82 W. Va. 780 | W. Va. | 1918
APPEAL OP STANDARD LIFE INSURANCE COMPANY OF AMERICA.
Plaintiffs, Hartley and Frame, trustees in a deed of general assignment of the Smith-Race Grocery Company, brought this suit in February, 1915, the general object of which was to marshall the assets, convene the creditors, and to have settled and adjudicated all disputed claims of lien and general creditors, and a distribution of the net cash assets to those entitled thereto.
The commissioner to whom the cause was referred, shortly after the institution of the suit, made his report in May, 1916. Among other things he reported that the lien first in priority on the real estate of the Smith-Race Grocery Company, located in the city of Morgantown, West Virginia, was a deed of trust of June 30, 1913, in favor of Standard Life
To this part of the report of the commissioner exceptions were interposed on behalf of the Smith-Race Grocery Company, the debtor, the Exchange Bank of Mannington, and the First National Bank of Fairmont. The grocery company excepted also to the allowance of the aggregate amount of said indebtedness, $68,585.83, without deducting therefrom an alleged credit claimed of $20,000.00. And counsel for the grocery company and the First National Bank of Fairmont, apparently to be consistent, cross assign error in the final decree appealed from that the court should also have wholly disallowed the claim of appellant as a common creditor.
The circuit court sustained the several exceptions of these exceptors to the report of the commissioner in favor of the insurance company in so far as it gave it priority on the real estate covered by the two deeds of trust, but adjudged to it the full amount of its debt and interest evidenced by the notes secured thereby, with right to share ratably with the general creditors in the distribution of the assets of the grocery company.
The basis of the court’s decree respecting these liens is elaborated in some nineteen findings of law and fact, contrary to the general and special findings of the eommjissioner, and which we think are wholly unwarranted by any evidence in. the ease. It is upon these findings and the legal principles applicable thereto that counsel for appellees rely to sustain the decree.
Summarized, these findings are: First, that the two deeds
And outside of and not covered by any findings of law or fact by the court, counsel for appellees here for the first time contend that the decree denying appellant the benefit of its lien by deeds of trust, and in support of their cross assignment of error, that it should also have been denied any recovery as a general creditor of the grocery company, first, on the theory that the evidence showed a fraudulent purpose and scheme on the part of Race, general manager, and Smith, secretary, of the grocery company in obtaining said loan, to further their private interests, rather than the interests of their companj-, and of all which appellant had notice; second, that appellant, a. Pennsylvania corporation, with principal offices at Pittsburg, was actuated by unlawful and fraudulent motives in conditioning its loan to the grocery company upon the officers of that company procuring subscriptions by responsible and influential citizens of West Virginia to its capital stock, and that in accepting as such subscribers, Race, general manager, Smith, secretary, and also stockholders, and of Tumlin, Showalter and Furbee, not stockholders, officers or directors of the grocery company, but respectively cashier of the Citizens National Bank of Fairmont, the First National Bank of Fairmont and the Farmers Bank of Clarksburg, West Virginia, with which banks they and their grocery company are shown to have had extensive business and financial transactions, the insurance company had notice of fraudulent purposes of Race and Smith, depriving it of .all right to recover its debt decreed it in the final decree and of the benefit of its liens therefor.
On the first proposition, want of authority to execute the
But it is contended on behalf of the Smith-Race Grocery Company and of the three banks contesting the rights of appellant, that the evidence tends to show want of due notice, such as was required by sec. 2, art. 3, of the by-laws and by see. 57, ch. 53 of the Code. The evidence on this question of fact is not very satisfactory. But how does this question affect the rights of the Insurance Company? It had the right under the evidence in this ease to accept the deeds and resolutions offered as showing full authority in the officers of the corporation to execute the same. We observe, moreover, that the forms of resolutions of stockholders and directors recited In the general deed of assignment of the corporation to the ■plaintiffs, as trustees, are in almost identically the same language.
Furthermore, we observe that neither the bill filed by the •assignees, Hartley and Frame, which was prepared by Show-■alter and Frame, attorneys, nor the petition and answer of the Smith-Race Grocery Company, prepared and filed by Showalter, anywhere expressly allege want of authority in the board of directors to execute these deeds of trust. On the ■contrary it is alleged that the stock of the Insurance Company was in fact paid for by the grocery company and con-stituted valuable assets of that company. It is alleged in the bill that there is apparent want of authority of the offi■cials of the company in executing, negotiating and trans
In addition to all the documentary evidence and want of pleadings to put in issue the validity of the notes and deeds of trust, we think the Smith-Race Grocery Company, as well as its contesting creditors, are further conclusively estopped by the fact, not controverted, that these loans by the insurance company were actually paid into the hands of the Grocery Company, and that at least fifty thousand dollars thereof actually went to the credit of the grocery company in the First National Bank of Fairmont, and, so far as the record discloses, was actually used in the business of the grocery-company. Besides it is admitted that a large part of the stock of the insurance company issued to one of the subscribers thereto is actually held by the First National Bank as collateral security for a loan to the subscriber individually, not to the grocery company. No proffer was ever made in pleading or otherwise to return to appellant the money loaned and so passed to the credit of the grocery company.
