Cummings Mfg. Co. v. Smith

• Decision Date: 01 May 1915
• Citation: 113 Me. 347,93 A. 968
• Parties: CUMMINGS MFG. CO. v. SMITH et al.
• Court: Maine Supreme Court

93 A. 968

113 Me. 347

CUMMINGS MFG. CO.

v. SMITH et al.

Supreme Judicial Court of Maine.

May 1, 1915.

Exceptions from Supreme Judicial Court, Somerset County, at Law.

Action by the Cummings Manufacturing Company against Clyde H. Smith and others. There was a directed verdict for plaintiff, and defendants bring exceptions. Exceptions overruled.

Argued before SAVAGE, C. J., and SPEAR, KING, and HANSON, JJ.

Fred F. Lawrence and Samuel W. Gould, both of Skowhegan, for plaintiff. Geo. W. Gower, of Skowhegan, for defendant Greene. Merrill & Merrill, of Skowhegan, for defendant Smith. Walton & Walton, of Skowhegan, for defendant Hill.

SPEAR, J. This was an action of assumpsit on account annexed, in which the defendants are sought to be charged as copartners. The general issue was pleaded. A denial of copartnership was seasonably filed. It was in evidence and not controverted that, for many years prior to 1910, F. J. Smith Company, a Maine corporation, was located at Portland and doing a publication and mail order business, and that during that time it had had dealings with the plaintiff. The F. J. Smith Company on February 17, 1911, gave a mortgage of all its assets, good will, and choses in action which came into the hands of the defendants, and was by them foreclosed August 9, 1911, a record of which was made August 29, 1911, the equity of redemption of which expired October 28, 1911.

From the expiration of the redemption of the mortgage, October 28, 1911, to the date of the organization of the Smith Publishing Company, the new corporation, December 26, 1911, the defendants were the absolute owners of every conceivable item of property of which the F. J. Smith Company had been possessed. During this time they proceeded to do business in the name of the F. J. Smith Company as they had a right to do, and contracted the whole account, for which the plaintiff brings this suit, except one item. But doing business in its name did not alter the fact that this company was out of business and was dead in law and in fact. Van Oss v. Petroleum Co., 113 Me. 180, 93 Atl. 72. So far as financial responsibility was concerned, they might just as well have done business in the name of the F. J. Jones Company. But it is said, although they owned the property, they did not take possession of it, but continued the business in the name, and obtained credit on the responsibility, of the corporation; and that the plaintiff, having given credit upon this theory, should now be confined for redress to the corporation to which he gave credit. This might be true if the plaintiff had known or had been informed of the true condition of the corporation. But had it known that this company had been stripped of every vestige of property, and was utterly worthless, it may be fairly assumed that it would not have given any credit whatever.

The case shows that the plaintiff believed it was giving credit to a going concern, possessed of the apparent assets and good will of the business, and acted upon this understanding. It follows that the plaintiff cannot, as a matter of law, under those circumstances, be held to have given credit to the F. J. Smith Company, although its account is charged to that company. Accordingly the defendants cannot avail themselves of the theory that the form of bookkeeping controls the merits of this transaction. The question is: Who are the real parties in interest? Who obtained credit of the plaintiff? Who had the benefit of that credit? Upon the principle of implied contract, those who had the benefit should be held responsible. There can be no question as to whose benefit the credit of the plaintiff inured, as appears from the following transactions:

After October 28, 1911, and during all the time this bill was being contracted, the defendants, as before stated, were the absolute owners of every vestige of property of which the F. J. Smith Company had been possessed. This corporation, by its mortgage and foreclosure, was left absolutely penniless, without $1 in property or capital, and was utterly stripped of every attribute of corporate existence, except the right to dissolve. Under the circumstances, after having obtained credit on the strength, as they say, of the corporation and its assets, they formed a new corporation, named the Smith Publishing Company. S., C, H., and G., directors of this new corporation, purchased of S., C, H., and G., directors in, and sole owners of, the assets of the F. J. Smith Company, under the foreclosed mortgage, not only all the assets included in the mortgage, but also the increment to the property after the foreclosure, the very gain of which may be due in part to the credit they now seek to avoid. The motion and vote to purchase show the following, to wit:

"On motion, voted to purchase of Greene, all of the personal property which said Greene acquired by virtue of the foreclosure of a chattel mortgage held by them against the F. J. Smith Publishing Company; also to purchase all additions made to said property, of every name, nature, and description, by said S., C, H., and G., or either of them, since the commencement of the foreclosure of said mortgage, together with the good will of the business."

In other words, S., C., H.,...