Page images


tain territory, acting in conjunction with the a claim for services therefor. Another of county superintendent of a county in which these warrants was issued during the period they did not reside, but in which all persons, of temporary organization in payment for in good faith, supposed they resided, organ- services of a “county attorney." No such ized a school district, which was held to be officer is provided for or allowed to a couna district de facto. In such case, however, ty during such inchoate and transitory pethe error did not inhere in the very law cre- riod of existence, and therefore no warrant ating the district, but in another law, and could be legally drawn in payment for his even then could be ascertained only by a services or salary. Another of the warrants measurement and calculation of land areas. was issued in payment “for livery furnished A political organization such as a county deputy sheriffs and road viewers." No such owes its life to the legislative will alone. items constitute legitimate charges against If that will has not been exerted, it can have any county. The sheriff and his deputies are no existence de jure or de facto. In the case paid by mileage and fees; the road viewers, of In re Wood, 31 Kan. 618, 649, 9 Pac. 758, a per diem. None of them, in the perform760, a question quite like the present one, ance of their duties, can hire livery conveyinvolving the political status of Meade coun- ances and charge the cost of the same to ty, arose, in the consideration of which it

the county. Others of these warrants are was remarked of such county: “Before it likewise objectionable upon different grounds, could have a municipal organization as and certain other general objections to all of township, and be entitled to township offi- them as a whole are strenuously urged, and cers, it must have been attached to an or- with strong show of reason; but we deem it ganized county for judicial purposes. If it unnecessary to continue our examination inwas not a municipal township, there could to their validity. For the reasons given, none not be any township officers." "We must

of them can be recovered upon, and the therefore hold the provision to be invalid, judgment of the court below will therefore and that the county of Meade was not, at be affirmed. All the justices concurring. the time when the commitment was issued, aftached to Comanche county, or to any other organized county of the state. It follows

(58 Kan, 10) that the county had no municipal organiza

LEONARD et al. y. HARGIS et ux. tion, nor any township officers, and that John Jobling, who assumed to act as justice of

(Supreme Court of Kansas. April 10, 1897.)

JUDGMENT BY DEFAULT, the peace of that county, and who issued

Where an answer is due after the comthe process under which the petitioner is

mencement of a term of court, and no pleadheld, was without authority to do so." ing is filed nor appearance made by the defendKearney county, therefore, not having been ant, the case may be docketed, and judgment attached to any other county, had no mu

by default rendered at any time thereafter dur

ing such term. nicipal existence. It could have no officers,

(Syllabus by the Court.) and could contract no debts. It had no valid scrip or warrants to be funded or redeemed

Error from district court, Barber county: when it came into existence as an organized

G. W. McKay, Judge. county. Seven more of the warrants sued

Action by Josiah N. Hargis and Emily C. on, aggregating $5,701.08, are clearly illegal.

Hargis, his wife, against William F. LeonThey were issued July 2, 1888, during the

ard and George W. Toms. Judgment for

Reprovisional organization, for procuring plaintiffs, and defendants bring error. transcripts of records of real-estate trans- versed. fers, liens, etc., from Hamilton county, to Ellis & Barrett, for plaintiff's in error. G. which it was supposed Kearney had been M. Martin, for defendants in error. attached. The law which it was assumed gave authority to incur indebtedness is sec- JOIINSTON, J. Josiah N. Hargis and his tion 133, c. 24 (par. 1591), Gen. St. 1889. wife, Emily C. Hargis, executed a mortgage Such law, however, applies only to "counties upon land in Barber county to secure a debt which shall have been previously attached of $3,000, and a second mortgage upon the to another county for municipal purposes." same land was executed by them to secure a Inasmuch as Kearney county had not been debt of $300. Default was made on the secattached to any other county for such pur- ond mortgage, and on January 5, 1889, W'ilposes, the expense incurred was clearly out- liam F. Leonard, the owner, brought an acside the terms of the act, and constituted no tion to recover the debt and to foreclose the ilem of charge against the county. Further- mortgage. Service of summons was duly. more it was not the duty of the provisional obtained upon Hargis and his wife on Janucounty clerk to procure these transcripts. ary 16, 1889, but they did not answer or apThe act in question, by its plain terms, im- pear, and personal judgment for the debt poses that duty upon “the county clerk was rendered, and a foreclosure and sale of chosen at the first election, after having the mortgaged premises without appraisequalitied according to law." He alone was ment decreed. At the expiration of sis authorized to perform such duty and incur months an order of sale was issued, notice such expense, and he alone could prefer | of sale was published in a newspaper printed in the county, and on September 23, 1889, ment was made, and does not expressly show the land was sold, subject to the first mort