The law, everywhere well recognized, is that one is es-topped by his deed from contradicting the facts recited therein, and this estoppel operates against all persons claiming by or under him, and there is no exception to this rule in favor of corporations. Summerfield v. White, 54 W. Va. 331, 319; Wynn v. Harmon, 5 Gratt. 157; Nash v. Fugatee, 24 Gratt.
Respecting the second proposition relied on, if the Grocery Company, and those claiming under it are estopped by the recitals in the deeds and by acceptance of the benefits of the loans thereby secured, as we have decided, little if anything more need be said on the question of notice to the appellant of want of authority. But on this question there is not a particle of evidence showing such notice to the insurance company or to any agent -with authority to represent it. It is suggested in argument that as the forms of the resolutions passed by stockholders and directors were drafted by counsel for the insurance company, this fact was sufficient to impute notice to it of the supposed invalidity of the meetings held and action taken thereon. But this fact is not pleaded and there is certainly no proof that any officer or agent of the insurance company was present or had any knowledge of what took place at these meetings except as reported and represented by the certified copies of the resolutions and the recitals thereof in the deeds of trust.
But may the decree denying appellant’s liens be sustained on the theory of fraudulent purposes on the part of Race and Smith and notice thereof to appellant? There is not a particle of evidence to support this contention. It is fully shown that at the time appellant made its loans to the grocery company the latter was apparently a prosperous going concern. Its collapse came nearly a year afterwards. Race and Smith and all those associated with them in business were merchants and bankers in high social and financial standing. The insurance company was most painstaking in making these loans. It employed local counsel to assist its general counsel in examining the title and in passing upon the sufficiency of the deeds of trust and notes secured thereby, and there is nothing evidential or otherwise appearing in the record of which it had notice showing fraudulent purpose on the part of the officers or agents of the grocery company. The insurance company did not solicit these loans; it was induced to go outside of its own state in loaning its
APPEAL OP THE FARMERS BANK OF CLARKSBURG.
Both the commissioner and the court disallowed a claim presented by the Farmers Bank of Clarksburg, amounting to $47,510.69, and represented by thirteen checks of the Smith-Race Grocery Company, aggregating $47,500.00 and protest fees amounting to $10.69. Though all these checks ostensibly emanated from the Smith-Race Grocery Company, they were disallowed on two grounds: (1) fraud on the part of its officers in the issuance thereof, known by the bank and participated in by it through the conduct of its cashier; and (2) lack of authority in the officers and agents of the Smith-Race Grocery Company to execute and negotiate the checks, and the notes to which they bear some sort of relation. The answer claims indebtedness to the respondent in
The Smith-Pace Grocery Company was a trading corporation constantly using large amounts of comimereial paper, and L. G. Race, the man who procured the drafts from the Clarks-burg bank, apparently for and on its behalf, was its general manager. In payment therefor, he produced or caused to be sent its checks on another bank, signed by its secretary-treasurer'. Representation that his principal was indebted to some other person, firm or corporation and delivery of the checks of his principal in indirect payment of such indebtedness were acts falling clearly within the scope of his authority. They were pro tanto general management of its business. Whether the representation was true or false, it was on its face an act apparently within his authority, and, unless the party receiving it and acting upon it knew it to be false or had reason to believe or suspect it was, it w$s binding upon his principal. Nothing in the evidence tends to prove the representation was false. On the contrary, the books and papers of the Smith-Race Grocery Company show
The presumption of valid indebtedness to Hollingshead and Campbell upon which the Farmers Bank had a clear right to rely in its dealings with the Smith-Race Grocery Company, not having been overthrown, the so-called kiting of checks to which the Farmers Bank was made a party through its cashier does not prove any fraud upon the Smith-Race Grocery Company, participated in by that bank. The repetition of checks and drafts, countenanced and relied upon by it, was limited to the amounts represented by the unpaid checks given for drafts in favor of Hollingshead and Campbell, and, by means thereof, the bank was simply extending time and upholding the credit of its debtor, in an effort to obtain the money it had advanced. Other banks and other people may have suffered inconvenience, and possibly some losses, in consequence thereof, but the debtor was certainly not injured by the mere issuance of one of its obligations in discharge of another, or, in substance and effect, renewal of its obligations as they became due and payable. The charge that the cashier entered into these transactions with
Proof of the authority of Smith, the secretary and treasurer of the grocery company, to draw its checks and drafts, is overwhelming. Its records show -innumerable instances of the exercise of such authority. To ascertain what authority an officer of a corporation has, it is not necessary to go to its by-laws. An informal or implied permission of the directors, not inhibited by the by-laws, amounts to a grant of authority. Their acquiescence in the known exercise of such authority suffices. Union Bank & Trust Co. v. Long Pole Lumber Co., 70 W. Va. 558. They are bound to take notice of what their records disclose. Third Nat. Bank v. Laboringman’s M. & M. Co., 56 W. Va. 446; Thompson v. Laboringman’s M. & M. Co., 60 W. Va. 42, 58. The directors of the grocery company left its entire management almost entirely in the hands of Smith and Eace. Neither they, the stockholders nor the creditors can deny the authority generally exercised by these two men at this late day.
