Carroll v. Stern
| Decision Date | 08 June 1915 |
| Docket Number | 2613. |
| Citation | 223 F. 723 |
| Parties | CARROLL v. STERN et al. |
| Court | U.S. Court of Appeals — Sixth Circuit |
The Keck Company, an Ohio corporation, was adjudged an involuntary bankrupt. The Duhme Company was also an Ohio corporation, and, for the purposes of the present controversy, it should be assumed that all of its capital stock, save qualifying shares, was owned by the Keck Company. Pending the adjudication in the matter of the Keck Company creditors filed a petition alleging that the Duhme Company 'is in fact a mere department and adjunct of said Keck Manufacturing Company'; that the Duhme Company was operated as the retail department of the Keck Company, under common management; and that the merchandise of the two companies was intermingled and confused. Thereupon the District Court in bankruptcy (then held by the late Judge Thompson) appointed a receiver for the Duhme Company, and he took possession of the assets. At a considerably later time and when it was supposed that each of the corporations was insolvent in about the same degree, the District Court made an order that the receiver of the Duhme Company-- who was also trustee in bankruptcy of the Keck Company-- should 'turn over to himself, as trustee in bankruptcy of the bankrupt herein, all of the property and assets, including cash now in his hands as such receiver, and that he keep an account thereof, separate and distinct from his account of the balance of the property of said bankrupt.' By a simultaneous opinion, the District Court directed that the bankruptcy trustee should receive these effects from the receiver, and, if there was any unsold property coming from that source, should convert it into cash, and that he should 'apply the funds and the proceeds of property yet to be sold to the satisfaction of debts due those who dealt in good faith with that company (the Duhme Company).'
Stern Bros. had been selling goods for years to the Keck Company and carried a ledger account of such sales. Later their salesman solicited orders from the store occupied by the Duhme Company, reported to Stern Bros. these orders as sales to the Duhme Company, the goods were shipped to and received by the Duhme Company, and they or their proceeds or substitutes must be presumed to form part of the assets which went to the receiver. These transactions were entered in Stern Bros.' order book and other primary records as if sales to the Duhme Company, but were posted in the ledger account of the Keck Company, with the identifying initial 'D.' One of Stern Bros. testifies that he understood the Keck Company had bought out the Duhme Company and was running it as a retail department, so he supposed there was a liability against the Keck Company. For the total of such later indebtedness, Stern Bros. accepted the Keck Company notes-- upon which nothing was ever paid-- and they also appeared as creditors of the Keck Company in negotiations extensions, etc., which were had in the unsuccessful effort to avoid bankruptcy. It finally developed that the Duhme Company, considered separately, was solvent, and claims which could be established against the proceeds of the Duhme stock could be paid in full. Stern Bros. then filed a petition to have their claim allowed as of this class, and an issue was made and a trial had before the referee. The parties and the referee seem to have regarded the controlling question to be, 'To which company was credit given? ' Balancing all the facts, the referee found that Stern Bros. were creditors of the Duhme Company, not of the Keck Company. On petition for review, the District Judge, in a careful opinion, confirmed this conclusion and directed the trustee to pay the claim. The trustee appeals.
Robert A. Taft, of Cincinnati, Ohio, for appellant.
C....
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