Chatz v. ARMOUR PLANT EMPLOYEES'CREDIT UNION, 8794
| Decision Date | 24 April 1946 |
| Docket Number | No. 8794,8795.,8794 |
| Parties | CHATZ v. ARMOUR PLANT EMPLOYEES' CREDIT UNION. SAME v. TODD et al. |
| Court | U.S. Court of Appeals — Seventh Circuit |
Harry A. Biossat, Joseph Z. Willner, and Euclid L. Taylor, all of Chicago, Ill., for appellants.
Harry H. Ruskin, Loren E. Lewis, Jerome Wald, and Simon H. Alster, all of Chicago, Ill., for appellee.
Before EVANS, MAJOR, and KERNER, Circuit Judges.
This appeal is from a judgment rendered in an accounting suit, in favor of plaintiff, as trustee of the estate of one Howard Haberman, bankrupt, against the defendants. The subjects of the litigation are money loaned, interest charged for services rendered, and payments made. Bankrupt was the borrower. Defendants either loaned the money or rendered services and made charges for both. The disputes and contradictions in the evidence were almost as many as there were transactions. Few, if any, dealings are not involved in dispute. The trial was long. The record before us is voluminous.
The Facts: Bankrupt conducted a ready-made clothing store on Chicago's south side, where sales were made on the installment payment plan. The customers were largely negro employees of Armour Packing Company, who worked as steadily as the demands of the business permitted. The demands, however, were not constant, and the employees temporarily out of employment could not, and did not make the payments of $2.00 per week, which was the usual installment payment provided for in the contract of sale.
An important part of bankrupt's business was the collection of sums due on the installment sales. This phase of its business led to bankrupt's contacts with Todd1 and Talley2 and through Todd and Talley with Armour Packing Company.3 Obtaining assignments of wages and keeping bankrupt's customers on Armour's payroll were the secret of the success or failure of the enterprise. At least we so infer from the story revealed by the record. A high grade of salesmanship in men's clothing was not required, nor was the price important. It was the extension of credit which made sales. It was the collection of these accounts which supplied the chief cause of bankrupt's worries. The cost of the latter was doubtless included in the cost of the merchandise. It was readily accepted by the customer if only he were extended credit. It is also inferable from the record that failure to make collections satisfactorily, brought on the failure and the bankruptcy of Haberman.
This suit grew out of the contacts and subsequent dealings between Todd and Talley and the bankrupt, who failed because of failure of collection and volume of business, which was in turn traceable to the loss of employment by bankrupt's customers, who, to a certain extent, lost their employment because of the slump in the number of cattle and hogs slaughtered by Armour in Chicago. The decline in the volume of Chicago packing house business was due to conditions with which we need not concern ourselves.
One of the defendants, Armour Plant Employees' Credit Union4, advanced cash to bankrupt on application of an Armour employee who was purchasing a suit from the bankrupt. A second defendant, the Armour Plant Employees' Service Bureau5, serviced installment purchases by receiving deductions from employee's pay directly from Armour to cover said installments. Two individual defendants, Todd and Talley, were employees of Armour and prominent in the C. U. and S. B. affairs. They helped to found and were directors and officers of both companies.
The active and guiding spirit in the bankrupt company was one Haberman, who was previously associated with his father-in-law, in a somewhat similar business in another section of the city. Through such business relations with T. and T., he learned of the possibility of financing a business, upon which he was about to embark, through T. and T. and the other two defendants.
The story told by Haberman concerning his contacts and contracts with T. and T. and Armour varies sharply and contradictorily from that told by T. and T., who were the controlling and guiding spirits of the two other defendants. It was Haberman's story that T. and T. assured him that the credit customers would be retained on Armour's payroll or reinstated at the first opportunity after lay-off, so that bankrupt's installment accounts would be promptly paid. He testified that T. and T. not only deducted from all payments the 10% service charge of the S. B. for collecting the installment payments, but in addition charged 10%, which was later increased to 12½% and to 15%. These deductions were made before bankrupt received anything. Plaintiff says this additional charge was to cover the assurance that T. and T. would keep the customers on Armour's payroll. This they failed to do, and therefore plaintiff was entitled to a refund of such deductions.
Defendants' theory or explanation of this charge is that bankrupt was a co-maker of the loans from the C. U. and the sums which were deducted constituted a reserve fund to cover defaulted loans and a part of such deductions went to Armour employees' organizations for sales promotion.
