82 Mo. App. 1 | Mo. Ct. App. | 1899
This proceeding is in equity praying that a receiver be appointed to take charge of a lot of merchandise and for an accounting. Plaintiffs obtained a decree and defendants appealed.
Defendant Arnold was engaged in the mercantile business and was the owner of a stock of merchandise. He was indebted to these plaintiffs and various other parties, among them being defendant Mclninch. On April 20, 1897, he executed to Mclninch a chattel mortgage on the stock' of goods securing payment to the latter of two promissory notes, one for $2,500 and the other for $600. And also securing the payment of another note executed to him for $1,350. No part of the latter note was owing to Mclninch, but something more than $1,000 of it was owing to other creditors of- Arnold, who are also defendants herein, leaving near $350 as fictitious indebtedness.
It is conceded that there was evidence tending to show that this fictitious portion was inserted with intent to hinder, delay or defraud other creditors. Though there was evidence tending to show that the act was done with fair intent — that not having the data at hand at the time the mortgage was executed, to show the amount due these other creditors, the
Afterwards, on May 28, 1897, Arnold and Mclninch becoming aware that the note for $2,500 was usurious and that the debts for which the $1,350 was included in the mortgage did not amount to that sum, as before stated, the former executed a chattel deed of trust on the same property in order to eliminate the usurious feature of the $2,500 note and to insert separately the exact sum due the creditors, for which the note for $1,350 had been given in the first mortgage, thus relieving the transaction of the fictitious indebtedness. This chattel deed was executed to W. T. Whiteside as trustee and he went into possession.
Near six weeks after the execution of this deed of trust, these plaintiffs obtained judgment on their claims before a justice of the peace and shortly thereafter, on July 21, begun the present proceedings. On the twenty-eighth of July,
“That the defendant, W. T. Whiteside, trastee under a certain deed of trust executed by the defendant, Eiohard T. Arnold, as grantor, on or about the 28th day of May, 1897, shall continue in the possession of the property conveyed in said deed of trust and may sell and dispose of the same under-the terms and conditions thereof.
“That the said W. T. Whiteside shall, until the final determination of this suit, retain in his possession sufficient of the proceeds which have come into his hands, or which he may hereafter receive in the execution of his trust to cover the amounts of the claims of the several plaintiffs as set up in the petition, together with the costs of this action should the final judgment be in favor of the plaintiffs.
“The plaintiffs upon their part in consideration of the foregoing agree to withdraw their application for a temporary receiver and to make no further application for the appointment of a receiver during the pendency of this action.
“Nothing herein is to be construed as affecting in any manner the rights of the parties to this action upon the final hearing thereof.”
An examination of -the briefs and argument of the respective counsel discloses that there is practically no substantial -difference between them as to the facts which have any application to the controversy. There are three main points of attack made by plaintiffs. First, that -there was usury in -the $2,500 note given by Arnold to Mclnineh. Second, that a part of the $1,300 noté was not a bona 'fide indebtedness against Arnold. Third, that a portion of the proceeds of the sale made by Mclnineh while holding under the original chattel mortgage was -applied, with Arnold’s consent, to the purchase, or payment of claims of other creditors who were not included in the mortgage.
The case of Carll v. Emery, 148 Mass. 32, while not like the one under consideration in its facts is yet enough like it in principle, to serve as authority for defendant’s position. There a debtor transferred property to another in fraud of his creditors of which the transferee had knowledge. After-wards he gave notice to the transferee of a change of purpose and an intention to use the property for his creditors. The court said that he might “recede from the transaction on notice to the other party, repossess himself of his property, and devote it to its proper purposes.” And “That a fraudulent transaction may be purged of the fraud by the subsequent action of the parties is well settled.”
Counsels’ brief concedes the position that constructive fraud may be purged, but deny that actual fraud can be, and cite the cases of Dry Goods Co. v. Grocery Co., 68 Mo. App. 290, and McKinney v. Wade, 43 Mo. App. 152. We can not find where those cases apply to the question, and feel confident that the law allows a locus poenilentiae to the fraudulent transgressor at any time before the intervention of interested third parties.
The foregoing views make it unnecessary to consider other suggestions found in briefs. The judgment should have been for defendants instead of plaintiffs and it is accordingly reversed.