Their authority to borrow money, assuming the transactions with the Farmers Bank were virtually loans from it, may stand upon a different footing, but, on the face, of these transactions, the grocery company has received the benefit of the loans, if such the advancements were, in the extinguishment of its obligations to Hollingshead and Campbell, which effectually estops it from denying the authority of its agents in procuring them. As long as it retains the benefit of these transactions, it cannot free itself from the incidental and reciprocal obligation. Union Bank & Trust Co. v. Long Pole
DAVIS TRUST COMPANY CLAIM.
Nothing is said in support of the cross-assignment of error attacking the allowance of the Davis Trust Company’s claim for $11,500.00 and interest, founded upon a sight draft drawn by the Smith-Race Grocery Company upon the Farmers Bank in favor of the Citizens Dollar Savings Bank, credited to. the last named bank on the books of the Davis Trust Company and returned to it unpaid by the Farmers Bank. This claim was allowed by the commissioner, and the court, overruling an exception to the allowance thereof, confirmed the report as to it and provided for it in the decree. The draft was regular on its face and came to the claimant in the regular course of business and the Smith-Race Grocery Company seems to have had the benefit of it in its account with the Citizens Dollar Savings Bank. The Davis Trust Company and the Farmers Bank were not in any way connected in business. The former was a correspondent of the Citizens Dollar Savings Bank and had been for a number of years. A circumstance seemingly relied upon in the evidence, but not advanced in argument, as ground of impeachment of the demand, is a personal relationship between the president of the Davis Trust Company and the cashier of the Citizens Dollar Savings Bank. From this alone, it cannot be assumed that they had equal knowledge of the affairs of a customer of the latter bank or the misconduct of the officers and agents of such customer. Part of another claim made by the Davis Trust Company on account of notes held by it and endorsed by the Smith-Race Grocery Company was allowed. In the brief filed by its counsel, all of these notes are discussed but there is no cross-appeal or cross-assignment of error predicated on-the disallowance of part of the claim. It concludes with a request for affirmance of the decree. Hence, we do not construe it as a eross-assignment of error.
In the decree, tbe two trustees in the deed of assignment of the Smith-Race Grocery Company for the benefit of its creditors were allowed $15,000.00 for their services to the date of the decree, in addition to their expenses previously paid and amounting to $1,939.25, and counsel fees were allowed amounting to $4,250.00, $1,250.00 to one firm, $2,500.00 to another attorney, all representing the trustees and the grocery company and $500.00 to an attorney of creditors, for preparing the final decree. For the most part, the powers and duties of the trustees were susceptible of delegation and were in fact delegated, and, though both attorneys, they had the advice, direction and assistance of counsel. While the amount of the allowance to them was within the sound discretion of the trial court, it is reviewable. We are of the opinion that it is entirely too large, and that $5,000.00 is a reasonable, fair and just allowance, under the circumstances, and in the state of the evidence submitted as to their compensation. The commissioner made no finding as to their compensation and there is nothing in the record that shows in detail the work actually done or the time devoted to the trust subject. One of the trustees says the work took a very large part of their time during practically two years, but this is a very general statement. He says he thinks they should be allowed the maximum commission usually paid in such eases, seven and one-half per cent. On this subject there is no arbitrary rule. In judicial and trustees sales, the commissions are very much lower than that. The store was run by hired help for about eight or nine months and then the remainder of the goods was sold in lots. Just how these sales were made is not disclosed. They may have been made by employees under salaries charged as expenses. A lump sum allowance of commissions should have a good solid foundation in the evidence. A loose method in making such allowances opens the door to the consumption of insolvent estates in costs and expenses. Our practice affords no precedent for a special allowance of a fee to an attorney for the preparation of a decree and, in view of the abuse to which such a
It follows from the foregoing conclusions that the decree 'below, in so far as it adjudges appellant, The Standard Life Insurance of America, not entitled to the benefits and priority of its two deeds of trust, must be reversed, the exceptions to the commissioner’s report thereon overruled and the report reinstated; and in so far as said decree overrules exception No. 1 of appellant, The Farmers Bank of Clarks-burg, to the commisisoner’s report and disallows the said claim of $47,510.44, it will be reversed, and said sum with interest thereon to May 10, 1917, the date of the decree,
Affirmed in part. Reversed in part. Remanded.