Earhart v. A. O. Thompson Lumber Co.

• Decision Date: 02 March 1940
• Docket Number: No. 19557.,19557.
• Citation: 140 S.W.2d 750
• Parties: EARHART v. A. O. THOMPSON LUMBER CO.
• Court: Missouri Court of Appeals

140 S.W.2d 750

EARHART v. A. O. THOMPSON LUMBER CO.

No. 19557.

Kansas City Court of Appeals. Missouri.

March 2, 1940.

Rehearing Denied May 20, 1940.

Appeal from Circuit Court, Jackson County; Allen C. Southern, Judge.

Action by Warren S. Earhart, trustee for the benefit of creditors of Lumbermen's Mutual Supply Company, against the A. O. Thompson Lumber Company on an open account. From a judgment for the plaintiff, defendant appeals.

Affirmed.

Harding, Murphy & Tucker, of Kansas City, for appellant.

Edwards, Thomsen & Johnson, Newbill & Brannock, Granoff & Meyerhardt, and L. W. Rodekohr, all of Kansaas City, for respondent.

KEMP, Judge.

This is a suit by the plaintiff as trustee under an assignment for the benefit of creditors, executed by the Lumbermen's Mutual Supply Company, a corporation, against the defendant, A. O. Thompson Lumber Company, on an open account. The case was tried in Division 5 of the Circuit Court of Jackson County. A jury was waived and, following a trial of the case before the court, there was a judgment in favor of the plaintiff for $5,000, from which judgment defendant has duly prosecuted this appeal.

The answer denied that the plaintiff was acting as trustee under a valid assignment for the benefit of creditors, and denied that any such assignment was legally authorized and executed by the Lumbermen's Mutual Supply Company by authority of its Board of Directors; denied that it was in any way indebted to the Lumbermen's Mutual Supply Company or to the plaintiff trustee, and alleged "that its former account with Lumbermen's Mutual Supply Company, including the account sued upon, has been fully paid and satisfied and that this defendant is in no way indebted to the plaintiff". In the course of the trial, however, and likewise upon this appeal, the only defense on the merits seriously urged by the defendant was the defense of payment.

From the record the following facts appear:

Some time prior to the incorporation of the Lumbermen's Mutual Supply Company in May, 1936, one William E. Fleming, a lumber salesman, contacted Mr. A. O. Thompson, then president of the A. O. Thompson Lumber Company, and suggested the possibilities of substantial profits to be derived from a corporation organized for the purpose of purchasing merchandise and materials from manufacturers and jobbers in car load lots for resale to individual lumber dealers in less than car load lot quantities. Discussions between Mr. Fleming and Mr. Thompson resulted in an agreement between them that Mr. Fleming would organize a corporation with the capital stock of $5,000, and that the capital stock would be fully paid up by Fleming executing and delivering his individual note for $5,000 to the A. O. Thompson Lumber Company, in consideration for which the Thompson Lumber Company would deliver and turn over to such newly formed corporation a stock of lumber and kindred merchandise of the value of $5,000.

Pursuant to this agreement, Fleming executed his individual note, dated May 6, 1936, to the A. O. Thompson Lumber Company, in the principal amount of $5,000. Contemporaneously therewith, the Lumbermen's Mutual Supply Company was incorporated with the fully paid capital of $5,000, divided into fifty shares of $100 each. A certificate for forty-eight shares of the stock was issued to Fleming, and certificates for one share each were issued, respectively, to Mr. Fleming's wife and to R. Carter Tucker, the attorney who handled the legal matters in connection with the incorporation of the company. Other than the inference arising from the issuance of the stock to them, all of the evidence is to the effect that neither Mrs. Fleming nor Mr. Tucker invested any money in the company or had any actual financial interest in the company. It seems clear that the one share each of stock issued to them respectively was a mere qualifying share, and that all of the capital stock had been paid up by the lumber and materials purchased from the defendant, A. O. Thompson Lumber Company, and paid for with the proceeds of Fleming's personal note for $5,000, which was agreed to be, and was, secured by the fifty shares of the authorized capital stock of the new corporation. The articles of incorporation were signed by W. E. Fleming, his wife, D. E. Fleming, and R. C. Tucker. While it may be contended that there was no direct evidence that these three incorporators were named as directors of the corporation, the facts disclosed by the record lead inescapably to the conclusion that these three persons constituted the first board of directors and no others were ever elected.

