Coronet Mfg. Corp. v. May Furniture Co., 136240

• Decision Date: 13 October 1971
• Docket Number: No. 136240,136240
• Citation: 31 Ohio Misc. 131,282 N.E.2d 588
• Parties: , 58 O.O.2d 506, 60 O.O.2d 296 CORONET MANUFACTURING CORP,, Plaintiff, v. The MAY FURNITURE COMPANY, Defendant.
• Court: Ohio Court of Common Pleas

Page 131

31 Ohio Misc. 131

282 N.E.2d 588, 58 O.O.2d 506, 60 O.O.2d 296

CORONET MANUFACTURING CORP,, Plaintiff, v. The MAY FURNITURE COMPANY, Defendant.

No. 136240.

Court of Common Pleas of Ohio, Montgomery County.

Oct. 13, 1971.

Jesse L. Jennings, Dayton, for Allied Supply Co.

Jack Pickrel, Benjamin R. shaman, Dayton, for Receiver.

DECISION AND ENTRY ON MOTION TO ALLOW CLAIM AS PREFERRED CLAIM

RICE, Judge.

A. THE MOTION:

This cause came on to be heard upon the Motion of the Allied Supply Company, Incorporated, for an order of the Court directing that its claim against the May Furniture Company, now in receivership, be allowed as a preferred claim rather than simply being listed among the general, unsecured creditors of said May Rurniture Company.

B. THE FACTS:

On September 10, 1970, agents of the May Furniture Company purchased certain merchandise from the Allied Supply Company on a C.O.D. basis, giving in payment two checks totalling the purchase price of $945.00. These checks were not honored by the bank for the reason that two signatures were required and only one appeared on the checks.

Fifteen days after the merchandise was purchased, one of the creditors of the May Furniture Company filed a Complaint seeking, inter alia, to have a receiver appointed to take charge of all of the assets of the corporation for the reason that the corporation might then be insolvent and unable to pay its debts as they mature. The May Furniture Company consented to the appointment of a receiver and one was appointed that same day.

C. BASIS OF ALLIED'S CLAIMS:

The Allied Supply Company alleges fraud on the part of the May Furniture Company in that Allied was induced to part with merchandise on the false representation that it had been paid for such merchandise (the payment by check which May Furniture Company knew or should have known was defective since it bore only one of the required two signatures) and that at the time the merchandise was purchased, the Defendant was insolvent and unable to pay any obligations incurred. In addition, the Allied Supply Company alleges that their claim should receive preferred status for the reason that Allied never intended to be a creditor of the May Furniture Company and supplied that company with merchandise with the understanding that it would be paid in cash. Finally, allied Supply Company claims that the May Furniture Company has been benefitted by the additional inventory sold to it by Allied; that since such merchandise does not appear in the inventory prepared by the receiver, same was obviously sold at a profit and the May Company's assets increased thereby.

Allies further bases its claim upon the following language: Clark, Law of Receivers, Third edition, (W. H. Anderson Company, 1959):

'The tradition of law in the United States is that, without an enabling statute, a Court will refuse to convert a claim of a simple contract creditor into a claim cognizable by a Court of Equity unless the claimant can show that he has a property interest in the Defendant's property by, inter alia, a constructive or ex maleficio trust. If a person enters into an agreement to part with his property, or money, by duress or actual fraudulent representation or other fraud on the part of the recipient and/or the recipient agrees to pay and knows at the time that he is insolvent and cannot pay and/or it will be impossible to pay, then a constructive trust or trust ex maleficio arises.' See Section 189.

'There are two important classes of circumstances and facts which will authorize the Court of Equity to impress upon the property a constructive trust:

1. 'When a buyer induces the seller to part with his property by false and fraudulent representations.'

2. 'An insolvent buyer who knows at the time of his purchase that his financial condition is such that it is and will be impossible for him to pay for his purchases, is conclusively presumed to have brought them with an intention not to pay for them, and a persuasive legal presumption to that effect arises from the fact that such a purchaser's affairs were such a condition at the time of purchase of the property that he could then have no reasonable expectation of paying for them.' See Section 1000.

'If the property has been disposed of (in this case the property is not listed in the receiver's inventory, therefore the presumption arises that it has been sold by the May Furniture Company) and cannot be traced or collected by the Court through its search or otherwise (the transferror would normally have the right to recover its property), the wrongdoer must account to those having a beneficial interest in the constructive trust property and the Court may make a decree finding that an amount of money is due the owner of the property from the wrongdoer.' See Section 189.

'The wrongdoer cannot say that because he no longer has the property, the person who parted with it has only his simple remedy at law.' See Section 189. According to the Allied Supply Company , although they have certain remedies at law, (See Section 1302, et seq., Revised Code), the facts are...