Case Name: Hiram A. Lusk, Trustee in Bankruptcy, appellant, v. Zachariah S. Riggs et al., appellees
Court: Nebraska Supreme Court
Jurisdiction: Nebraska
Decision Date: 1904-01-06
Citations: 70 Neb. 713
Docket Number: No. 13,225
Parties: Hiram A. Lusk, Trustee in Bankruptcy, appellant, v. Zachariah S. Riggs et al., appellees.
Judges: Letton and Kirkpatrick, CC., concur.
Reporter: Nebraska Reports
Volume: 70
Pages: 713–722

Head Matter:
Hiram A. Lusk, Trustee in Bankruptcy, appellant, v. Zachariah S. Riggs et al., appellees.
Filed January 6, 1904.
No. 13,225.
1. Fraudulent Conveyance: Burden of Proof. Where a conveyance of real estate is presumptively fraudulent, the burden is on those claiming under such conveyance to show the tona fieles of the transaction. In such case, when the grantee attempts to show-payment of a consideration for the conveyance, he must also show that the money used was his own.
2. Incorporation: Collateral Attack. Where a collection of person^ claim to have organized themselves into a corporation, the invalidity of their organization may be shown, even when questioned collaterally, by evidence that no articles of incorporation were filed as required by statute.
Appeal from the district court for Clay county: George W. Stubbs, Judge.
Reversed.
J. L. Epperson, Charles H. Epperson and Ambrose Epperson, for appellant.
Thomas S. Matters, contra.
Rehearing allowed. See opinion, p, 718, post.

Opinion:
Duffie, C.
On a former appeal the case was reversed and remanded with directions to the district court to try the issues made relating to the bona fide character of the conveyance of the W. y2 of the N. W. % of section 33, township 5 N. of range 7 W. of the 6th P. M., it being alleged in the petition that a conveyance of said land to the defendant Edward R. Cornelison was fraudulent as to creditors. The former opinion contains a full statement of the facts. See 65 Neb. 258.
On the second trial it was shown that the land in controversy was conveyed by W. T. Cornelison and wife to the Fairfield Grocery Company, June 4, 1898, and that on December 14, 1898, the Fairfield Grocery Company, by W. T. Cornelison, manager, conveyed the land to Edward R. Cornelison. It further appears that on the date of said conveyance Edward R. Cornelison executed his note for #800, the alleged consideration for said conveyance, to the Fairfield Grocery Company, which note, Avith ten per cent, interest thereon, Avas payable thirty days after date; and about January 18, 1899, a draft for #800, said to have been purchased by R. W. Cornelison & Company, was drawn by the Morrill & James Bank of -Hiawatha, Kansas; in favor of E. R. Cornelison, and by him indorsed to W. T. Cornelison and forwarded to Fairfield, Nebraska, in payment of this note. This draft was indorsed over to the Fairfield Grocery Company by W. T. Cornelison, and by said company deposited to its account in the Citizens Bank of Fairfield, Nebraska, and the proceeds thereof used in payment of accounts due to its creditors. Upon this showing the district court dismissed the pétition of the plaintiff, who has taken a second appeal.
On the former hearing it Avas held that the conveyance' of this land to the Fairfield Grocery Company, and by that company to Edward R. Cornelison, was presumptively fradulent, and that the burden was upon the defendants to show the bona fides of the transactions. We do not think that this has been done. It is true that Edward R. Cornelison, the present holder of the legal title, executed his note for $800 in payment for this land. It is further true that a draft payable to the order of Edward R. Cornelison Avas sent to W. T. Cornelison in payment of this note. Whose money purchased the draft is not shown. The written application for the draft is signed by R. W. Cornelison & Company, and the bank undoubtedly charged the amount of the draft to the account of that company; but there is no evidence whatever to show that the money with which the draft Avas purchased had not in fact been furnished by W. T. Cornelison or the Fairfield Grocery Company, or, if purchased with the money of R. W. Cornelison & Company, that they had not been reimbursed for the amount. The note in payment of Avhich the draft was sent dreAv interest at ten per cent, per annum, and no attempt is made to sIioav that interest due upon the note Avas paid. The Arice-president of the Morrill & James Bank of HiaAvatha testified that shortly after this transaction, and on March 12, 1900, W. T. Cornelison deposited in that bank the sum of $1,800, and this, together Avith the fact that but three days prior to this deposit lie had received his discharge in bankruptcy, is a circumstance giving rise to the suspicion that he might have had money in that hank in the name of his father, or a firm with which his father was connected, prior to that date, and was the party who, in fact, furnished the.money for the purchase of the draft. Another suspicious circumstance is the fact that Edward R. Cornelison, although summoned to give his deposition at the same time that the deposition of the vice-president of the Morrill & James Bank of Hiawatha was taken, gave notice by his attorney that he refused to appear and testify in obedience to the subpoena served upon him. It has long been a rule in this state that, when transfers like these in question have been made between near relatives, the burden is on the defendants to show a sufficient consideration and good faith in the transaction. National Bank of Commerce v. Chapman, 50 Neb. 484; Plummer v. Rummel, 26 Neb; 142; Knudson v. Parker, 3 Neb. (Unof.) 481; Bartlett v. Cheesbrough, 23 Neb. 767. That a note was given by Edward R. Cornelison in consideration of the conveyance to him, and that said note was taken up by a draft drawn to Edward R. Cornelison, is plain enough, but the material and important question, who furnished the money that purchased the draft, is a question upon which the record is entirely silent. The burden being upon the defendants, it was incumbent upon them to show that the money received for the purchase of this land was the money of Edward R. Cornelison, and upon this point there was an entire failure.