that it contains all the pleadings, and the case

appears to have been tried as though the pegage, to George W. Toms. The sale was con

tition were sufficient, it will be presumed in firmed, and the deed made to Toms, who support of the judgment that a sufficient amendtook possession of the land in 1890. In April, ment was made.

2. A bank which has not received a certificate 1891, Hargis and wife brought this action

from the bank commissioner authorizing it to against Leonard and Toms, alleging that the transact business may negotiate promissory mortgage was void, the sale illegal, and ask- notes, so as to bind itself, and pass a valid

title thereto. ing that the proceedings, sale, and deed be

3. An indorsement made on the back of a set aside, and for a recovery of damages al

promissory note in the following language: leged to have been suffered through the en- *For value received, we hereby guaranty payforcement of a void judgment to the amount

ment of within note at maturity, waiving deof $10,000. The result of the trial was a va

mand, protest, and notice of protest,”-signed

by the payee of the note, is a commercial incation of the judgment and a recovery of dorsement, as well as a guaranty of payment; $2,555 as damages. The case was tried and and the note, being negotiable in form, is suffidecided upon the theory that the action up

cient to pass a valid title to the paper, and

protect an innocent purchaser thereof. on the note and to foreclose the mortgage

4. A fraud may be perpetrated by an insolwas not triable when it was disposed of, and vent merchant, through the instrumentality that the judgment then rendered therein was

of a corporation organized and controlled by

himself, to which he transfers the bulk of his therefore void. It appears that the summons

property, as well as by a transfer to an indiwhich was served upon Hargis and wife on vidual; and where it appears that this has been January 16th was returnable on January done for the purpose of hindering and delaying 20th, and in the summons the 9th day of

creditors, and enabling the debtor to retain the

management and control of his property, and of February was fixed as the time for answer. depriving his creditors of an opportunity to colThe succeeding term of court began on Feb- lect their dues, and where such insolvent reruary 5th, and, no answer or demurrer being

tains substantially all the stock in the cor

poration, and no innocent person contributes filed, nor any appearance made on Feb

any substantial sum to the assets of the corruary 9th, the cause was docketed, and on poration, the court is warranted in treating the the 11th day of February, the defendants be- whole transaction as a sham, in sustaining ating in default, judgment was rendered

tachments levied on the property, and directing

the sale thereof to satisfy the claims of credagainst them. If the defendants had ap- itors. peared, and raised an issue of fact or law, it (Syllabus by the Court.) is conceded that the case would not have

Error from Neosho county court; L. Stillbeen triable at that term of court; but, as

well, Judge. no pleading was filed, nor appearance made, there was no issue to be tried. It is settled

Separate actions by the Douglas County

Bank, by Latham, Alexander & Co., and by that a judgment upon default may be ren

the Chemical National Bank of St. Louis, dered at any time during any term of court. Race v. Malony, 21 Kan. 31. Here the peti

against Q. A. Kellogg, in which the Kellogg tion stated a cause of action, service of sum

Mercantile Company and others interpleadmons upon the defendants was duly made,

ed, were consolidated; and, from judgments and therefore the court had jurisdiction of

for the respective plaintiffs, defendant brings

error, Affirmed. the subject-matter and of the persons of the defendants. Even if the judgment had been Three petitions in error are attached to one prematurely entered, it would not, under the record by Q. A. Kellogg, as plaintiff in error. circumstances, have rendered the judgment

