41 Kan. 694 | Kan. | 1889
Opinion by
The First National Bank of Peoria, the plaintiff in error, is a corporation organized under the general banking laws of congress, doing business at the ■city of Peoria, state of Illinois. William E. Stone is the ■cashier of the bank. The defendants in error, E. S. Jaffray •& Co., the Nonotuck Silk Co., Alonzo W. Rollins, Shaw & Co., King & Fildes, and the Merrick Thread Co., are merchants to whom Day Bros. & Co. were indebted for goods ■sold and delivered by them to Day Bros. & Co. after the 10th day of January, 1884. On the 1st, 2d and 4th days of October, 1884, and on the 2d day of December, 1884, these defendants commenced actions in attachment in various counties of Kansas against Day Bros. & Co., and caused the lands in controversy to be subjected to attachment liens for said indebtedness. Judgments were subsequently rendered in these actions against Day Bros. & Co., and the lands sold to satisfy said judgments.- The defendants in error, Weigley, Burrows,
On the 3d day of October, 1885, this suit was commenced in the district court of Cowley county, seeking to have the nine quitclaim deeds made by Cobleigh to Stone, declared a mortgage to‘secure the sum of $15,000, and for a foreclosure
Edward D. Burrows filed an answer similar to that of Weigley, and he claims to be the owner of certain tracts of the land by virtue of judicial sales in actions brought against Day Bros. & Co. by other creditors.
Theodore A. Shaw filed an answer to the others, claiming to have purchased a portion of the land at judicial sale in a creditors’ suit. They all prayed that the mortgage be declared fraudulent, for various causes hereinafter stated.
The claims of these defendants upon which they brought their actions in this state, and attached the various tracts of land involved in this controversy, were, with a few exceptions, contracted by Day Bros. & Co. with their creditors after the 10th day of January, 1884.
At the September term, 1886, the court below rendered a ‘judgment in favor of the bank, against Day Bros. & Co., for $15,000; adjudged that the mortgage had been executed by Cobleigh, and received and accepted by Stone, and held by the bank, for the purpose and with the intent on the part of each and all of the parties to hinder, delay and defraud the creditors of Day Bros. & Co.; and that it is void as to these creditors, who are made defendants in error. All exceptions were saved, a new trial was asked for and refused, and the case is here for review on the whole record. All the evidence is in depositions and documents, and the questions of fact may be fully examined and determined. There are many errors assigned, but probably a few controlling questions will determine the case.
It is claimed by the defendants in error that the conveyances made by Cobleigh to Stone are fraudulent in fact, and void in law as against them as creditors of Day Bros. & Co. The principal facts relied on to support this judgment are: First, that Day Bros. & Co. were insolvent on the 10th day of January, 1884; second, that the bank knew of the insolvency;
While incidentally we will consider and pass upon many of the questions that have been so thoroughly discussed by counsel on both sides, both in their oral argument and in their elaborate briefs, we shall avail ourselves of the right to consider all the evidence in the case, as it is all embraced in documents and depositions, and decide the facts according to the evidence, and determine the case on its merits. It is doubtful whether there is such a finding of all the material facts of the case, in the judgment rendered by the court below, as authorizes us to send a mandate ordering a judgment in this case according to our direction, as contemplated by § 559 of the code. While there is no general finding of the court below, that the facts stated in the answer of the defendants are true, or that all the issues are found in their favor, there are some special findings on particular questions of fact, but they do not embrace all the material facts, and consequently do not conform to what is generally understood under our rules of practice, as “findings of fact.” We shall endeavor to give all the questions arising in the case that broad and comprehensive view that is so earnestly urged by counsel for defendants in error. The evidence is very voluminous, and the questions discussed numerous, but some of the rules governing such actions are familiar, having been often determined by this court, and others well settled by the repeated adjudication of other tribunals.