One other question needs consideration. Appellant insists that the Fairfield Grocery Company was not legally incorporated and authorized to transact business, for the reason that its articles of incorporation were never filed in tfie office of the secretary of state. Section 126, chapter 16, Compiled Statutes, 1901 (Annotated Statutes, 4119), provides, among other matters:
"Every corporation, previous to the commencement of any business, except its own organization, when the same is not formed by legislative enactment, must adopt articles of incorporation and have them filed in the office of the secretary of state and recorded in a book kept for that purpose, and domestic corporations must also file with the county clerk in the county where their headquarters are located," etc.
It is insisted that there is no evidence that the articles were not duly filed with the secretary of state, and that a certificate from the 'secretary to the effect that no articles of the kind were on file in his office is not competent evidence of that fact. This we must concede, but the articles themselves were introduced in evidence and, while they show a filing in the office of the county clerk, they do not bear a certificate of the secretary of state to the effect that they were filed in his office. It is well known that the secretary of state files and retains the original articles and, when occasion requires, furnishes the company, or other parties who may desire, with certified copies thereof. This proceeding relating to the conduct of a public office is a matter which needs no proof, as the wording of the statute requires that method to be adopted. The fact, then, that the articles offered in evidence fail to show that they had been filed in the office of the secretary of state is evidence conclusive that no filing had been made there. Until such filing was had the company, under the terms of our statute, was not authorized to transact business. Thompson in his Commentaries on the Law of Corporations (vol. 1, sec. 219), says:
"It has already been seen that a number of individuals, by the mere act of uniting and calling themselves a corporation, can not constitute themselves such, but that a corporation can only be created by the sovereign power. It will hereafter be pointed out that the principle which validates irregularities in the organization of corporations, when their corporate existence is questioned in collateral proceedings, applies only in cases where the corporation might have existed. If we attend to these principles, we shall see that a corporation can not be deemed to exist, even de facto, where the adventurers never had any charter at all. It must follow, from a consider ation of these premises, that where a collection of persons claim to have organized themselves into a corporation under a general law, their claim will not be good, even when questioned collaterally, provided they file no articles of association at all; and such is the adjudged law."
T. Evidence. Evidence examined, and held not sufficient to sustain the judgment of the trial court.
2. Corporation: Collatekal Attack. Where the law authorizes a corporation and there has been an attempt in good faith to organize, and the requirements of the statute have been eolorably complied with and corporate functions thereafter exercised, there exists a corporation de facto, which can not ordinarily be called .in question collaterally. Haas v. Bank of Commerce, 41 Neb. 754, followed and approved.
S. Overruled. Paragraph 2 of the syllabus of the original opinion in ' ' ' this case' 'examined, and overruled.
In Abbott v. Omaha Smelting & Refining Co., 4 Neb. 416, it was held that until articles were filed as required by statute, a corporation de facto did not exist, and this ruling was followed in Capps & McCreary v. Hastings Prospecting Co., 40 Neb. 470. And the rule is firmly established in this state that a corporation has no legal existence until the statute has been complied with in filing with the proper officers the articles of incorporation. We think, therefore, that the Fairfield Grocery Company never had any legal existence and that such fact may be shown in any controversy where the matter is brought in question. We recommend that the judgment of the district court be reversed and the cause remanded for another trial.
Letton and Kirkpatrick, CC., concur.
By the Court:
For the reasons stated in the foregoing opinion, the judgment of the district court is reversed and the cause remanded for another trial.
Reversed.