Houchin Sales Co. v. Angert

• Decision Date: 10 February 1926
• Docket Number: No. 6913,6914.,6913
• Citation: 11 F.2d 115
• Parties: HOUCHIN SALES CO. v. ANGERT. ANGERT v. HOUCHIN SALES CO.
• Court: U.S. Court of Appeals — Eighth Circuit

11 F.2d 115 (1926)

HOUCHIN SALES CO. v. ANGERT.

ANGERT v. HOUCHIN SALES CO.

Nos. 6913, 6914.

Circuit Court of Appeals, Eighth Circuit.

February 10, 1926.

H. A. Loevy, of St. Louis, Mo., for Houchin Sales Co.

M. G. Levinson, of St. Louis, Mo. (H. A. Gleick and Levinson & Levinson, all of St. Louis, Mo., on the brief), for Angert.

Before KENYON and VAN VALKENBURGH, Circuit Judges, and YOUMANS, District Judge.

KENYON, Circuit Judge.

As both of these cases arise out of the same facts, we consider them together. The Ferguson-McKinney Company is now in the hands of a receiver, and the receiver has been substituted as a party here. For convenience we shall refer to the parties as the Houchin Sales Company and the Ferguson-McKinney Company; the Houchin Sales Company being appellant in No. 6913 and appellee in No. 6914, while the receiver for the Ferguson-McKinney Company is appellee in No. 6913 and appellant in No. 6914. We first consider No. 6914 as our conclusion therein is practically determinative of No. 6913. The genesis of both cases is as follows:

The Houchin Sales Company is a corporation organized under the laws of the state of Missouri, having its principal place of business in the city of St. Louis. The Ferguson-McKinney Manufacturing Company, a corporation, was engaged in manufacturing and selling merchandise. Its exact relationship to the Houchin Sales Company was a matter of controversy in the case — the Houchin Sales Company claiming it was merely an agent of the Ferguson-McKinney Company; the latter claiming that it made sales to the Houchin Sales Company, the same as to any other merchant, and that the relation was that of vendor and vendee. In any event, the Ferguson-McKinney Company filed on December 29, 1922, its amended petition in the Eastern Division of the Eastern Judicial District of Missouri, in which it sought to have the Houchin Sales Company adjudged a bankrupt, claiming that it was indebted to petitioner for goods, wares, and merchandise in the sum of $14,226.52 on open account, and that while insolvent, and within four months preceding the date of the filing of the petition, it had committed an act of bankruptcy, in that it transferred a portion of its property to one of its creditors, with intent to prefer such creditor over its other creditors, the act consisting of paying to R. G. Dun & Co. the sum of $50 upon an account of $100. Another allegation as to preferred payment was made in the petition, which was not pressed at the time of the trial.

The Houchin Sales Company denied that petitioner was a creditor having a provable claim against it in any sum; denied that it was insolvent, or that it had committed any act of bankruptcy in making payment to R. G. Dun & Co. of $50; claimed that during the four months before the filing of the original petition of the Ferguson-McKinney Company it had paid said company approximately $32,000, and that it had dealt with it entirely as a wholesale jobber, and had no other debts, except for current office and business expenses and salaries, and pleads in its answer that it had preferred the Ferguson-McKinney Company in making payments to it, and had not preferred R. G. Dun & Co.

The trial court referred the matter to a special master, who took the evidence and reported his findings and conclusions to the District Court. The evidence before the master shows that the petitioning creditor was carrying on a manufacturing and jobbing business, and that Houchin Sales Company was one of its purchasing debtors, and owed it about $14,000 at or about the time the petition in bankruptcy was filed, and also had a few minor running accounts; that the Houchin Sales Company had assets at that time of about $6,000 in accounts and $4,000 cash in the bank; that it had, during the four months immediately before the petition was filed, paid the Ferguson-McKinney Company over $36,000; that it had paid no other creditors until December 9, 1922, when it paid R. G. Dun & Co. $50 on the $100 which it owed said company for its credit rating book for 1922.