I. The first complaint of counsel for the plaintiffs in error is, that the judgment rendered by the court below does not
II. The primary question, the controlling fact, the foundation upon which all the correlative facts, inferences and legal conclusions rest, and upon which all the superstructure is built, is, whether or nt>t there was at the dates of these various transactions an honest existing indebtedness on the part of Day Bros. & Co. to the bank ? If this fact is not satisfactorily established, if there is grave doubt of the existence of such indebtedness, then the fraudulent intent, like a poisonous fluid, would penetrate the innermost recesses of each individual act of the parties, and its virulence destroy the whole transaction. We have carefully read all the evidence in the record, and there is not a single utterance in all this large mass of bifarious testimony that casts a shadow of doubt on the bona fides of the indebtedness of the firm of Day Bros. & Co. to the bank. This fact being established, all the efforts of the bank to secure the payment of the indebtedness, and
III. The third fact established and claimed to sustain the judgment is, that the bank held the deeds from the 10th day of January, 1884, until the 1st day of September of that year, without having them recorded. The first consideration touching these deeds is to determine if possible the precise circumstances or conditions under which they were executed. The record to some extent furnishes these conditions. The bank claims that they were taken on the day of their date as collateral security for the indebtedness of Day Bros. & Co., which then amounted to $53,000, and was unsecured. The bank at this time considered Day Bros. & Co. perfectly good, and this was the sole and only reason why they were not recorded. The firm of Day Bros. & Co. had been in business in the city of Peoria ever since the year 1856. There had been frequent changes in the persons composing the firm, but it had grown from small proportions until the firm transacted business to the extent of nearly one million dollars yearly. It carried large stocks of goods' in three large establishments, and had large outside property. For years it had been doing business through the bank, and to all outside appearances was thriving and prosperous. It was indebted to the bank in the sum of $53,000 at this particular juncture. In the exercise of an ordinary business prudence, the bank asked to be secured, and'these deeds were executed as security, with an honest belief on the part of the bank at that time that the firm was solvent and able to pay. The deeds were quitclaims, and there were some prior mortgage liens upon the lands, and these
. We have examined the statements made in January, 1882, by L. L. Day, for the firm, and delivered to the resident agent of Bradstreet’s; it contains no allusion to lands in Kansas or Nebraska. Day says in his statement that the firm possesses outside real estate, estimated at the value of $90,000. In the transmitted reports of the resident agent we find no allusion to “outside real estate” after the above date, until the 10th day of September, 1884, when in an additional report he says that the following statement has been made by a party conversant with their affairs. In this statement the Kansas land is estimated at a value of $30,000. This reference to the Kansas land was long after the liabilities of the defendants in error were contracted. In the copies of the reports made by Nettle, the resident agent of Dun & Co., there is no reference to real-estate investments by the firm. The firm is credited with outside investments to the value of $125,000, but there is nothing in the reports indicating the character of the investments.
These statements, made by Stone to the commercial agents in 1882, 1883, and up to the 10th day of May, 1884, are all
While this disposes of the question of estoppel, we cannot refrain from noticing the character of the evidence by which it is claimed that the creditors were induced to extend credit to the firm by the representations of Stone. These creditors, without exception, state that they were induced to give credit to the firm of Day Bros. & Co. by reason of the regular standing of the house, its general reputation, their dealings
V. There remain some legal questions to be determined. The first contention is, that the deeds in question are void for want of power in the bank under its charter, to take them for the purposes claimed. (Revised Statutes U. S., §§5187, 5200.) This contention is disposed of so far as this court is concerned, by the case of Orrin v. National Bank, 16 Kas. 341. Under the provisions of the national banking law, the right to take real-estate security for a preexisting indebtedness is expressly granted. At the time these deeds were executed and delivered to Stone, for the benefit of the bank, there existed a bona fide indebtedness from the firm of Day Bros. & Co. to the bank, that had been running for months before the deeds to the real estate were executed as security for this indebtedness, and under these circumstances the bank had the right to take real-estate security. We do not comment on the fact that the deeds were made to W. E. Stone and not to the bank, because if they, were in the name of the bank as grantee, it would make no
VI. The next contention is, that the plaintiffs’ right to relief is based upon an express parol trust, and such trust cannot be declared and enforced under the laws of Kansas. It is within the statutes of fraud. Comp. Laws of 1885, cb. 114, §§ 1, 2,3, and the cases of Brake v. Ballou, 19 Kas. 397, and Simpson v. Mundee, 3 id. 72, are cited to sustain this proposition. In the case of Brake v. Ballou, the plaintiff, who was not an actual settler on the Osage diminished reserve, procured the defendant to enter upon a certain quarter-section of land and purchase the same from the government, under a parol agreement that the plaintiff would furnish the purchase-money and all necessary means therefor, and deed it to the plaintiff, in consideration of which the plaintiff was to deed the defendant a certain other eighty-acre tract. The defendant refused to convey, as by the terms of the act of congress, these lauds could only be sold to actual settlers. The plaintiff commenced his action to procure the title to the land from the defendant. This court held that, as this particular contract concerning the purchase and conveyance of land belonging to the United States was in violation of the spirit and words of the statute and in fraud thereof, it could not be enforced in equity, and that no trust resulted. The case is -plainly distinguishable-from the one we are considering. The other citation, Simpson v. Mundee, is a case wherein it is held by this court that the old equitable doctrine of vendor’s lien is repugnant to the general policy of our real-estate law, and does not exist in Kansas. A reference to some other cases decided by this court will dispose of this contention. It is said in the case of McDonald v. Kellogg, 30 Kas. 170:
“In Kansas, every deed of conveyance, whether absolute or conditional upon its face, and whether made to,a trustee or not, if made for the purpose of securing a debt and for that purpose only, is a mortgage.”
