Wells, Fargo & Co. v. George M. Scott & Co.

Zane, C. J. The defendant, a corporation, dealing in hardware and mining machinery, in the City of Salt Lake, with a capital stock divided into 1,500 shares', of which George M. Scott owned 601 shares, and of which he was president and a director; James Glendinning 748 shares, vice president and a director; R. C. Chambers 100 shares, and a director; Joseph Galligher 50 shares, and a director, and W. S. Rumfield 1 share, and was secretary and a director, on the 29th day of January, 1898, assigned all its property to one Hugh Anderson, for the benefit of its creditors. The deed of assignment gave preferences. The claims of the first class of creditors amounted to $29,000; those of the second class $100,000, and the claims of the third class aggregated a large sum. A note of $1,000 to O. J. Salisbury, another of $5,000 to Hoge, Daly & Co., and a third of $2,500 to the Park City National Bank, were in the first class and endorsed by Geoi'ge M. Scott. Plaintiff insists that the preference given to these creditors, upon whose notes George M. Scott was endorser, rendered the assignment fraudulent and void. It appears the notes were given for bona fide indebtedness of the defendant; that Scott received no part of their consideration, and that he was simply liable as endorser. No fraud in fact appearing, did the fact that Scott, who was president and a director, voted with the other directors, who held a majority of the stock, to make the assignment in which the notes upon which he was endorser were preferred, render the assignment fraudulent in law ? If Scott had not voted, or had voted against the [131] assignment, tbe result would Lave been the same. Under such circumstances we are of the opinion the preference given to the notes endorsed by Scott did not violate the statute or amount to fraud in law. Levering v. Binel, 45 N. E. 775; Colo. Fuel & Iron Co. v. Wes. Hardware Co., (Utah) 50 P. R. 828; Sanford Tool Co. v. Howe, Brown & Co., 157 U. S. 312. The plaintiff also urges that the deed of assignment was fraudulent and void because a note executed by George M. Scott for $40,000, was preferred as second class indebtedness. This claim is made in view of the following facts in evidence: In November, 1894, the defendant being indebted to the plaintiff, a corporation doing a banking business, in the sum of $46,000 upon overdrafts, and being desirous of negotiating a loan of $40,000 from the Travelers’ Insurance Company; to facilitate and accomplish the same, deeded to Scott for that purpose, real estate valued at $15,000, and an undivided half interest in certain other real estate valued at $50,000, the remaining half interest in the latter being in George M. Scott. For the loan Scott gave his note to the Insurance Company and a mortgage on his half interest as well as on the real estate conveyed to him by the defendant. The defendant gave no note or other express evidence of indebtedness to the Insurance Company or George M. Scott; but the entire $40,000 was deposited in plaintiff’s banking house to the credit of the defendant. The transaction was made in the name of George M. Scott for the benefit of the defendant, and the entire $40,000 was applied to the payment of its debts. Not only was the entire loan received for the use of the defendant, but was actually paid to it or upon its debts. The transaction was not made for Scott, nor did he receive any part of the loan. In view of these facts we must hold this loan of $40,000 [132] was in effect to the defendant, and was indebtedness it bad the right to prefer. ' Other errors ¿re assigned by the plaintiff which we have considered. We find no reversible error in the record. The judgment is affirmed, with costs. BartoSc, J., and Miner, J., concur.