Court Opinion

ID: 8309729
Source: CourtListenerOpinion
Date Created: 2022-10-17 13:46:42.702398+00
Date Added: 2024-06-11T16:44:40.704718
License: Public Domain

Nelson, D. J.
Upon the facts, as I understand them, the question presented is not difficult of solution, although the transactions are somewhat complicated. The State National Bank, on July 16, 1877, held as collateral security for the payment of King’s notes the 800 shares of stock which represented the entire corporate property of the Minneapolis Agricultural & Mechanical Association, comprising 70 acres of land, and had a right to sell the pledged stock, all the notes being past due and unpaid. It proceeded to give reasonable and proper public notice of the time and place of sale, and specially notified the 'pledgeor and the complainant, who had succeeded to all his *805interest therein. At the sale the stock was struck off to Knight, the son-in-law of the president of the bank, who had been requested to bid the amount of the bank’s lien — $13,000. It is very clear this bid was for the benefit of the bank, and was so regarded by the president and its agent, Baldwin. The conduct of Baldwin in subsequent transfers of the stock after the sale can be accounted for in no other satisfactory manner. Tie drew the agreement of sale to Morrison of nine-tenths of the stock, providing for the payment of the expenses of certain litigation incurred by the bank and himself, for which Knight was not liable, and by memoranda upon one of the certificates designated the number of shares therein reserved under the sale to Morrison, signing thereto Knight’s name, which indicates that he had not parted with the control of the stock.
There is no clear and certain testimony that Knight ever had anything to do with the pledged stock or the corporate property, except in connection with Baldwin, who represented the bank. Knight testifies that “Harrison or Baldwin delivered the stock to him at his store about the time he purchased.” Harrison says: “I don’t know to whom the stock was delivered after it was bid off. Baldwin attended to these matters as agent of the bank. ” “He (Knight) never paid any money to me on account of that bid. I don’t know what he did outside of that.” Baldwin says: “I had nothing to do with the receiving or application of the proceeds of the sale. * * * 'I made the sale and turned the matter over to the proper officer of the bank.” On his subsequent examination it is assumed that he had previously testified that he delivered the stock, and ho then states that Knight had the stock for a long time. It is clear, however, that it never passed entirely from Baldwin’s control, even if it was in Knight’s possession. Knight paid no money at the time of the sale, but gave his check on the bank where he had no deposit, at the request of Harrison, who indorsed it, and this check was accepted by the parties in interest. It is uncontroverted that neither Baldwin, Knight, nor Harrison knew what became of this check. Dean, who was the cashier at the time of the sale, is of the impression that the cheek was entered upon the books as proceeds of the sale, but it is evident, from an examination of his whole testimony, that he knows nothing certain about it. The conclusion is irresistible that the bank was the purchaser, and it is elementary law that nothing passed by such form of sale and it still held the stock under its original title as collateral security. After the sale Brackett’s note was returned to *806him, together with King’s notes for $14,000, which had been pledged for its payment; but this cannot 'change the situation. The complainant’s right to redeem from the bank or set aside the sale after such form of foreclosure is not doubtful. Has anything subsequently transpired which will prevent him from asserting his equitable right to the corporate property ?
2. Dorilus Morrison, who was one of the original directors of the association, purchased, as he says nine-tenths of the stoek from Knight. He had previously as such director executed a deed to the complainant, purporting to convey on behalf of the association the corporate property. He knew all about King’s sale to complainant, and executed this deed at his instance, in order, if possible, to perfect the title. When the agreement for sale between him and Knight was signed, Baldwin, the agent of the bank, was present, drew up the bill of sale, and managed the transfer and delivery of nine-tenths of the stock, in which Morrison agreed to pay the liability of the bank incurred in litigation about the stock, which was neither a lien nor a condition of sale imposed by Knight. His conduct subsequently in connection with the stoek and the corporate property clearly shows that he never regarded his interest any more than a lien for the protection of advances made by him. In fact, he paid no money to Knight, but when the agreement was executed gave his notes for $12,-430.42, which Knight turned over to Baldwin, and these notes were subsequently paid out of a fund subscribed by certain citizens of Minneapolis. He was a purchaser with notice, and his right to hold the stock as against the complainant is no better than Knight’s or the bank’s. The conveyance by the association to Knight and himself of the entire corporate property did not change his relation to the complainant. It virtually dissolved the corporation, but the grantees acquired no right thereto superior to that they before possessed.
3. The trustees, Sidle and Langdon, are not bona fide purchasers for value. They knew all about the property — its complications, and the previous and pending litigation. Their desire was to make up the deficiency resulting from the fair of 1878, which was a failure financially, and at all the conferences between citizens who afterwards subscribed to the fund of $30,000 to pay off debts, it was understood that Morrison, who was present and participated in these meetings, only desired that his notes, then outstanding, should be provided for, and that he would deed the property for about $14,000, which was the amount then due thereon. In fact, the representation of King to *807Sidle and others of the deficiencies due embraced this item of $14,-000, and the declaration of trust by Sidle and Langdon speaks of in-cumbrances, which, in my opinion, refers to the Morrison interest.
4. "While Sidle and Langdon took the title to the land with notice of the complainant’s equity, and could not by a declaration of trust affect it, yet the complainant in my opinion is liable to them for the money actually paid Morrison for his interest, which was $8,646.55, and they must account to him for any income, profits or advantages derived from the use of the property.
My conclusion is that complainant is entitled to a decree in his favor requiring James M. Knight, upon the payment to him of the sum of $569.58, to execute to the complainant a conveyance of one-tenth of the said real estate, and Jacob K. Sidle and Robert B. Lang-don to account for the rents, profits, and income of said real estate while in their possession, and to pay over to complainant the excess, if any there be of the same over and above said sum of $8,646.55, and to convey nine-tenths of said real estate to complainant. But in case said sum of $8,646.55 shall exceed such rents, profits, and income, then to execute such conveyance upon' the payment of the balance to them by complainant. And that upon the failure of the said Knight to execute such conveyance within 10 days after the payment or tender to him by complainant of said $569.58, that such decree stand as a conveyance. And upon the failure of said Sidle and Langdon to make such accounting within 10 days after the service of notice on them to appear before the master for such purpose, or to execute said deed within 10 days thereafter, or after the payment or tender to them of the excess of said sum of $8,646.55, over said rents, profits, and income, in case there is an excess, that such decree stand as a conveyance from them.
The case will be referred to H. E. Mann, as master, to take the accounting provided for. Let a decree be entered accordingly.