Hibernia Ins. Co. v. St. Louis & N.O. Transp. Co.

• Decision Date: 28 September 1882
• Citation: 13 F. 516
• Court: U.S. District Court — Eastern District of Missouri
• Parties: HIBERNIA INS. CO. v. ST. LOUIS & NEW ORLEANS TRANSP. CO. [1]

13 F. 516

HIBERNIA INS. CO. v. ST. LOUIS & NEW ORLEANS TRANSP. CO. ^[1]

United States Circuit Court, E.D. Missouri.

September 28, 1882

O. B Sansum and George H. Shields, for plaintiff.

Given Campbell and Thomas J. Portis, for defendant

McCRARY C.J.

This case has been considered upon the plea interposed by the defendant to the fifth subdivision of the bill, and the proofs adduced in support of the same. The bill alleges that the complainant is, by subrogation to the rights of certain shippers, a creditor of the Babbage Transportation Company, a corporation of Missouri, and that, after the creation of the indebtedness, said corporation transferred all its property to the St. Louis & New Orleans Transportation Company another Missouri corporation, without making provision for the payment of complainant's claim. It is alleged that Henry Lourey, being the President of said Babbage Transportation Company, and the principal owner of the stock thereof, organized the said St. Louis & New Orleans Transportation Company, and caused all the property of the former to be sold and transferred to the latter, without paying or securing the debt due the complainant. It is averred that the said sale was made without the payment of any consideration by said St. Louis & New Orleans Transportation Company. Then follows the following allegations, to which the plea applies:

'Fifth. And your orators charge that said sale and transfer of the property of said Babbage Transportation Company to the said defendant, St. Louis & New Orleans Transportation Company was fraudulent as against the rights of the complainants creditors of the said Babbage Transportation Company, and that the said Henry Lourey and the said St. Louis & New Orleans Transportation Company had notice of said fraud; and so your orators allege and charge that said St. Louis & New Orleans Transportation Company was not a bona fide purchaser of said property for a full and valuable consideration, without notice of the rights and claims of your orators in the premises, and that said sale and transfer of said property was made subject to the rights of all persons who had claims, debts, or demands against said Babbage Transportation Company, and the claim and demand aforesaid of your orator.

'Wherefore your orators pray process against the said St. Louis & New Orleans Transportation Company, the said Babbage Transportation Company and the said Henry Lourey, and that they be cited to appear before this honorable court, and true answer make to all and singular the matter aforesaid, their answer under oath being hereby expressly waived, and that this honorable court will be pleased to decree payment of the aforesaid debt to your orators, with interest thereon and costs of suit, and that said St. Louis & New Orleans Transportation Company be restrained from selling or otherwise disposing of any of the said property until your orators' said debt, and interest and cost, be paid and satisfied, and that until the said debt be satisfied your orators have a lien upon said property in said Exhibit A described, and that this honorable court will be pleased to give and decree to your orators such other and further relief as to law and justice and as this honorable court shall be able to give in the premises.'

The plea avers that the Babbage Transportation Company, being the owner of its property, for a valuable consideration, and with the consent of all its stockholders, sold and delivered the same to the St. Louis & New Orleans Transportation Company; that the consideration paid consisted of 500 shares of the capital stock of the last-named company, of the value of $100 a share, and the agreement of said last-named company to pay all the then known outstanding debts of the former company, not to exceed $42,000; that the sale was bona fide, and that neither of the parties thereto were aware that the old company was in any manner liable to or indebted to the complainant, or the parties under whom it claims by subrogation; that the stock was delivered to the old company, and the new company paid all the debts of which the parties had notice at the time of the sale. All fraud is denied. The proof shows the following facts:

(1) The Babbage Transportation Company sold all its property to the St. Louis & New Orleans Transportation Company in consideration of 500 shares of full-paid stock in the latter company, and the payment of the debts of the former company to an amount not exceeding $42,000. (2) This consideration was paid by the delivery of the stock and the payment of the debts, amounting to something more than $42,000, but not including the claim of complainant. (3) All the stockholders in the old company assented to the sale on these terms. (4) Henry Lourey was a large stockholder in the Babbage Transportation Company, and was also president, general manager, and treasurer thereof. (5) The said Henry Lourey was also then an officer of the St. Louis & New Orleans Transportation Company, and the stockholders of the two companies were substantially identical. (6) The officers and stockholders in both corporations at the time of the sale knew of the accident and loss out of which the complainant's claim arose, but no demand had been made for the payment of the sum, and they did not know that any would be made. (7) At the time of the sale inquiry was made as to the amount of outstanding indebtedness of the Babbage Company, and the same was estimated at about $42,000.

Upon these facts this court holds that the sale by the Babbage Company of all its property to another corporation, composed mostly, if not wholly, of the same persons, was fraudulent and void as to all creditors of the former company not assenting thereto. The purchaser knew that it was buying all the property of the seller, and that, by the transaction, the latter was being deprived of the means and power of meeting any of its outstanding obligations. The fair inference from...