114 Mo. 592 | Mo. | 1893
This is a suit in equity in the nature of a creditor’s bill by three creditors of the Kendail-
The Kendall-Bayle Cracker Company was a corporation engaged in the manufacture and sale of crackers in the city of St. Louis. The stock of the company was full paid, and was owned in nearly equal proportions by Messrs. Kendall, Bayle, Daniels and Cole. The business of the company, at first prosperous, was conducted for a considerable period at a loss, and for some months prior to January, 1888, the company was in a very precarious financial condition. In December, 1887, the company owed to the Franklin bank $20,000, which was evidenced by several notes, a portion of which was indorsed by Mr. Cole and the remainder by Mr. Kendall, both of whom were directors of the company. It owed nearly the same amount to what may be termed outside creditors, amongst whom were plaintiffs, and these debts were wholly unsecured. They had assets of the value of about $15,000, divided in about the following proportions:
Stock on hand.................................................$7,000
Good accounts ............................................... 5,000
Leasehold, machinery and odds and ends....................... 3,000
The company was hopelessly insolvent and could no longer go on unless matters should change in some manner. To furnish a possible means of raising fresh capital, Bayle & Daniels surrendered their stock to the company for $1 each and retired. This situation was well known to the bank and its directors, and they knew that, unless fresh capital could be-secured or better .prices obtained for their crackers, the company would be compelled to suspend. They knew also that the
The directors of the company held a meeting on Thursday, the twenty-sixth of January, resolved to cease business and make an assignment. They instructed their attorney to prepare a deed of assignment, which he did, leaving the date blank. The deed was an ordinary assignment under the statute. On the same Thursday, or possibly on the morning of Friday, the twenty-seventh (the evidence is not clear as to which day), the directors of the company, accompanied by their attorney, Mr. Mills, went to the bank and notified them of their failure and of the fact that an assignment had been determined upon. The directors .of the company, the attorney and the officers of the bank then entered into a consultation to determine the best method of “protecting the bank,” and securing for it a preference over other creditors. Mr. Mills was of the opinion that the best method was to attach, as, in his opinion, any plan which required the visible co-operation of the company would be dangerous. Mr.
On final hearing the court rendered the following decree:
“Wherefore the court doth order, adjudge and decree that plaintiffs have and recover of the defendant the Franklin Bank, the said sum of $10,877.39, together with interest thereon from said twenty-seventh of January, 1888, at the rate of six per cent, per annum, amounting in the aggregate to the sum of $13,107.26, together with costs of this action, and that an execution therefor be issued to the sheriff of vthe City of St. Louis in due form, and that the said sheriff, when he shall collect and receive the said sum shall pay the same to a receiver of the Kendall-Bayle Cracker Company for the creditors of the Kendall-Bayle Cracker Company, appointed by the court as hereinafter provided.
“And it is ordered and decreed that a receiver for the collection from the sheriff and distribution to the creditors of the said Kendall-Bayle Cracker Company of said fund be appointed as prayed in the petition, and P. E. Flitcraft is hereby appointed receiver for such purpose. It is further ordered that the said P. E. Flitcraft before entering upon the execution of his said
“That said P. E. Flitcraft, receiver, shall attend at the place designated in said notice in person on said day,, and shall remain in attendance during said day and two consecutive days thereafter, and shall adjust and allow all claims and demands against said trust fund.
“The said P. E. Flitcraft shall, with all convenient speed, report to the court all claims and demands by him allowed or rejected for approval by the court, and also all costs and expenses of this suit and proceeding, including counsel fees to plaintiffs and a reasonable compensation to himself, to be determined by the court, and the balance of said fund he shall distribute as and
“It is further ordered that this action be dismissed as to the defendants, the Kendall-Bayle Cracker Company, George J. Kendall, Charles B. Cole, John Rankin, Adolph Moll and P. R. Flitcraft.”
The court rendered a decree against the Franklin bank and in favor of the other defendants. The bank appealed and plaintiffs took a cross-appeal from the decree in favor of Mr. Moll.
It is well settled in this state that an insolvent debtor may prefer a bona fide creditor in the payment of his debts to the exclusion of others. Foster v. Planing Mill Co., 92 Mo. 79; Shelly v. Boothe, 73 Mo. 74; Dougherty v. Cooper, 77 Mo. 528. And this rule applies alike to corporations and private persons, unless by such preferment it deprives 'the corporation of the power to continue in its due course of business and renders it necessary for it to suspend. “And it has been held that the insolvency of a corporation does not per se abrogate its power to continue the management of its assets, but that it may continue in its due course of business, so long as there is a fair and honest prospect of redeeming its fortunes, and may pay off debts in regular course of business, though a part of the creditors are thereby deprived of their security.” Foster v. Planing Mill Co., 92 Mo. supra; 2 Morawetz on Private Corporations, see. 786, and cases cited. This question will be further discussed in the course of this opinion.
