Hunter v. Baker Motor Vehicle Co.

• Decision Date: 25 August 1915
• Citation: 225 F. 1006
• Parties: HUNTER v. BAKER MOTOR VEHICLE CO. et al.
• Court: U.S. District Court — Northern District of New York

225 F. 1006

HUNTER v. BAKER MOTOR VEHICLE CO. et al.

United States District Court, N.D. New York.

August 25, 1915

This action was brought to recover upon a bond given by the defendants to the plaintiff, the amount of recovery to be determined by facts entirely outside anything stated in such bond as to amount, except as certain language of such bond confines the liability to a certain matter. The amount claimed is $8,329.75 and interest from January 4, 1908. It was tried before the court, a jury trial having been duly waived.

Elisha B. Powell, of Oswego, N.Y., for plaintiff.

Willard P. Jessup, of New York City (Warnick Kernan, of Utica, N.Y of counsel), for defendants.

RAY District Judge.

The defendants concede that the plaintiff is entitled to recover the sum of $1,167.31, without interest, less the costs and disbursements of the defendants in this action, which they claim they are entitled to recover, on account of an offer of judgment made and served but rejected. The plaintiff claims that he is entitled to recover the sum of $8,329.75, with interest from January 4, 1908.

The Facts.

The defendant the Baker Motor Vehicle Company at all the times mentioned was, and now is, a corporation organized and existing under the laws of the state of Ohio. The defendant American Bonding Company was and is a corporation of the state of Maryland. The plaintiff was and is a citizen and resident of the state of New York. The C. B. Rice Company was a corporation organized and existing under the laws of the state of New York, and its certificate of incorporation was duly filed January 2, 1907, with the secretary of state and in New York county, N.Y., January 23, 1907. On the 16th day of August, 1907, the Baker Motor Vehicle Company of New York was duly organized and incorporated, and thereafter existed and still exists, under the laws of the state of New York with its offices and principal place of business in the city of New York.

At that time the plaintiff, Louis R. Hunter, had a valid claim against said C. B. Rice Company, amounting to $9,204.85 subsequently, and January 4, 1908, adjudicated in an action in the Supreme Court of the state of New York then pending at $8,329.75, including costs. Just prior to the organization and incorporation of the said the Baker Motor Vehicle Company, of New York, the creditors of said C. B. Rice Company, except this plaintiff, who refused to sign and did not assent thereto, signed the following:

'Whereas, the C. B. Rice Company is insolvent, and it appears to the creditors for their best interest that the business should not be wound up, but should be continued, in order that as large a sum as possible may be received from the assets, and they are willing to grant an extension of time for that purpose; and

'Whereas, it is proposed to organize a new corporation, which will take over all the assets of the C. B. Rice Company, subject to its liabilities, and subject to a further provision that, in the event of liquidation, all debts contracted after August 1, 1907, by the C. B. Rice Company, or the new company to be organized, with creditors assenting to such extension, shall have preference over the debts existing at that time:

'Therefore, in consideration that a new corporation is organized to succeed to the business of the C. B. Rice Company and assume its obligations by a contract providing that, in the event of the liquidation and dissolution of the said new corporation, all debts contracted on or after August 1, 1907, with creditors assenting to such extension, shall have preference over debts existing at that date, the undersigned hereby agree that it will accept in payment of its claim against the C. B. Rice Company the note of the new corporation, payable one year after date, with interest at the rate of 6 per cent. per annum, for the amount of said claim, and in the event that the new corporation is managed without a loss for the said period of one year that it will extend the time of payment of said note for the further period of one year, the said notes to be subject to a provision that in the event of liquidation they will be subsequent in payment to all claims arising against the C. B. Rice Company or the new company after August 1, 1907, in favor of creditors assenting to such extension.'

Thereupon the Baker Motor Vehicle Company of New York was organized and incorporated; its certificate being dated and acknowledged August 9, 1907. The defendant the Baker Motor Vehicle Company, the Ohio corporation, was a creditor of said C. B. Rice Company, and its claim was $58,313.08 out of a total indebtedness of $79,831.98, excluding this plaintiff, or of $89,036.83, including this plaintiff.