Each of these has been given a separate absolutely void. We think, however, the number by the clerk. The defendants in erjudgment was rightly taken, and that the ror first named in the petitions, and who are court committed error in holding and in- the only parties appearing in this court, are structing the jury that the judgment then the Douglas County Bank, in No. 9,494, rendered was absolutely void. The judg

Latham, Alexander & Co. in No. 9,495, and the ment of the district court will be reversed,

Chemical National Bank of St. Louis in No. and the cause remanded for further proceed-9,1. The Douglas County Bank brought ings. All the justices concur.

suit on a promissory note executed by Kellogg on the 20th of November, 1831, for the

sum of $4,100, payable to the order of M. D. (58 Kan. 43)

Ewing, cashier, and caused an attachment KELLOGG v. DOUGLAS COUNTY BANK to be issued and levied on property claimed

et al. SAME v. LATHAM et al. SAME by Kellogg to belong to the Kellogg MercanF. CHEMICAL NAT. BANK OF ST. LOUIS tile Company. Latham, Alexander & Co. et al.

brought suit on a note executed by Kellogg (Supreme Court of Kansas. April 10, 1897.) on the 24th of October, 1891, for $3,700, payAPPEAL-PRESUMPTIONS-BANKS AND BANKING

able to the order of M. D. Ewing, cashier, BILLS AND NOTES IXDORSEMENT

indorsed “C. T. Ewing, Pt.," and delivered FRAUDULENT CONVEYANCES.

to the plaintiff. An attachment was also is1. Where the averments of a petition are in

sued in this action, and levied on a stock of sufficient to support the findings of the court, but it appears that leave to amend was granted,

merchandise and certain real estate, as the and the record is silent as to whether the amend- property of the defendant. The Chemical National Bank brought suit on a note ex- logg, his wife, 20 shares; to E. W. Smith, ecuted by Q. A. Kellogg to M. D. Ewing, 20 shares; to C. W. Smith, 5 shares; to John cashier, for $3,500, dated February 19, 1892, Diller, 5 shares. The stockholders, other due four months after date, indorsed as fol- than Kellogg, executed their promissory lows: "For value ,received, we hereby guar- notes to him for an amount equal to the anty payment of within note at maturity, face of the stock taken, but E. W. Smith waiving demand, protest, and notice of pro- soon surrendered 19 of his shares to Kellogg, test. M. D. Ewing, Cashier.” The last-men- and took up his note. On the 10th of Febtioned suit was brought on the 24th of May, ruary, 1892, Kellogg was elected president 1892, before the maturity of the note. On and treasurer; his wife, M. E. Kellogg, vice application to the district judge, an order of president; his nephew C. W. Smith, secreattachment was allowed, issued, and levied tary; and on the same day he conveyed his on real and personal property. A motion business house, valued at $3,000, his stock was made by Kellogg to discharge the at- of merchandise, valued at $8,316.69, and tachment in each of the three cases, support- notes and accounts, valued at $3,653.31, to ed by his affidavit denying the grounds set the corporation. The corporation assumed out in plaintiffs' affidavits. Motions to dis- his outstanding indebtedness for merchansolve the attachment, and release the prop- dise, amounting to $1,499.47. He still retainerty attached, were also filed by the Kellogs ed a small amount of property, which he did Mercantile Company in each of the two last not transfer to the corporation. His total innamed actions. The motions to discharge debtedness at that time, including $15,350 of the attachments in these cases were heard accommodation notes executed to Ewing, is and considered together, and overruled on found by the court to have been $26,199.47, the 20th of June, 1892. The action of the and his total assets were $18,462.25. The Douglas County Bank was not brought until court found that, at the time of the transthe 21st of June, 1892. Interpleas were filed fer, Kellogg was chargeable with notice of in each of the three cases by the Kellogg Ewing's insolvency; that the incorporation Mercantile Company, claiming to own all of the Kellogg Mercantile Company, and the attached property. Interpleas were also the transfer of his property to it, were with filed by numerous other creditors, claiming the intent to hinder and delay his creditors. a lien on the attached property under a chat. Judgments were entered in favor of each of tel mortgage executed by the Kellogs Mer- the plaintiffs against Kellogg on the notes, cantile Company, to secure their claims. By and also against all of the interpleaders. consent of all the parties interested, the Kellogg, as plaintiff in error, brings this pro. court ordered that the three actions and all ceeding, to reverse the judgments and orthe interpleas filed in each case be tried to- ders of the court. gether, and this was accordingly done at the April term, 1893, resulting in judgments in

