49 Mo. App. 450 | Mo. Ct. App. | 1892
The facts of this case as disclosed by the evidence are as follows:
In the year 1882, some of the citizens of Sedalia undertook to establish a school of a somewhat higher standard than the common schools, and for this purpose contemporaneously organized two corporations, one called “The Sedalia University,” whose articles of association were acknowledged October 3, 1882, and the other was called “The University Land Company,” whose articles were acknowledged October 28, 1882.
“Sec. 6. The purposes for which this corporation is named is to purchase real estate in and adjoining the city of Sedalia, and to improve, cultivate, sell and dispose of the same. One special object of forming this corporation is to buy a certain tract of land lying south of and adjoining said city of Sedalia, containing about fifty-four acres, and known as the Elisha Barrett farm, and to donate, or sell for a nominal sum, twenty acres thereof, including the improvements to the Sedalia University. And the board of directors are hereby authorized and directed, when these articles of association are complete and filed with the secretary of state, to make and execute the deed of this corporation to said Sedalia University to said twenty acres of land.”
The object of organizing the university company was to “found, maintain and establish” a university in the city of Sedalia; and to receive from the land company the north twenty acres of land, which contained the improvements.
The fifty-four acres were bought of Barrett for $10,000, one-half of which was paid in cash, and a note bearing interest executed for the remaining $5,000, secured by a deed of trust on the whole tract. The university company took possession at once of the said north twenty acres, and held it, without question, until June, 1887, and conducted there a school such as the promoters contemplated. The land company in like manner occupies the remaining thirty-four acres, and have held it ever since; - never at any time claiming the
The School was opened and conducted, but with continued financial embarrassment, until June, 1884, when the university company needed additional rooms and buildings, and was in sad need of the money to ■pay for them. Under these circumstances they applied ■ to the land company, who still held the title to the whole fifty-four-acre tract, to borrow upon it the needed funds. They did this, and the contract of .June 28, 1884, set out in the plaintiff’s petition, was entered into between the land company and the university company. By this contract it was agreed that the land company had, at the request of the university company, borrowed $5,000 of the Missouri Trust Company, for which the land company has executed its note, and secured the same upon the whole fifty-four •acres. The net proceeds of the loan were to be used in paying Barrett $878.55, the balance due on the original purchase money of the land, and the balance to be turned over to the university company, to be by them expended in improvement on the said north twenty acres. The university company bound itself to pay the principal and interest of said indebtedness as it matured; and upon such payment being completed was to receive a deed from the land company for the twenty acres, in pursuance of the articles of association of the land company, and the land company should also repay it the said sum of $878.55; but, in
A difference-of opinion existed between the land company and the university company, or arose at this time and was finally settled by the contract a§ the witnesses state; they could do nothing else. The land company held the title and would not convey it or mortgage it except upon the terms of that contract. The university company had already contracted on the faith of getting the money for an expenditure of $5,000, and they had to borrow the $1,200. The plaintiffs went on the note, and afterwards had it to pay, and this is the demand upon which the action is brought. There is no controversy as to the debt or its amount. The university company carried on the school, paid the interest on the note until June, 1887. Default having then been made, the land company paid interest amounting to $300. The land was again advertised, and plaintiffs bought the note from the Missouri Trust Company, the holder of the note, and again stopped the sale.
On February 2, 1888, the land company declared the land forfeited under the contract of June 28, 1884, and directed Mr. Wilkerson, their president, to- take possession of the same. Mr. White had been left in charge of it by the university company, and Mr. Wilkerson got Mr. White to deliver possession to him. Mr. White did so without any direction or authority of the board of trustees of the university company, and without calling any meeting to consider the matter. The school had closed, and no meetings of the board
Default still continuing on the payment of the indebtedness represented by the $5,000 mortgage, the holder advertised the same for sale, and the sale was had on the sixth day of March, 1889. This deed of trust, it must be borne in mind, was executed by the land company, and conveyed the whole fifty-four acres to P. H. Sangree, and contained the usual clause, that the proceeds of the sale, after paying the debt, etc., should be paid to the land company, and was claimed from the trustee by the land company. When the trustee was about to offer the land for sale, Mr. Wilkerson, as the president and representative of the land company, requested that the north twenty acres being that part of the tract of fifty-four claimed by the university company be sold first, and it was so offered by the trustee and brought $6,900, which, after paying the debt and costs, left a balance in the hands of the trustee of $866.58. An account was taken by the court and judgment rendered against the defendants. No question was raised, nor is here made, as to the fairness or correctness of the accounting, but the whole question is. as to the right - of the plaintiffs to recover at all. The court gave judgment against the defendant for the $878.55, after deducting therefrom such amount as the accounting showed to be proper, and for $935, the proceeds of the sale under the deed of trust, after paying the debt, cost, etc., in the hands of the defendant Sangree, which amounts were to be divided pro rata between plaintiffs and intervenors. The plaintiff’s claim, in the aggregate, was $688.50, and intervenors’, $6,224.65.
