Meyer v. SEABOARD FINANCE COMPANY, 19175.

Decision Date07 December 1962
Docket NumberNo. 19175.,19175.
Citation309 F.2d 741
PartiesFerd S. MEYER and Hoke T. Maroon, Appellants, v. SEABOARD FINANCE COMPANY, Appellee.
CourtU.S. Court of Appeals — Fifth Circuit

Robert C. Ward, Ward & Ward, Miami, Fla., for appellants.

Laurence A. Schroeder, John H. Wahl, Jr., Miami, Fla., for appellee. Walton, Lantaff, Schroeder, Atkins, Carson & Wahl, Miami, Fla., of counsel.

Before RIVES, JONES and GEWIN, Circuit Judges.

JONES, Circuit Judge.

The judgment before us on appeal was entered in an action which grew out of the Peckham-Family Loan Company litigation. The appellee, Seaboard Finance Company, is a Delaware corporation with its principal place of business in California. The appellants, Ferd S. Meyer1 and Hoke T. Maroon, for themselves and other stockholders of Family Loan Company, entered into a contract on April 20, 1953, with Seaboard for the exchange of all of the stock of Family Loan for 61,000 shares of the stock of Seaboard. Meyer and Maroon, for themselves and the other stockholders of Family Loan represented by them, referred to collectively as the Associated Stockholders, represented and warranted by a provision in the contract2 that Family Loan had no liabilities except as were shown in its audit report and balance sheet. Also included in the contract was a covenant of indemnity3 of Meyer and Maroon by which they undertook to indemnify Seaboard and Family Loan in respect of all liabilities of Family not appearing on the audit report or balance sheet.

R. E. Peckham was the assignee of a judgment for $824,933.33 against Sol Meyer. In 1949 Peckham brought suit against Family Loan, Meyer, Maroon, and others, in the nature of a creditors bill,4 asserting that Family Loan was created with assets of Sol Meyer for the purpose of defrauding his creditors, and seeking to subject the assets of Family Loan and its outstanding stock to the judgment against Sol Meyer. The Peckham suit was not reflected or reserved in the audit of Family Loan Company nor in its balance sheet. Meyer and Maroon advised Seaboard of the existence of the suit before the contract was executed. On or about May 25, 1953, stock of Family Loan was transferred by Meyer and Maroon to Seaboard pursuant to the contract. On October 24, 1954, Peckham filed a supplemental complaint, joined Seaboard as a defendant, and alleged that the sale of the stock of Family Loan to Seaboard was for the fraudulent purpose of preventing Peckham from recovering on the judgment. The same relief was sought against Seaboard as Peckham had attempted to obtain against Family Loan. Seaboard employed counsel to represent it in the Peckham suit. There was a trial and a judgment against Peckham. 169 F.Supp. 52. This Court affirmed. 262 F.2d 422. The Supreme Court denied certiorari on October 12, 1959. 361 U.S. 824, 80 S.Ct. 70, 4 L.Ed. 2d 68.

After ten and a half years the Peckham litigation was at an end. Seaboard had been a party during the last five years of the suit. It paid its attorneys for their fees and expenses in the defense of Seaboard in the Peckham litigation and demanded reimbursement from Meyer and Maroon. Payment was refused and Seaboard brought suit claiming it was entitled to recover under the representation and warranty clause and under the indemnity clause of the contract. Trial was had without a jury and judgment was for Seaboard in the amount of $21,935.28. Meyer and Maroon have appealed. They contend, as they contended in the district court, that the Peckham litigation was not a contingent liability of Family Loan covered by the contract; that since Seaboard had knowledge of the Peckham suit prior to the execution of the contract it was not the intent of the parties that it should be covered by the warranty and indemnity provisions of the contract; and that the expenditures of Seaboard were in protecting the stock acquired by it rather than in defense of a claim asserted against Family Loan. Although set up by three specifications of error, the question for decision is whether, upon the facts established,...

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