J. M. Dunsmore and John W. Deford, for favor of each of the plaintiffs against the

plaintiff in error. Lapham & Brewster and defendant and all the interpleaders. It was

J. B. Ziegler, for defendants in error. shown at the trial that C. T. Ewing carried on a banking business at Thayer, under the ALLEN, J. (after stating the facts). 1. The name of Ewing's, Bank, M. D. Ewing acting sufficiency of the record to present the eras cashier. Q. A. Kellogg was a merchant rors complained of is challenged. If there doing business in the same town.

For a

are really three separate cases, it is difficult number of years Kellogg had executed prom- to see how all may be prosecuted on one issory notes as an accommodation to Ewing, record. Parkhurst V. Bank, 55 Kan. 100, which he had discounted. The three prom- 39 Pac. 1027. As all of the cases were issory notes sued on were executed in this tried together in the district court, and all manner without consideration, for Ewing's the parties laid claim to the attached propaccommodation, he agreeing to protect Kel- erty, and as all of the parties necessary to logg from liability on them. These notes a consideration of the questions involved were negotiated by Ewing to the respective are made defendants in error in one or an. plaintiffs. Ewing was, and for a long time other of the petitions in error, which are athad been, insolvent. Kellogg, in the course tached to the single case-made, we are inof their dealings, had executed accommoda- clined to treat the case here as a single one, tion notes in like manner, aggregating in and the three petitions in error as really but amount over $400,000, and a large amount one in substance. This practice, however irof notes of this kind was outstanding at the regular it may be, does not appear to prejutime Ewing's bank was closed. In the latter dice the rights of any of the parties. part of January, 1892, Kellogg being pressed 2. A copy of the note attached to the petifor payment or security by the National tion of the Douglas County Bank fails to show Bank of Kansas City, which held his note any indorsement by Ewing to the plaintiff. for $6,500, organized a corporation called the It is urged that the note was entirely without Kellogg Mercantile Company, fixing the capi. | consideration as between Kellogg and Ewing, tal stock at $15,000, of which he took 100 and that there was neither allegation nor shares, of $100 par value, and the balance proof of such a negotiation as would cut off was distributed as follows: To M. E. Kel- Kellogg's defense of want of consideration. In answer to this, it is said that leave was an indorsement, which passed a full title to taken by the plaintiff to amend the petition, the note. 2 Daniel, Neg. Inst. 1781; Robinand that, in support of the finding and judg- son v. Lair, 31 Iowa, 9; Heard v. Bank, 8 ment of the court, it must be inferred that Neb. 10. And an indorsement as collateral an amendment was made showing that the security for a debt contracted at the time note was properly indorsed. In the second of the indorsement protects the indorsee the paragraph of the facts, as found by the trial same as if the purchase were absolute to court, we find the following: “Said note the extent of the debt. Association v. Hunt, was duly indorsed to the plaintiff herein, 17 Kan. 532. and said plaintiff became the owner and 5. It is insisted that, in order to avoid the holder of said note before the maturity there. transfer of the property from Kellogg to of in good faith, for value, and in the regular the Kellogg Mercantile Company, actual course of trade and business, without notice fraud must be shown; that constructive of any defense that Kellogg might have to fraud is insufficient; and that there is no said note as against C. T. Ewing.” On the showing in this case of actual fraud. It is trial, Mr. Sparr, the president of the bank, contended that the organization of the mertestified, without objection, that the indebted. cantile company was suggested by the attorness to his bank on the note sued on was ney for the National Bank of Kansas City, $4,100 and accrued interest; that the bank as a means of securing Kellogg's indebtedpurchased it from Ewing's bank as a re- ness to it. It appears that Kellogg was asked discount; and that they were the owners by the attorney for the bank to secure his and holders thereof. The cross-examination note by chattel mortgage on his stock; that was solely as to whether there should be a he refused to do so; that the representatives credit on it. We find no statement in the of the bank afterwards suggested the organcase-made to the effect that it contains all ization of a corporation, and the transfer of the pleadings, nor is there anything from a part of the stock as security for Kellogg's which we are required to infer that the peti- note to the bank. After the corporation was tion was not amended so as to show a proper organized, he did assign $10,000 of the stock indorsement of the note. There is nothing in the mercantile company to the bank, to seindicating that the attention of the court was cure a new note for $6,500, due in one year ever called to the want of a proper indorse- after date, with 7 per cent. interest. The ment, and it seems altogether improbable fact that the organization of the corporation that the question now presented was ever was suggested by the representatives of the really before the trial court. All presump- Kansas City Bank does not conclusively tions are in favor of the judgment.

