Daily Kennebec journal. [microfilm reel] (Augusta, Me.) 1870-1975, 1917-03-02
DECREE N THE CASE OF
PEOPLES NATIONAL BANK
vs.. MITCHELL & co. ct AIS

vs.. MITCHELL h CU. AIS
Following is the text of the decree
of Associate Justice Cornish, sustain
ing with costs the bill in equity
brought by the Peoples National Bank
Of Watervilie against Mitchell & Co.
ct ais:
This is bill in equity brought I'M
der r. s. 5000. Chapter rs, Section
| s. Par. TX, which authorizes bills in
equity by creditors to reach and apply
in payment of a debt. any property,
right, title or interest, legal or equit-
able, of debtor or debtors which can
not become at to be attached on writ
or taken on execution in a suit at law,
and any property or interest conveyed
in fraud of creditors. 1T is commonly
known as an equitable trust process
The important facts are these. How
ard r. Mitchell and his son, Frank
Mitchell, prior to 1906 were in part
nership in the florist business In Wat
erville. In March, 1906, Howard r.
Mitchell sold his interest to George F.
Terry The partnership in its new form
continued until February, 1908, when
a corporation was formed under the
name of Mitchell & Co. The authorized
capital stock was $4,000, of which
$4,000 was issued. The par value of
the shares was 500 and 124 shares
were issued to Frank H. Mitchell, 124
shares to George F. Terry, and two
shares to Grace A. Mitchell. George F.
Terry was elected one of the directors
and the president of the corporation
and continued in those offices. The cor
poration continued to carry on the
florist business and in 1911 branched
out into the nursery business. New
property was bought and additions and
improvements were made.
In 1909, Clara F. Terry, the wife of
George F. Terry, loaned the company
$4,000 and took its note therefor. In
1913 George F. Terry loaned the COM
pany $1050 and took it's note therefor.
The corporation also borrowed various
amounts from the Peoples National
Bank, the plaintiff, these notes being
Endorsed by George F. Terry. Various
other bills were owed to creditors.
Trouble arose between Mr.. Terry
and Frank Mitchell in 1912 as to the
management and condition of the bus
mess, and in 1913 Terry told Mitchell
that one or the other must withdraw.
Finally on Jan. 6. 1914. a stockhold-
ers' meeting was held, Mr.. Terry be-
ing present as the owner of ia shares,
Frank H. Mitchell as the owner of 124
shares, and Howard K. Mitchell as the
owner of two shares. 1t was unani-
mously resolved that it was the sense
| of the directors of this corporation
that it would pe advantageous to all
| 10 f,,,, r,f : he
debt of the company" This was in ac-
cordance with a vote of the directors
passed on the same day, the directors
and the stockholders being the same
three individuals.
The stockholders accordingly pro-
ceeded to authorize the issue of $4,000
six per cent coupon bonds due serially
from 1916 to 1929. and to secure the
same by trust mortgage of all its real
and personal property, the kennebec
Trust Company to be trustee.
The treasurer was authorized by vote
to use the proceeds of the bond as fol-
lows: ITO purchase all notes given by
said company to George Fred Terry and
Clara F. Terry for the release by said
George Fred Terry of all claims and de-
mands of every nature against said
company
The bonds and mortgages were duly
executed and the entire issue to the
amount of $4,000 was given to Mr..
Terry in payment of the notes held by
himself and his wife aggregating a II
tie over $1,000, and of his 124 shares of
the capital stock, which at par value
would be worth s12.400. The stock was
indorsed in blank. and as Mr.. Terry
says was delivered to the treasurer, but
the corporation passed no vote touching
the same, either in the way of reduction
of capital or otherwise. At the same
time MIR. H. r. Mitchell was substituted
for Mr. Terry as indorser on the cor
poration notes at the People National
Bank.
Mr. Frank Fl. Mitchell then assumed
control of the management, but the
| business continued Improbable and on
September II 1915, the kennebec Trust
Company began foreclosure proceed
ings on the trust mortgage for breach
of condition in payment of interest.
| On September ), 1915, and just prior
to the expiration of the year of re-
demption, the plaintiff brought this
equitable trustee process, alleging that
the mortgage was made in fraud of
CToQ1IOrS, InaC the company was III
solvent when it was made, that the
plaintiffs claim might be satisfied out
of the property SO held. and an injunc-
ton issued to stay the foreclosure pro-
ceilings. The injunction was granted
without opposition, and the cause came
on to be heard on its merits on Janu-
airy 10, 1917. and was argued on Febru-
airy 10. 1917.
| A large amount of evidence was in
troduced as to the financial condition of
the company on January 10, 1914, the
| date of the mortgage. I find that while
it had plant upon which had been ex-
pended large amount of money and
which according to the report of an
auditor was ample at the valuations he
placed upon it to meet it's Indebtedness,
yet l think those valuations were eX-
cessive and that had the property been
closed out then the assets would not
have met the liabilities.
But in the sense in which the term
Insolvency is used in cases of this
kind. that is. the inability of the COR
poration to meet its obligations as
they became due in the ordinary
! course of business. also find that it
was insolvent. 1t was Obliged to re-
new all of it's notes, it could not pay