This is a sufficient statement for the consideration
I. The facts of this case are more complicated than are the questions of law involved. Indeed, the latter are few, and not very difficult of satisfactory solution. It will be observed that this is a creditor’s bill, whereby the plaintiffs, holding claims against the defunct corporation known as the Sedalia University, “seek to reach and appropriate to the payment of said claims certain alleged assets of the debtor corporation.” I think the facts may be somewhat simplified by eliminating much that is contained in the foregoing statement and presenting the substance in this manner: In June, 1884, the university corporation was the equitable owner of the twenty acres of land in the vicinity of Sedalia, and desired to borrow thereon the sum of $5,000; and for this purpose applied to the land company (in whom was the legal title of the land) to make a deed of trust to secure the amount said university company desired to borrow. The land company still owed a balance of purchase money on the entire fifty-four.acres of $878.55, which it was insisted should be paid out of the proceeds thus to be borrowed by the university company. To this the latter company objected. However, after much negotiation, an agreement was arrived at, and the following contract was executed:
*461 “The University Land Company and the Sedalia University on this the twenty-eighth day of June, 1884, made the following contract and agreement: At the request of said university, said .land company has borrowed from the Missouri Trust Company $5,000, and said land company has executed to said Missouri Trust Company its note for said sum of $5,000, even date herewith, payable to the order of the said Missouri Trust Company, five years after date with interest from date until paid, at the rate of six and one-half per cent, per annum, said interest is- payable semi-annually and is evidenced by ten interest coupons for $162.50 each, attached to said note, said coupon and note by their express terms are to bear interest after their maturity until paid at the rate of ten per cent, per annum. The net proceeds of said note remaining after paying the costs and expenses of said loan to be applied as follows: Eirst to the payments of amounts^ $878.55 on the note given by said land company to one J. R. Barrett, for a part of the purchase money of a certain tract of land in section 9, township 45, and range 21, in Pettis county, Missouri, containing fifty-four acres, which said Barrett in the year 1882 sold and conveyed to said land company, and the balance of said proceeds shall be paid over to said university to be used by it, in the erection of improvements on said tract of land. To secure the payment of said note and coupons said land company has this day executed to one P. H. Sangree, trustee, a deed of trust on said tract of land. Said university agrees to pay the interest on the said notes semi-annually as it accrues, and becomes due, and according to the terms of said notes and coupons, and to pay said sum of $5,000 when it becomes due, and to pay all interest that may accrue on any of said coupons, or on said note after the maturity thereof, and said university agrees to pay for all insurance and the*462 buildings on said tract of land by said deed of trust, and also to pay all taxes on the north twenty acres of said tract of land during the continuance of said loan, and the university shall have the use of the north twenty acres of said fifty-four-acre tract of land for five years, provided it pays said interest, taxes and insurance agreeable to this contract, and if the said university shall pay said interest and taxes and pay the said insurance and pay said principal sum of $5,000, when the same becomes due, then the said land company shall convey to said university company in pursuance of the articles of association of said land company twenty acres off the north end of said fifty-four-acre tract, and said land company shall also pay to the said university company said sum of $878.55. But if said university company shall fail or neglect to pay two successive installments of said interest on said note as evidenced by said coupons, or if it shall fail or neglect to pay said taxes or said insurance, or if it shall fail or neglect to pay said principal sum of $5,000 at maturity of said note, then said university waives and forfeits all right to have said twenty acres of land conveyed to it, as provided in the articles of association of said land company.
“In witness whereof, the president and secretary of the board of trustees of said university, by order of the said board, have hereunto signed their names and affixed the seal of said university, and the president of said land company and the secretary thereof, by order of the board of directors, have hereunto signed their names, and affixed the seal of said. company, the day and year first aforesaid. ’ ’
The gist of the matter, then, is that the university company borrowed this $5,000 pledging its land to pay the same, but let the land company have the sum of $878.55, coupled with a promise of the land company
The trial court held under this state of facts that the contract between the two corporations was a mortgage, and that as between the university and the land company the surplus arising from the sale by the trustee belonged to said university company; and we are of the same opinion. As already stated in equity the university corporation was at the date of the contract of June, 1884, the owner of the twenty acres of land. By the very terms of its corporate charter the land company was bound absolutely to convey this twenty acres to the university. We quote from its articles of association: “One special object of forming this corporation is to buy a certain tract of land lying south of and adjoining said city of Sedalia, containing about fifty-four acres and known as the Elisha Barrett farm, and to donate or sell for a nominal sum twenty acres thereof including the improvements to the Sedalia University. And the board of directors are hereby authorized and directed, when these articles of association are completed and filed with the secretary of state, to make and execute the deed of this corporation to said Sedalia university to said twenty acres of land.”