The evidence also shows that Houchin Sales Company was carrying on its business in the usual way, securing orders and sending them to the Ferguson-McKinney Company, which orders were either rejected or approved and filled by said company up to very near the time of the filing of the petition in bankruptcy. The action of the Ferguson-McKinney Company on December 10th in notifying it that it refused to fill further sales orders crippled and injured its business, and after the involuntary petition in bankruptcy was filed, which was four days after notice to the Houchin Sales Company by the Ferguson-McKinney Company that it would not fill further orders, it was unable to secure any new business, but was in condition to wind up the old business. The filing of the petition in bankruptcy ended its business career.

The balance sheet of Houchin Sales Company of October 1, 1922, shows that it had on that date total assets of $28,792.69, and total liabilities, excluding liability of capital stock, of $23,381.96. Of these liabilities, that to the petitioner was $22,293.87. The balance sheet of November 29, 1922, shows it had total assets of $13,522.26, and total liabilities, excluding liability for capital stock, of $17,646.57. Its financial situation was extremely precarious.

The special master, under the evidence, which was sharply conflicting on the question, found that the relationship between the petitioning creditor, Ferguson-McKinney Company, and the Houchin Sales Company, was that of vendor and vendee, and not principal and agent. He also found that petitioner had not received a voidable preference, such as would preclude it from prosecuting its petition to have Houchin Sales Company adjudged a bankrupt; that the payments made to petitioner were not shown by the evidence to have been made at a time when the Houchin Sales Company was insolvent, or that petitioner had reasonable cause to believe that the payments would result in enabling it to obtain a greater percentage of its debt than other creditors of the Houchin Sales Company of the same class. The special master also found as follows:

"The special master accordingly finds that the respondent, on December 9, 1922, while insolvent, made a payment of $50 to R. G. Dun & Co. upon an antecedent indebtedness, but that such payment was not made by respondent with intent to prefer R. G. Dun & Co. over its other creditors, and further finds that, in making such payment, respondent did not commit an act of bankruptcy."

The trial court overruled the exceptions of both petitioning creditor and alleged bankrupt to the report of the special master, and entered judgment dismissing the petition of the Ferguson-McKinney Manufacturing Company at its costs.

There are questions of fact involved in the findings of the special master, as well as some conclusions of law. Such findings of fact, where the evidence is conflicting, and where the trial court approves the same, are entitled to great respect in an appellate court and carry much weight. Unless manifestly erroneous, they will not be disturbed. Coder v. Arts, In re Coder, In re Arts, Arts v. Coder, 152 F. 943, 82 C. C. A. 91, 15 L. R. A. (N. S.) 372; Baker v. Bishop-Babcock-Becker Co. et al., 220 F. 657, 136 C. C. A. 265; Arenz v. Astoria Sav. Bank (C. C. A.) 281 F. 530; United States v. Apple et al. (C. C. A.) 292 F. 935; In re Empie, Swender v. Empie (C. C. A.) 296 F. 672; In re Foley, Withers Bros. v. Foley (C. C. A.) 6 F.(2d) 126; Road Improvement Dist. No. 2 of Conway County et al. v. Missouri Pac. R. Co. (C. C. A.) 275 F. 600. The master found that the payment of $50 to R. G. Dun & Co. was too trivial to raise a presumption that there was any intention to create a preference, particularly as the payment was to meet a service charge to enable the debtor to continue in business.

It is claimed strenuously by appellant that at the time of this payment of $50 the alleged bankrupt was practically out of business, and therefore it was not the payment of any service charge necessary to carry on the business. Undoubtedly it was in serious financial straits, and was not soliciting new business, but had not closed its doors or abandoned hope of continuing.

A court may well take judicial notice of the general purpose and business of well-established mercantile agencies, such as R. G. Dun & Co., and the convenience and importance of their ratings in the commercial world to those engaged in business and extending credit to customers. 23 C. J. p. 74, § 1843; H. Holmes et al., Respondents v. H. F. Harrington et al., Appellants, 20 Mo. App. 661; Ernst v. Cohn (Tenn. Ch. App.) 62 S. W. 186. Houchin Sales Company had contracted early in 1922 with R. G. Dun & Co. for the year's service, but had paid them nothing until December 9th. The good faith of the transaction is in no way questioned. We believe the payment of the $50 on the R. G. Dun & Co. bill of $100 for the credit...