Hume v. Brown Shoe Co.
| Decision Date | 14 November 1911 |
| Docket Number | Case Number: 1091 |
| Citation | 126 P. 823,33 Okla. 634,1911 OK 393 |
| Parties | HUME, Trustee, v. BROWN SHOE CO. |
| Court | Oklahoma Supreme Court |
¶0 1. BANKRUPTCY--Fraudulent Preferences--Knowledge of Creditor. Notice of facts which would incite a person of reasonable prudence to an inquiry under similar circumstances is notice of all the facts which a reasonably diligent inquiry would develop; and where the effect of a conveyance by an insolvent to a creditor, within four months prior to his bankruptcy, was to give such creditor a preference over other creditors, it will be conclusively presumed that it was so intended; and the conveyance is voidable if it is shown that the creditor knew or had reasonable cause to believe such fact.
2. APPEAL AND ERROR--Review--Necessity of Cross- Petition. Alleged errors committed by the trial court, of which defendant in error complains, will not be considered, but held to be waived, where no cross-petition in error is filed.
Error from District Court, Oklahoma County; George W. Clark, Judge.
Action by C. Ross Hume, trustee in bankruptcy of M. J. Duncan, against the Brown Shoe Company. Judgment for defendant, and plaintiff brings error. Reversed and remanded, with instructions.
Harris & Wilson, for plaintiff in error
R. N. McConnell, for defendant in error
¶1 This case presents error from the district court of Oklahoma county. C. Ross Hume, trustee in bankruptcy of the estate of M. J. Duncan, a bankrupt, began this action to recover of and from the Brown Shoe Company, the defendant, the value of certain property conveyed to it, contrary to the provisions of sections 60a and 60b of the national bankruptcy act of 1898 (Act July 1, 1898, c. 541, 30 St. at L. 562 [U. S. Comp. St. 1901, p. 3445]), as amended by the act of 1903 (Act Feb. 5, 1903, c. 487, sec. 73, 32 St. at L. 799 [U. S. Comp. St. Supp. 1911, p. 1506]). The adjudication of Duncan a bankrupt, under the facts shown, relieves us of a consideration of any of the questions presented, or sought to be presented, by counsel on this branch of the case, with the exception of the issue made by the averment that the bankrupt, with the intent to prefer the said Brown Shoe Company Over and above all of his other creditors, made and delivered to defendant a chattel mortgage containing a power of sale, and the defendant received the same with knowledge of the insolvency of the bankrupt, and when it received and took possession of the stock of goods covered by said mortgage, it had reasonable ground to believe that a preference was intended. The defendant filed an answer which was in effect a general denial, and also denied specifically that the instrument was executed by the bankrupt with the intention on his part to prefer the defendant over any of the other credi- tors, and alleged that it had no reasonable cause to believe, and did not believe, that it was intended that defendant receive a preference, or that the chattel mortgage did constitute a preference over and above the other creditors of the bankrupt. Upon the issues thus made, the cause was tried to the court upon the evidence of the plaintiff alone, at the conclusion of which the defendant rested and submitted the cause thereon. The court in its consideration found for the defendant, and plaintiff has brought the action to this court to secure a review of the judgment rendered.
¶2 Sections 60a and 60b of the bankruptcy act under which plaintiff is proceeding read as follows:
¶3 The undisputed facts, as disclosed by the record, may be summarized as follows: The defendant, the Brown Shoe Company, had, prior to April 29, 1904, a past-due account against the bankrupt, who conducted a general mercantile business at the village of Binger, in Caddo county. On or about the 23d day of April, 1904, its counsel in Oklahoma City received from it for collection this account. Without correspondence or other information, on the 29th day of April, 1904, he traveled to Binger for the purpose of making collection. On arrival he found the debtor was not at his store, but that it was in charge of a clerk. Learning that the debtor was at Anadarko, the county seat, he proceeded to that place, and on the same afternoon took from him a chattel mortgage of the entire stock of merchandise, with authority to dispose of the same at public auction, or private sale, without notice, at the place where the property was found, or at any other place in the county, and providing for the recovery of all costs involved therein, with a 15 per cent. attorney's fee; also a specific waiver of all right and claim for damages by reason of the seizure or sale of the property under the terms of the mortgage, regardless of the price for and the manner in which the same was seized or sold. The mortgage was given to secure a note covering the claim, payable on demand, in the sum of $ 1,048.65. Immediately after securing the chattel mortgage, counsel for defendant, by telephone, arranged for taking immediate possession of the stock of goods by the clerk, whom he had found in charge of the bankrupt's business. Thereafter and on the succeeding day he sent from his office one of his employees to take charge of the goods, with instructions to sell the same as soon as possible, without unnecessary sacrifice. Six days thereafter, and on the 5th day of May, 1904, a sale was made of the stock of goods, counsel for defendant receiving approximately $ 1,375 therefor, out of which he paid the defendant and one other creditor the full amount of their claims, and, aside from the expenses, returned the balance, about $ 100, to the bankrupt. The chattel mortgage under which this was done was not filed until the morning of the day on which the sale was made.
¶4 The stock of merchandise which was taken, and a few worthless accounts, constituted the entire assets of the debtor. It was shown by several witnesses to have been of general knowledge throughout the community that the bankrupt, for some months prior to the transfer of the stock, had been negligent of his business, often leaving his store locked a day at a time, and for the month next preceding the same had not been in his store more than four days out of the week, while he drank and gambled in a dissolute manner. It was not necessary for the recovery of plaintiff in this case that the defendant should have actual knowledge of any or all of these things. It was necessary only that it or its agent had reasonable cause to believe that the bankrupt intended, in making the transfer, to give to it a preference; and the rule in such cases, as stated by the Circuit Court of Appeals of the Eighth Circuit, in the case of Coder v. McPherson, 152 F. 951, 82 C.C.A. 99, is that "notice of facts which...
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