Since, then, what ought to be done will in equity be considered as done, we now regard the university company as having been invested with the title to this
It seems to be the contention of defendant’s counsel, that this arrangement between these twin corporations, as evidenced by the writing executed in June, 1884, was in the nature of a conditional sale, and not a mortgage. The position is untenable. It will not bear the uniform tests in such cases. It seems settled law, that notwithstanding the absolute form of the conveyance, if the debt for which the same was made still remains, then the transaction is to be considered a mortgage rather than a conditional sale. Slowey v. McMurray, 27 Mo. 113; Turner v. Kerr, 44 Mo. 429.
The intention of the parties should control, and if this is in doubt it will be held a mortgage rathe! than a
II. It is claimed, however, that plaintiffs are not entitled to maintain this suit in equity for the reason that their claims had not been reduced to judgment. There is no doubt as to the general proposition that, where a creditor seeks to set aside the alleged fraudulent conveyance of his debtor, he must come into a court of equity with an adjudicated demand. He has no right to question the act of his alleged debtor, unless he is shown to be a genuine, bona fide creditor; and, as a general rule, it is held that this must first be established by the judgment of a court of law. But this rule even has many exceptions. While admitting it to be necessary that a party shall first exhaust every legal remedy before resorting to the court of equity, yet the courts have, in a great variety of cases, permitted the creditor to apply in the first instance to the court of chancery, as, for example, where it appears manifest that a suit at law would be wholly unavailing.
As we view this controversy, then these plaintiffs (original and intervening) had a superior right to the funds in controversy as against the land company, and, therefore, in that regard,, we affirm the judgment of the lower court.
III. This trust fund having been secured, some controversy arose between the original plaintiffs and those subsequently coming in as to the distribution thereof. It will be remembered that the original petition was filed by plaintiffs, White, Smith and Wood,- in
Afterwards, to-wit, on the same day, the plaintiffs made application moving the court to make an allowance out of the amounts for which judgment was rendered in this case for plaintiffs as attorneys’ fees, for the prosecution of this cause, and for the other expenses incurred by said plaintiffs in procuring evidence and preparing for trial.
And upon the same day the, application coming on to be heard, the plaintiffs offered to introduce evidence tending to show the rendition of the services of the attorneys for the plaintiffs, in the prosecution and trial of said cause, and the value ,thereof and of the expenses incurred by the plaintiffs in the preparation of said case for trial, and that the cause was wholly prepared and tried upon its merits by the attorneys employed by the original plaintiffs, which testimony the court refused to admit, and to this action of the court, in refusing to admit said testimony, the plaintiffs then and there excepted at the time. The court overruled the same
IV. Clearly these original plaintiffs were not entitled to any preference over the other plaintiffs in the distribution of this fund. While it is true they were the original movers in the effort to save these assets of the debtor corporation, yet such suit was brought for and in behalf of the intervening plaintiffs. Stahl and Ready were invited to come into the litigation and to share its success or defeat. They did enter the controversy, and were made coplaintiffs. By the suit the fund was saved, and it composes, under the well-settled doctrine, a trust fund for the benefit of all these creditors of the insolvent corporation. After the payment of the legitimate costs and expenses the funds should be distributed among these creditors pro rata. Kankakee Woolen Mills Co. v. Kampe, 88 Mo. App. 229, and numerous other authorities that might be cited.
V. If, however, these original plaintiffs have borne all, or the major portion, of the expenses incurred in employing counsel and preparing the cause for trial it would seem just and equitable that such extra expense be first paid before any distribution is ordered. But the court below seems to have taken a different view, since the offer of the plaintiffs to show the rendition of the services of'their attorneys in the preparation, prosecution and trial of said cause, and the value thereof, as well as other expenses incurred by the plaintiffs in the preparation of the cause for trial, and that said attorneys did the entire work in said cause was denied, and the court refused to make any allowance whatever therefor.
In this ruling we think the court erred. Here was a fund belonging in common to these plaintiffs and intervenors; and, if the truth be, as plaintiffs offered to
It follows then from the foregoing considerations