The actual assets of the C. B. Rice Company were then valued at $116.657.07, and in point of fact at a fair valuation were worth more than enough to pay all the just debts and obligations of the C. B. Rice Company. The assets of the C. B. Rice Company were actually entered on the minute book of the New York Baker Motor Vehicle Company at the value or worth of $116,657.07, and upon the same book were entered the liabilities as $79,831.98. Thereupon, without the consent of this plaintiff, the C. B. Rice Company, by bill of sale, etc., transferred all of its assets to this new corporation, the Baker Motor Vehicle Company of New York. This transfer was without consideration, other than that the Baker Motor Vehicle Company of New York assumed or agreed to assume and pay all the liabilities of the C. B. rice Company, in the following language, viz.:

'The Baker Motor Vehicle Company of New York shall and by its acceptance hereof does assume and agree to pay off the liabilities of the C. B. Rice Company as the same appear upon the books (error and omissions excepted) on the 31st day of July, 1907.'

'Error and omissions excepted' clearly refer to the words 'as the same appear upon the books. ' This claim of this plaintiff was then being disputed and contested by the C. B. Rice Company.

The evidence establishes that this C. B. Rice Company was in fact organized and controlled by the Baker Motor Vehicle Company of Ohio, this defendant, and used by it as an instrumentality or agency for carrying on its own business under that name and selling its goods in the state of New York. The Rice Company was dominated by this defendant the Baker Motor Vehicle Company of Ohio, and really controlled by it.

The organization and incorporation of this new (or New York) Baker Motor Vehicle Company was brought about and caused intentionally by the Baker Motor Vehicle Company, the Ohio corporation, and those representing and acting for it by general authority, for the express purpose of taking over the assets of the C. B. Rice Company, and well knew what was done. The authorized capital stock of this New York Baker Motor Vehicle Company was $10,000, with only $500 paid in, and with this sum of $500 it commenced business, took over the assets of the C. B. Rice Company, and paid off all the creditors of that company except this plaintiff, and also a few who received money by its notes in the following form, viz.:

'New York, Aug. 16, '07. $ . . .

'Aug. 1, 1908, the Baker Motor Vehicle Company of New York promises to pay . . . dollars with interest at the rate of six per cent. per annum, payable annually, to the order of . . ., who by acceptance hereof agrees that, if the business of the Baker Motor Vehicle Company of New York is conducted without loss until August 1, 1908, the time of payment hereof will be extended to August 1, 1909, and agrees further that the payment will be subsequent and deferred to all claims against either the C. B. Rice Company or the Baker Motor Vehicle Company of New York arising on or after August, 1, 1907.

Baker Motor Vehicle Company of New York, 'By . . . President.'

These notes of the New York Baker Motor Vehicle Company were accepted by such creditors, except plaintiff, and except a few who received cash, in payment of their claims respectively. This transaction left the C. B. Rice Company without any property or assets of any kind or description, and without any business, and also left this plaintiff without any security, or any one to look to for the payment of his claim, except as he could sue, recover judgment, and pursue the assets of the C. B. Rice Company in the hands of this new corporation, the Baker Motor Vehicle Company of New York, or sue that corporation on its assumption of and agreement to assume and pay all the liabilities of the C. B. Rice Company, which he might do if such assumption and agreement included the claim of the plaintiff.

It is not necessary to go through this evidence in detail, it would take too long, but it appears that the Baker Motor Vehicle Company, the Ohio corporation, this defendant, had an agency in New York City for the sale of its products, automobiles and their parts, and having some trouble sent C. B. Rice, who had been in its employ for some time as salesman, to correct matters, which he successfully did. It then continued the business with Rice as manager, but he carried on the business in his own name. It was defendant's business in fact, and Rice had a salary and a percentage of the profits. This was continued up to the fall of 1906, when the New York office or business was found to be indebted to the home office or business in the sum of about $80,000 or $85,000. In December 1906, the Rice Company was incorporated. Defendant company took all the stock issued, $65,000, in payment of the $65,000 due it from the business conducted by Rice, after a credit of $20,000 for goods returned had been given. This new company was organized with its general manager, Mr. White, its treasurer, Mr. Norton, and its secretary, Mr....