ENDICOTT JOHNSON CORPORATION v. Scott, Civ. No. 4199.

• Decision Date: 27 January 1959
• Docket Number: Civ. No. 4199.
• Citation: 169 F. Supp. 556
• Parties: ENDICOTT JOHNSON CORPORATION, a Corporation, Plaintiff, v. Walter SCOTT, as Trustee in Bankruptcy of the Estate of Harold Vinston Lemley, Defendant.
• Court: U.S. District Court — District of Wyoming

169 F. Supp. 556

ENDICOTT JOHNSON CORPORATION, a Corporation, Plaintiff, v. Walter SCOTT, as Trustee in Bankruptcy of the Estate of Harold Vinston Lemley, Defendant.

Civ. No. 4199.

United States District Court D. Wyoming.

January 27, 1959.

David N. Hitchcock, Laramie, Wyo., and Meyer M. Kahn, St. Louis, Mo., for plaintiff.

Walter Scott and G. R. McConnell, Laramie, Wyo., for defendant.

KERR, District Judge.

Endicott Johnson Corporation, a corporation, hereinafter referred to as "seller", brings this action against Walter Scott, as Trustee in Bankruptcy of the Estate of Harold Vinston Lemley, hereinafter referred to as "Trustee" and "purchaser", to reclaim from Trustee certain shoes, or, in the alternative, to recover in cash the full value of the goods sold to the purchaser.

The seller's principal business is supplying, selling and delivering shoes to retail dealers. It is the theory of the seller that on February 24, 1958, purchaser prepared, signed and mailed to seller a property statement and attached thereto as a part thereof, showing and representing to seller that on January 2, 1958, purchaser had total assets of $44,403.70, total liabilities of $13,839.45, and a net worth of $30,564.25; that the purchaser further represented that during the period from January 2, 1957 to January 2, 1958 his total sales had been $51,377.60 and a net profit of $7,770.75; the seller further contends that the financial statement was delivered to it with the intention that it would accept the same as accurate, and, in reliance thereupon, would extend credit to purchaser and ship him shoes on such credit; the seller further alleges that the information was grossly false and misleading, as the purchaser well knew, and that this conduct on the part of the purchaser constituted deliberate fraud; that when the financial statement was prepared and delivered to the seller the purchaser was insolvent and had no reasonable expectation of paying for goods ordered from and shipped by the seller in accordance with his orders.

The Trustee interposes the defense that the financial condition of the purchaser was well known to the seller at the time the alleged financial statement was submitted; that an employee of the seller suggested the method of preparation of the financial statement for the purpose of consummating a sale; that the seller had other methods of determining the financial condition of the purchaser and did in fact make further investigation and well knew the insolvency of the purchaser at the time the financial statement was made on January 2, 1958.

The cases are many in which this same type of litigation has been before the courts. Taylor v. Fram, 2 Cir., 252 F. 465; Samson Tire & Rubber Co. v. Eggleston, 5 Cir., 45 F.2d 502; In re Forsythe Shoe Corporation, D.C., 3 F. Supp. 328; Reliance Shoe Co. v. Manly, 4 Cir., 25 F.2d 381; Manly v. Ohio Shoe Co., 4 Cir., 25 F.2d 384, 59 A.L.R. 413; Edgewood Shoe Factories, Division of General Shoe, Corp. v. Stewart, 5 Cir., 107 F.2d 123; Liebowitz v. Voiello, 2 Cir., 107 F.2d 914; Yarm v. Whitcup, D.C., 46 F.2d 117; In re Triangle Shoe Mfg. Co., D.C., 7 F.2d 704; In re McCrory, D.C., 26 F.2d 294; Ellet-Kendall Shoe Co. v. Martin, 8 Cir., 222 F. 851; In re Leflys, 7 Cir., 229 F. 695; Ludvigh v. American Woolen Co., 231 U.S. 522, 34 S.Ct. 161, 58 L.Ed. 345; In re Gold Band Curtain Co., D.C., 18 F. Supp. 847; In re Penn Table Co., D.C., 26 F.Supp. 887; In re General Lumber Products Co., D.C., 21 F.2d 979. It is true by differences of fact no one case becomes an exact precedent for another, yet a uniform principle pervades them all.

A perusal of the above authorities persuades me to the belief that in order for seller to recover in this reclamation proceeding it must prove three requisites: (1) the insolvency of the purchaser at the time the sale was made; (2) the concealment of the insolvency; and (3) intent not to pay for the goods at the time they were bought.

I will review the undisputed testimony as gathered from the evidence and exhibits and attempt to determine whether the evidence offered on the part of the seller squares with the decided cases.

Evidence.

During the month of August 1956 purchaser placed an order for shoes with the seller and deposited with it twenty-five budget checks in accordance with an agreement entered into between seller and purchaser; it may be assumed, after an examination of this record, that the checks were paid as there is no evidence to the contrary; on December 11, 1956, the seller advised the purchaser that it had completed its necessary credit investigation and had approved the orders for shipment made by the seller; the seller further advised the purchaser: "It is pleasing to note that a considerable reduction, amounting to approximately $4,000, has been accomplished in your accounts payable since the financial statement you sent to us as of January 1, 1956".; on November 15, 1956, the purchaser submitted a property statement to the seller disclosing his total assets to be $23,400 and total liabilities, $18,000; in March 1957 the seller invited the purchaser to visit its place of business in St. Louis; the object of this visit was to inspect exhibits of the seller for the purpose of determining whether the purchaser could establish a self-serving shoe store in Laramie, Wyoming; following this visit and on March 29, 1957, the seller acknowledged receipt of a financial statement executed by the purchaser while in St. Louis and further stated "As we discussed while you were here it would seem that you should have sufficient assets to provide the necessary working capital to set up the self-service shoe...