prove good faith on the part of Kellogg in 3. It was not necessary for the plaintiff to acting on the suggestion. He refused to give show that Ewing's bank had received a cer- a chattel mortgage, on the ground that it tificate from the bank commissioner authoriz- would result in closing his business. He ing it to transact business, nor that the bank adopted the other course, and organized a had transmitted the statement required by corporation, in order to shield himself from the banking law. It would be a strange the attacks of his creditors, and enable him construction of the act to hold that securities to carry on his business, and enjoy the innegotiated by a bank would be rendered void come therefrom. The incorporation seems to through the failure of the banker to comply have been little but a paper scheme devised with the law. It would be absurd to visit in his own interest. His wife and clerks penalties on innocent purchasers of their pa- were mere instruments in his hands, conper for a failure of the officers or proprietors ! tributing no real capital, and obtaining no of a bank to perform their duty. The law substantial interest in the property. Clearly, was intended to protect the public. The con- a fraud may be committed in the transfer struction we are asked to place on it would of a debtor's property to such a corporation, aid in defrauding those who might deal with as well as by a transfer to another individual an unlawfully conducted bank.

for the purpose of placing it beyond the 4. The indorsement to the Chemical Na- reach of creditors. In such case the court tional Bank was sufficient. It was placed was clearly warranted in closely scrutinizing on the back of the note, and, while it was a the transaction, and declaring its real purguaranty of payment, it was also an indorse- pose, notwithstanding the elaborate fabricament of the note. The guaranty itself would tions of charters, by-laws, and paper transbe senseless and wholly inoperative, unless fers. There is no force in the contention that the note was transferred by the payee to a it was not a fraud as to the Chemical Bank, third party. Such indorsements are not at because the note sued on was not given until all uncommon. The cases of Briggs v. Lath- after the creation of the corporation. The am, 36 Kan. 205, 13 Pac. 129, and Hatch v. note was merely a renewal of a prior obliBarrett, 34 Kan. 223, 8 Pac. 129, are not in gation, and the debt existed before the fraud. point. One was a transfer of a mortgage; ulent transfer was made. No error appearthe other a mere assignment of a note with- ing on the record, the judgments are affirmed. out recourse. This was both a guaranty and All the justices concurring.

(58 Kan. 51)

GILMORE v. BUTTS. (Supreme Court of Kansas. April 10, 1897.)


In a controversy over a stock of goods between mortgage and attachment creditors, where the mortgage was prior in point of time to the attachments, and where it was claimed that the mortgage was fraudulent, testimony of the transactions and business failure of the son of the debtor years before, when engaged in business for himself, and with which the debtor had no connection, is incompetent, the son not being a party to the attachment proceedings, nor to the action between the mortgage and attachment creditors.

(Syllabus by the Court.)

Error from district court, Miami county; John T. Burris, Judge.

Replevin by L. C. Gilmore against D. E. Butts. From a judgment for defendant, plaintiff brings error. Reversed.

W. H. Browne, John C. Sheridan, and B. F. Simpson, for plaintiff in error. W. T. Johnston and Ellis, Reed, Cook & Ellis, for defendant in error.

