Court Opinion

ID: 5434715
Source: CourtListenerOpinion
Date Created: 2022-01-08 17:51:47.276364+00
Date Added: 2024-06-11T08:31:46.548641
License: Public Domain

Baldwin, J. delivered the opinion of the Court
Field, C. J. concurring.
This was a bill filed to set aside a mortgage decree of foreclosure *216and sale, on the ground of fraud ; the plaintiff claiming that the mortgage was made to secure a debt of the individual stockholders of the Volcano Water Company, for which the corporation was not bound, and that this was done when the corporation was insolvent, and with the object of defrauding its creditors, of whom the plaintiff is one. Issue having beengoined upon this question of fraud, much testimony was taken on both sides. The Court found against the. plaintiff upon this question. The plaintiff below appeals from the judgment, assigning for error that the evidence does not justify the findings.
It is scarcely necessary to repeat what we have so often said, that we do not weigh proofs in such cases, but require a very manifest and apparent error to be shown on the part of the Judge trying the cause, before we reverse his finding upon a question of fact, and this rule is particularly applicable to questions involving fraud or the imputation of it.
In the present instance, after examining attentively the evidence, we see no ground for interfering. It is very true that the first and second mortgages of Horn were made in the name of certain persons apparently in their individual characters, and binding their interests in the corporate property—if obligatory at all—but there is proof to show that the money borrowed went to the corporate purposes, and was applied to the payment of the corporate debts ; and there was some proof tending to show that the corporate authorities recognized this as a corporate debt, and that Horn understood it so at the time of the loan; and afterwards the corporation made a formal and express recognition of it, as such, and in consideration of this indebtedness and some water-scrip of the corporation, and an agreement for a further advance of $8,000—a large portion of which was afterwards paid—the mortgage of Horn was taken. There is no proof of any fraud or guilty knowledge on the part of Horn; and it would be difficult, under these circumstances, to hold his taking a mortgage to secure the repayment of money which he advanced upon the supposition, induced by the parties, that the company was bound to repay it, and for which they got the full benefit, is such a fraud as to avoid the security in favor of a general creditor of the corporation.
*217The Court finds expressly that this arrangement was not made to hinder or delay creditors. On the contrary, it seems to have been supposed that it would prove effectual for the relief of the corporation from its pressing liabilities, and enable it to go on with its business. The recognition of these debts as those of the corporation by the stockholders and corporate authorities, in the absence of any showing of frapd or suspicious- circumstances, would seem to be prima facie sufficient to rebut an inference of fraud arising from the mere form of the original transaction, especially when this recognition is accompanied by the facts found by the Judge, that the money went immediately into the treasury, and was disposed of by the corporation for its own purposes; that no credit was given those stockholders on the books ; that it was regarded as one of the debts of the corporation, when there seemed to have been no motive of fraud; and when the loan was effected by those who held the largest portion of the stock. At all events, we do not feel authorized to interfere with the decree of the District Court under these circumstances. The same observations apply substantially to the case of the mortgage of Thompson.
It is not necessary to notice other points.
Judgment affirmed.