions of the transfer of Rouse Bros. & Smith to EE. K. Rouse when he bought the property from EL K. Rouse. Et is agreed that H. K. Rouse would testify, if on the stand, that Exhibit A to this agreement is correct, and that he collected of the corporation’s money, before the appointment of a receiver one thousand, two dollars and eighty-five cents, and paid on the debts of the corporation of Rouse Bros. & Smith five thousand, five hundred, twenty-six dollars and seventy-four cents, as shown by Exhibit A hereto. This does not include notes for purchase money of stock of goods which were delivered to Marks, Bothenburg & Co., creditors of Bouse Bros. & Smith. It is agreed that J. P. Williams, attorney, handled the claims of Owensboro Buggy Company, Louis P. Bice & Co., and Ed. Y. Price & Co., and that he knows nothing about the alleged payments .to .the above-named firms. Complainants reserve the right to object to this statement as incompetent.”

We are unable to see any fraud on the part of the mercantile corporation, its directors, or the Bank of Poplar-ville. It seems clear that it was the understanding when the bank canceled its mortgage it was to enable- this mercantile corporation to borrow money from the Georgia Savings Association. It is not disputed that, when this transaction was agreed upon, it was also agreed that a second mortgage would be executed in favor of the bank. For some unexplained reason the mercantile corporation did not carry out this part of the contract. It appears, however, that within a few months the real estate was sold at a satisfactory price, and in the transfer of the purchase-money notes the directors of the Bouse Bros. & Smith Company merely made good the agreement that the bank was to enjoy the preference over other creditors than the Georgia Savings Association so far as this real estate was concerned.

We cannot see that this transaction was an effort of the directors to prefer themselves; but, on the contrary, it seems to have been the delayed performance of an admitted obligation.

We believe that the learned chancellor was correct in his conclusions, and the case is therefore affirmed.

Affirmed.