JOHNSTON, J. In 1888, J. W. Steele engaged in the mercantile business at Paola. He was an elderly, and somewhat feeble, man, and his son, Clay B. Steele, who was a traveling salesman, sometimes assisted him in selecting and purchasing goods. The business was carried on by J. W. Steele until July, 1891, when he died, leaving the greater part of his property to his wife, S. A. Steele. She continued the mercantile business, and upon her request Clay B. Steele came home, and took the control and management of the business. During the latter part of 1891, S. A. Steele borrowed money from the National Bank of Paola to the amount of $1,000 upon four promissory notes, and it is claimed that it was used to discharge the mercantile debts of the house which accrued prior to January 1, 1892. A portion of the money borrowed from the bank was paid, but it appears that on May 14, 1892, S. A. Steele was still owing the bank $3,438.85. A note for that amount was executed to L. C. Gilmore, who was cashier of the bank, and a chattel mortgage was given to him upon the stock of goods to secure the payment of the note. The note and mortgage were delivered and recorded on May 17, 1892, and on the same day S. A. Steele executed another note to L. C. Gilmore for $750, securing its payment by a second mortgage on the goods, and it is claimed that the money obtained on this second note and mortgage was paid to Hattie Steele, the wife of Clay B. Steele, for money previously loaned by her to J. W. Steele, and which was put into the mercantile business. In the early part of 1892, S. A. Steele became indebted to Swofford Bros. Dry Goods Company for goods purchased to the amount of $3,000, and to Brown, Durrell & Co. in the amount of $161.24. On May 17, 1892, L. C. Gilmore took possession of the stock of goods by virtue of the chattel mortgages, and on May 26, 1892,

Brown, Durrell & Co. began an action against S. A. Steele to recover the amount due them from her, and on the following day the Swofford Bros. Dry Goods Company commenced an action for the amount of their claim. In each of these cases an attachment was levied on the stock of goods, and possession taken by the sheriff, D. E. Butts. L. C. Gilmore then brought this action of replevin to recover the possession of the goods, which it is conceded were worth more than the mortgage debts. The attaching creditors recovered judgments against S. A. Steele for the amount of their claims, and in this action they are represented by D. E. Butts, the sheriff. They claim that there was nothing due to Hattie Steele, and that $750 was in fact advanced to Clay B. Steele in order to induce the Steeles to give L. C. Gilmore security for his claim of $3,438.85. The jury found in favor of the attaching creditors, and that the $750 was paid in order to induce the Steeles to make the larger mortgage.

The principal error assigned is in the admission of testimony. It appears that Clay B. Steele was engaged in business at Parsons, Kan., in 1881; that he became financially embarrassed, and had difficulty with his creditors, who finally obtained possession of the stock of goods. The goods were subsequently sold to the Steeles, and replenished, and the business was conducted in the name of H. Steele & Co.,-H. Steele being the wife of Clay B. Steele. They conducted the business until October, 1881, when they became financially embarrassed, and their goods were seized and taken by certain chattel mortgage creditors. A large volume of testimony was introduced, showing the financial transactions of Clay B. Steele and his wife at Parsons in 1891, 1892, and 1883, the difficulties they had with their creditors, the business failure and reorganization, and the subsequent breaking up of the business, leaving a large number of debts unpaid and unprovided for. On this line there was the testimony of nine witnesses, as well as the transcript of a judicial proceeding in Labette county between Clay B. Steele and one of his creditors, in which it appeared that judgment had been obtained, and an execution thereon had been returned unsatisfied. The testimony was wholly in. competent, and should hare been excluded from the jury upon the objection of the plain. tiff'. There is an attempt to justify this ad. mission upon the claim that Clay B. Steele was in fact a proprietor in the business at Paola, and that, therefore, his conduct and business transactions several years before at Parsons tended to throw some light upon the transactions at Paola, and upon the motives which actuated him in giving the mortgages to the plaintiff. The attachment creditors, however, are not warranted in assuming this position. The business was conducted in the name of S. A. Steele; the goods were sold to her; and the actions to recover for the goods and the attachment proceedings were brought

« PreviousContinue »