All necessary details for the incorporation were fully carried out, the certificate of incorporation duly issued by the secretary of state, and the articles of incorporation duly filed in the office of the recorder of deeds of Jackson County. The by-laws appearing from the minute book of the new corporation provided that the directors shall hold office until their successors shall be duly appointed. The minute book further shows that notice was given to Mr. Fleming, Mrs. Fleming and R. C. Tucker of a meeting of the directors to be held on May 23, 1938, and that such meeting was held, and that it was attended by Mr. and Mrs. Fleming, at which time a resolution was adopted authorizing the assignment to the plaintiff herein, as trustee for the benefit of creditors.

Following the incorporation of the Lumbermen's Mutual Supply Company, it rented of defendant, premises at 33 East Eighteenth Street, just across the street from defendant's main yard in Kansas City, Missouri. The $5,000 stock of merchandise was moved across the street to the Supply Company's business, and it began operation. During the following two years the Supply Company made numerous sales of merchandise to the defendant which were charged against it on the books of the Supply Company. Defendant concedes the correctness of these items but maintains that the account has been paid in full and that the ledger sheets of the Supply Company do not show all of the credits to which it was entitled.

The crucial question in this case hinges upon defendant's claim that it is entitled to a credit of $5,000, on account of the surrender by it of Fleming's aforedescribed note for $5,000. The trial court, in rendering judgment for $5,000 in favor of the plaintiff, undoubtedly resolved all other claims of defendant with respect to credits to which it was entitled, in defendant's favor, but resolved defendant's claim for credit on account of its alleged surrender of Fleming's personal note of $5,000, in favor of the plaintiff.

The Supply Company's accounts receivable ledger sheets were offered in evidence by the plaintiff and show no such credit. A ledger sheet kept by the defendant company shows a separate account with W. E. Fleming, wherein he was charged with the $5,000 note, and shows credits made thereon. Other ledger sheets of defendant company show an account with the Lumbermen's Mutual Supply Company. On defendant's ledger sheet showing its account with Fleming appear two credits in November, 1936, in the respective amounts of $2,042.89 and $1,428.93. In 1937 appear the following credits:

                   February 22         $  24.85
                   July 31                36.75
                   November 16          1466.58
                

Defendant admits that Fleming made no payments from his personal funds, but that all of these credits represent materials sold and delivered to the defendant by the Mutual Supply Company, but offered evidence to the effect that this was done at Fleming's direction, or at least with his consent. With respect to the last item of $1,466.58, credited on Fleming's personal note, there is testimony to the effect that Fleming, in October, 1937, went to the defendant company with a view to collecting something on the Supply Company account. He discussed the matter with Mr. Tamm, vice-president of the company, in which conversation some suggestion was made about the balance due on his personal note. Fleming testified that they each "had a feeling" that this was a good time to settle up this note, and they agreed to cancel out the balance due on the note, crediting it with amounts due the Supply Company for goods sold by it, and agreed that the Thompson Company would issue its check to the Supply Company for the balance due on said account, after allowing the necessary credit, to pay the balance due on said note.

Taking all of Fleming's testimony together, it would appear that the above conversation with Tamm was a preliminary conversation to a preparation of a statement in accordance with this understanding. However, at another place in his testimony Fleming testifies that he prepared a statement of account, which statement, bearing date of October 15, 1937, and identified as Exhibit "B", was offered in evidence. This statement shows items of merchandise sold by the Supply Company to the defendant company between November 30, 1936, and October 4, 1937, in the aggregate amount of $6,269.21. It also shows the following credits:

                6-1-36          Note            $5000.00
                1-13-37         Check             500.00
                8-5-37          Check             300.00
                                                ________
                                        Total    $5800.00
                

and shows a balance of $469.21. There were other statements offered in evidence showing corrections of this account, which reduced the balance to $425.81.

Fleming testified that following the presentation of this statement to defendant and the agreement as to the settlement thereof, defendant surrendered to him his personal note for $5,000, together with three certificates aggregating the fifty shares of capital stock of the Supply Company, and also gave him a check drawn in favor of the Supply Company for the balance of $425.81.

Fleming testified that at the time of the trial the note was then in his wife's safety deposit box. This note, so surrendered by the Thompson Lumber Company, was never listed on the books...