(See also the cases of Moore v. Wade, 8 Kas. 380; Kirkwood v. Koester, 11 id. 471; McNamara v. Culver, 22 id. 661; and Bennett v. Wolverton, 24 id. 284.)
VII. The last contention that we shall notice is, that the conveyances are fraudulent and void as against the creditors of the grantor. To state this proposition more concisely, it is claimed that the law is that a conveyance executed by an insolvent debtor to his creditor, absolute on its face, but with the agreement and understanding that it should operate only as a security, is fraudulent and void as to other creditors. It is asserted in the brief of counsel for defendants in error, and strongly insisted upon, that there is an imperative rule of law that declares that when an insolvent debtor in fact makes a conveyance to a creditor, absolute on its face, but with the understanding that it should operate only as a security, such conveyance is fraudulent and void as to creditors who become such after the execution and delivery of the conveyance; that the insolvency of the debtor, the execution of the absolute conveyance, and the agreement that it should be held and considered as a security, are of themselves sufficient evidence of the fraudulent intent, and that when these three things exist and unite in the same transaction, the rule applies. Many authorities are cited that are claimed to support this view, and among them are the cases of McDonald v. Gaunt, 30 Kas. 693, Clark v. Robbins, 8 id. 574, and Wallach v. Wyley, 28 id. 138. There is no color of authority in the cases decided by this court to support such a-claim. One of the cases decided is to the effect that in a general assignment for the benefit of creditors made under the statute, the debtor cannot reserve a portion of the goods assigned for his own benefit. The other two cases are decided on familiar principles, that are not in any respect similar to the rule contended for, and may be dismissed from consideration with the absolute assurance that they do not tend in any degree to support this contention.
It is probably the law — and it ought to be — that where there is an agreement that the mortgage or conveyance shall be kept off the record for fear that it might impair the credit or hasten the failure of an insolvent debtor, then that such a ■conveyance or mortgage is a fraudulent one as to the creditors; but this does not reach the principle contended for in this case. In the many cases cited, and in the many more that can be found in the reports, there is not one that goes to the extent •claimed. There are cases’which hold that when an insolvent ■debtor conveys real property to a creditor, or gives a mortgage, and the consideration expressed in the conveyance or mortgage, •or the value of the property conveyed, or the amount stated
In the case of Sexton v. Wheaton, 21 U. S. 229, Chief Justice Marshall, speaking of a subsequent creditor, says: “ In this case the title never was in Joseph Wheaton; his creditors therefore never had a right to trust him on the faith of the house and lot.” In this case the title to the Kansas and Nebraska lands never vested in Day Bros. & Co., and these defendants in error had no legal right to rely upon the ownership by the firm of these lands and having no right to do so, they cannot question the validity of the conveyances made by Cob
IX. We find an existing indebtedness by Day Bros. & Co. to the bank on the 10th day of January, 1884, in the sum of $53,000; that this indebtedness was secured by the conveyances made on that day of the Kansas and Nebraska lands, and by other property; that the conveyance of the Kansas laud was made by Cobleigh, and received by Stone as security only; that Stone and the bank had an honest belief that Day Bros. & Co. would pay, and for that reason alone did not record the conveyances; that the bank had no knowledge of the insolvency of Day Bros. & Co. on the date of the delivery of the conveyances; that on the 23d day of September, Day Bros. & Co. were indebted to the bank in the sum of $83,000; that this indebtedness was secured by a mortgage on L. L. Day’s homestead in Peoria, for $18,000; $20,576.30 was agreed to be paid by Chas. B. Day; $30,000 was to be collected and retained from commercial paper of customers of the firm, which paper was delivered to the bank; the balance, $15,000, was to be considered secured by the conveyances of the Kansas land, and Stone, in pursuance of the original agreement, that day executed a written instrument reciting the fact that the conveyances were to be considered as security for the sum of $ 15,000, with interest, and when that sum was paid, the lands were to be reconveyed to Cobleigh, the grantor; that sufficient of the commercial paper was collected to pay the $30,000, and the balance of the paper not necessary to be used by the bank was subsequently turned over by the bank to the assignees of Day Bros. & Co., amounting to over $9,000, and this applied to the benefit of creditors; that there cannot be deductively inferred from these facts that there was a fraudulent intent on the part of the bank and its officers to perpetrate any fraud on the other creditors of the firm; that the bank, as a vigilant creditor, had the legal right to amply protect
We think the judgment was wrong — both technically and substantially wrong; and we recommend that it be reversed, and the cause remanded with instructions to the court below to grant the plaintiffs in error a new trial.
By the Court: It is so ordered.