Butler v. Beach

• Decision Date: 17 December 1909
• Citation: 74 A. 748,82 Conn. 417
• Parties: BUTLER v. BEACH.
• Court: Connecticut Supreme Court

74 A. 748

82 Conn. 417

BUTLER

v. BEACH.

Supreme Court of Errors of Connecticut.

Dec. 17, 1909.

Appeal from Superior Court, Hartford County; William L. Bennett, Judge.

Action by William K. Butler, as receiver of Hills & Co., Incorporated, against Mary B. Beach and another, in which defendant Mary B. Beach filed a cross-complaint. From a judgment for plaintiff against Mary B. Beach alone on a finding that both complaints were true, she appeals. Reversed and remanded.

William BroSmith and Robert C. Dickenson, for appellant.

J. Gilbert Calhoun and Edward W. Broder, for appellee.

BALDWIN, C. J. This suit is brought for the price of goods sold to the defendants by the insolvent corporation, Hills & Co., Incorporated, on or before April 24, 1905. The receiver was appointed in May, 1905. Hills & Co., Incorporated, was organized to succeed to the grocery business of Hills & Co., copartners. In November, 1903, this partnership owed the defendant Mary B. Beach and James G. Batterson about $19,000, to recover which they sued the firm in July, 1904, and levied an attachment on goods and moneys amounting to more than the sum of the indebtedness. Subsequently they agreed with the firm and their creditors to accept one-third of their claim in full payment. This the firm promised to pay, but afterwards, at their request and that of their creditors, Mary B. Beach was induced to agree to accept, in lieu of her share of it, $2,000 in cash and $1,500 in preferred stock of a corporation which the creditors proposed to organize under the general incorporation laws of Connecticut. This agreement was conditioned on the insertion in the articles of association, the by-laws, and the certificates of preferred stock of the new corporation of a provision for her special benefit and protection that in case the holder of any shares of the preferred capital stock should be indebted to the company at the time of any regular annual stockholders' meeting for goods purchased, or in other manner, the company should, upon request, call in the stock of such stockholder at par to an amount not exceeding one thousand dollars in any one year td one stockholder, and not exceeding the amount of such indebtedness; and thereupon such stockholders should be released and discharged from such indebtedness to the amount of such stock so called in at its par value, and such stock might afterwards be reissued and sold to other persons. This provision and the right to purchase goods of Hills & Co., Incorporated, and to discharge her liability therefor by the surrender of her preferred capital stock, were held out to Mary B. Beach by the creditors and said firm as an inducement to her to take the $1,500 of the preferred capital stock in lieu of money in part payment of the percentage of her claim agreed upon in settlement. Relying upon this inducement, the representations of the creditors and said firm in relation thereto, and the right to discharge any liability for goods purchased of Hills & Co., Incorporated, Mary B. Beach dismissed her action in the superior court, released her attachment lien, and became a party to the organization of Hills & Co., Incorporated, and a stockholder therein to the extent of $1,500 of its preferred capital stock. The creditors who made these representations and stipulations were, with few exceptions, the same who were creditors of the corporation when the receiver was appointed. In August, 1904, its organization was effected and the stipulations fulfilled; Mary B. Beach receiving the $2,000 in cash and $1,500 in the preferred stock. Within the next few months she purchased groceries of Hills & Co., Incorporated, to the amount sued for by the receiver, which was less than $1,000; the creditors who are represented by him knowing that she bought on the faith of the special agreement that she could pay in shares of preferred stock, and that she would insist upon exercising that right, and but for that would not have made the purchase. In July, 1905, at the regular annual meeting of the stockholders of Hills & Co., Incorporated, it did, upon her request, call in her preferred stock at par to an amount not exceeding $1,000, in settlement and discharge of her indebtedness to it; and she then and there surrendered her stock to that amount. Including the value of the groceries so bought, Mary B. Beach has received less than 25 per cent. of her claim against the copartnership. The general creditors of the corporation (being with few exceptions the creditors who were parties to the special agreement with...