At the time of the sale of about all of the stock of the cracker company, and its solvent accounts against its customers to Mr. Moll, one of the directors of the defendant bank, the deed of assignment of the remainder of the stocjs and effects, which amounted to very little, had already been drawn up and was held up as is ■clearly shown by the evidence at the request of the
If so, under the laws of this state the transaction between the cracker company and the defendant bank by its officers was void and of no effect, and the defendant bank must account for the amount realized by it. from the transaction and share pro rata with the other creditors of the cracker company. If not the same transaction, then it cannot be compelled to do so. Section 424 of the Revised Statutes of 1889 provides that, “ every volunta/ry assignment of lands, tenements, goods, chattels, effects and credits made by a debtor to any person in trust for his creditors shall be for the benefit, of all the creditors of the assignor in proportion to their respective claims; and every provision in any assignment providing for the payment of one debt or liability in preference to another shall be void, and all debts, and liabilities (including judgments entered by confession thirty days previous to such assignment) shall be paid pro rata from the assets thereof; and every such assignment shall be proved or acknowledged. * * * ” Under this statute no preference of any creditor can be-made by voluntary assignment, and a provision in a deed of assignment making such a preference is null and void and of no effect. Crow v. Beardsley, 68 Mo. 437.
So it was held by this court in the case of Hargadine v. Henderson, 97 Mo. 375, that, “The assignment law of Missouri is not in letter or spirit a bankrupt or insolvent debtor’s act. A debtor, whether solvent or insolvent, may, in good faith, sell, deliver in payment, mortgage or pledge, the whole or any part of his property for the benefit of one or more of his creditors, to the exclusion of others, even though such transfers may have the effect of delaying them in the collection of their debts. Its terms in no way qualify the rule by which the character of this instrument is to be determined. Reading the instrument, then, as a whole, in the light of the circumstances under which it was executed, was it intended as a security, or as an absolute unconditional conveyance, in presentí, to the grantee of all the grantor’s interest in the property, both legal and equitable, to the exclusion of any equitable right of redemption?” And it w.as accordingly held' that the law of assignments was not applicable to a deed of trust, which conveyed all of the debtor’s property,
This case as well also as the case of Crow v. Beardsley, supra, was followed and approved by the supreme court of the United States in the case of the Bank v. Bank, 136 U. S. 223. See also May v. Tenney, 13 Sup. Ct. Rep., number 17, 491; 148 U. S. 60; Foster v. Planing Mill, Co. 92 Mo. 79.
A different rule is announced by many courts of high authority, which hold that an insolvent debtor cannot so dispose of his property or the principal part thereof by sale, deed of trust or mortgage, so as to prefer one or more creditors to others at the same time intending to make an assignment for the benefit of his other creditors, as such disposition would be an evasion of the assignment law. This has been held in'the following cáses: Preston v. Spaulding, 120 Ill. 208; White v. Cotzhausen, 129 U. S. 329; Berry v. Cutts, 42 Me. 445; Holt v. Bancroft, 30 Ala. 193; Perry v. Holden, 22 Pick. 269; Mussey v. Noyes, 26 Vt. 471; Van Horn v. Smith, 59 Iowa 142; United States v. Bank, 8 Rob. (La.) 302.
The rule thus laid down has also been announced by the federal courts within this state so as to hold a deed of trust in the nature of a mortgage, of all the personal property of the debtor to be á voluntary assignment within the meaning and effect of the Missouri statute. Martin v. Hausman, 14 Fed. Rep. 160, Dahlman v. Jacobs, 16 Fed. Rep. 614; Kellog v. Richardson, 19 Fed. Rep. 70; Clapp v. Dittman, 21 Fed. Rep. 15; Perry v. Corby, 21 Fed. Rep. 737; Kerbs v.
But in the case at bar a different state of facts exists from those in either of the federal cases cited. Here the transactions were all parts of the same scheme, which, we hold, amounted to an absolute conveyance in presentí. It seems clear therefore, from the views herein expressed and the authorities cited, that the transfer to Moll, one of the directors of the defendant bank, of about all of the effects of the cracker company, which of itself compelled it to suspend business, and the execution of the deed of assignment were but one and the same transaction, in contravention of the statute in regard to assignments, and that the defendant bank by its officers, having notice of all the facts and circumstances and being party thereto, should not be allowed to profit by a transaction or scheme so transparent at the expense of the other creditors of the insolvent company, but on the contrary, should be held to share pro rata, with all of the other creditors. This is but equal and exact justice to all creditors, and such seems to be the spirit and intention of the law of assignments. As this necessarily results in the affirmance of the judgment, it is not deemed necessary to pass upon the other questions raised by counsel in tho case. There was no error in' dismissing the case against Moll. Judgment affirmed.