Plaintiff denies bankrupt was a co-maker on, or a guarantor of the C. U. loans.
The court found in favor of plaintiff on this issue. It found for the plaintiff on all disputed fact issues.
It accepted more readily and fully the testimony of Haberman than it did that of either T. or T. or both of them. To a degree the factual issues involve the credibility and veracity of these three witnesses. We accept the District Judge's opinion as to their credibility. We might add there is little to commend the story of either side. None of the parties was in the business for his health. Each had a palm that itched.
Haberman was desirous of securing credit. His capital was nearly all borrowed money. Conducting a sizable installment payment clothing business, he needed capital which he did not possess. With capital he could extend credit and easy terms to a class of customers to whom he sold clothes and who were not averse to buying on credit. As a result, bankrupt greatly increased the volume of his business and the size of his loans. To maintain this position, he needed help from Armour, both in acceptance of wage assignments and in giving priority of employment to those wage earners who were his customers. Bankrupt found what he sought in the two companies above named, operated by T. and T., who asserted connections with, and an inside approach to, Armour. It does not appear how they were to secure preferential treatment of bankrupt's customers by Armour, but T. and T. evidently convinced bankrupt that they did receive and could deliver such preferential treatment by Armour.
For the services rendered by T. and T. and by both C. U. and S. B., bankrupt paid liberally. In short, the bankrupt wanted preferred, preferential treatment for his customers, and the customers welcomed the services of one who could secure such advantages from Armour. T. and T. with asserted positions of vantage with Armour, sold their services and influence to the bankrupt. It does not clearly appear whether the influence thus sold was real or merely sales talk by T. and T.
The story came to a most unhappy ending. With the store in bankruptcy and Haberman making charges of over reaching against defendants, who deny the charges, the parties found their way into court, which was, in this instance, the federal court, due apparently to the intervention of bankruptcy.
At the end of a trial where disputes and contradictions abound, a judgment was finally entered in favor of the trustee of the bankrupt estate of Howard Haberman against S. B. and C. U. for the sum of $60,659.37 and against T. and T. and S. B. for $45,192.21. The judgment also provided that T. and T. be allowed the sums of $3,612.54 and $16,614.25 as credit against plaintiff's claim and such sums were credited to said T. and T. in the $45,192.21 computation. It was further adjudged that all bankrupt's notes held by T. and T. be declared paid and satisfied and T. and T. are directed to deliver them to plaintiff.
In entering the $105,851.58 judgment in favor of the plaintiff, the court made the following statement:
"A — Amounts Due Plaintiff
Deductions by A. Todd and C. H
Talley for `assurance agreement'
from March 1, 1935 to October
1, 1938 ............................... $16,945.53
Plus 5% interest per annum ............. 6,466.64 $ 23,412.17
__________
(Finding No. 24)
Deductions by A. Todd and C. H
Talley from proceeds from Armour
Employee Credit Union
loans received by false representations
and without consideration ............. $10,076.75
Plus 5% interest per annum ............. 5,089.70 15,166.45
__________
(Finding No. 25)
Deductions applied on Armour
plant Employees' Credit Union
defaulted loans ....................... $43,297.14
Plus 5% interest per annum ............. 17,362.23 60,659.37
__________
(Finding No. 29)
Net amount admitted to have
been received by Defendants
Todd and Talley on collections
on $50,275.57 of Haberman's
Armour accounts ....................... $13,236.64
Plus 5% interest per annum ............. 3,915.42 17,152.08
__________
(Finding No. 35)
Money due Plaintiff on Haberman
accounts receivable
turned over to Todd and Talley
between October 1, 1938
and July, 1939 ........................ 8,335.32
(Finding No. 36)
Deductions by A. Todd and C. H
Talley to apply on note for
$10,670.00 ............................ 1,353.00
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...Annual Reports for 1943 and 1946. 23 Kohen et al. v. H. S. Crocker Co., Inc., 260 F.2d 790 (C.A.5 1958); and Chatz v. Armour Plant Employees' Credit Union, 154 F.2d 236 (C.A.7 1946). 24 I-T-E's Statement Pursuant to Local Pre-Trial Order No. 4, op. cit., supra, note 13 at 25 See also, Lawre......