Armstrong v. Ellerslie Planting Co.

On the Merits. The notes held by the garnishee represented about two-thirds of the credit portion of the purchase price of certain plantation property that had been sold by the defendant to the Bayou Salle Planting & Drainage Company, and the third note, representing the remainder thereof, had been transferred to another by the vendor under an arrangement by which the first two were subordinated to the last. Subsequently the holder of the note, with the preference thus created, foreclosed against the property, and it did not bring enough to pay his indebtedness. Hence the security for the notes now in contest, in so far as the real estate was concerned, was lost, and they possess only such contingent value as may arise from the disputed liability of certain stockholders of the Bayou Salle Planting & Drainage Company. After the death of John R. Todd, presidént and principal stockholder of the Ellerslie Planting Company, Limited, his wife, Mrs. Fannie M. Todd, by virtue of her community interest of one half and as usufructuary of the other half of this stock, assumed control of the company, and was elected its president. The other two stockholders were her son and daughter, John R. Todd, Jr., and Miss Ethel Todd, who together owned $2,500 of the $125,000 of stock. After the sale of the plan *565 tation property, Mrs. Todd advanced the corporation from $5,000 to $8,000 to pa'y certain of its debts, and since the mortgage had been foreclosed and nothing had been left to secure the two remaining notes, thereby making their value somewhat questionable, these three stockholders met in an informal way at the family residence in the city of New Orleans, when the office and domicile was in St. Mary parish, and had a private understanding by which the mother should take the two notes now in controversy for the funds so advanced. At that time the plaintiff’s indebtedness of several thousand dollars was outstanding against the corporation, and there were a number of minor children, issue of the marriage between Mrs. Todd and her deceased husband, living. [2] Under this situation, even if it could be said that the title to the notes was lawfully transferred to Mrs. Tódd, president of the corporation, the company was woefully insolvent to her knowledge, and it needs little citation of authority to sustain the view that she could not thus prefer herself as a creditor, even with the formal consent and official action of the 'other officers of the defendant company. Cahill v. Slaughterhouse Co., 47 La. Ann. 1483 , 17 South. 784 ; Frellsen v. Strader Cypress Co., 110 La. 883 , 34 South. 857 . [3] The garnishee’s claim of pledge upon the note arises out of the following circumstances: He had indorsed the note of Mrs. Fannie M. Todd for $2,000 at a bank in Lake Charles, La., and subsequently had it to pay. He had an understanding with her that these two notes for $36,666.66 should be considered as pledged to secure him in that in-i dorsement, although they were never actually delivered to him and the pledge legally perfected until after he had paid the note so indorsed, and until after the attempted giving in payment of the notes to Mrs. Todd, president of the defendant company in payment for the advances made as above indicated. The garnishee had been attorney both for Mrs. Todd and the Ellerslie Planting Company, Limited, and was entirely familiar with the financial affairs of the company. Mrs Todd not having acquired any title to the notes, in so far as the rights of the plaintiff, a creditor of the corporation, were concerned, she could convey no better title to the garnishee. Hence, as to the plaintiff, the notes were still the property of the Ellerslie Planting Company, Limited, and its superior right against the notes in the hands of the garnishee must be recognized. [4] As to the agreement between the heirs of John R. and Fannie M. Todd and Borah, I-Iimel, Bloch & Borah, we can see no objection to such an arrangement by which they should receive one-third of whatever might have been collected on the notes, had the agreement been made with a properly authorized officer of the defendant company; but the employment was not had, even under the garnishee’s contention, by the corporation. It was with the heirs, on the theory that Mrs. Todd was the owner of the notes. For the same reasons, set forth above, i. e., that Mrs. Todd was not the owner of these notes, as to the plaintiff, their claims, in so far as they are urged by the garnishee herein, must give way to the superior rights of plaintiff. Not being parties to this proceeding, however, their rights cannot be concluded by any disposition of this case. For the reasons assigned, the judgment appealed from is affirmed at the cost of the appellant. -