Johnson v. Rothschilds

• Decision Date: 06 February 1897
• Citation: 41 S.W. 996
• Parties: JOHNSON v. ROTHSCHILDS.
• Court: Arkansas Supreme Court

41 S.W. 996

JOHNSON v. ROTHSCHILDS.

Supreme Court of Arkansas.

February 6, 1897.

Appeal from chancery court, Hot Springs county; Charles P. Roberts, Special Chancellor.

The firm of B. & H. Berger having assigned for benefit of creditors, and T. T. Johnson having been appointed receiver, Rothschilds and others attached the property and intervened in the proceedings. From a judgment declaring the assignment fraudulent, the receiver appeals. Affirmed.

On the 2d day of January, 1893, the firm of B. & H. Berger, merchants at Malvern, Ark., made an assignment for the benefit of their creditors; preferring in said assignment, among others, several of their relatives, to the amount of $27,115. Among the claims preferred was one in favor of their father, Leopold Berger, for $12,781.31. This amount consisted of $7.600, which Leopold Berger loaned to Ben Berger, which the firm is said to have assumed, and the sum of $5,181.31, being the amount said to be due from B. & H. Berger to Leopold Berger, as shown on the books of the firm, which originally was $4,000, said to have been loaned by Leopold Berger to B. & H. Berger at the time he claims to have retired from the firm in 1879. The business in which they were engaged was begun by Leopold Berger in 1876 or 1877 on a capital of $4,000, which continued in his name until Henry Berger became of age, in 1879, when the name of the firm was changed to that of B. & H. Berger. At this time, it appears, Leopold Berger gave his sons, Ben and Henry Berger, the accumulated profits of the business, and left in it his original capital of $4,000, and continued to buy goods for the firm, with apparently unlimited authority to do so, with the understanding and agreement that he was to receive a per cent. of the profits of the business. It appears that, less credits for amounts drawn out by Leopold Berger previously, his interest, with profits added, amounted on September 30, 1888, to $8,141, which, reduced by the credits, left the said sum of $5,181.31 due on the 20th of September, 1892. It appears that in 1888 Leopold Berger became an invalid, and unable to participate actively in buying for the firm. For the sum of $5,181.31 the firm of B. & H. Berger on the 20th of September, 1892, gave to Leopold Berger a note. This was three months and about a third before their assignment, on the 2d of January, 1893. It does not appear that when Leopold Berger is said to have withdrawn from the firm, in 1879, and left his capital stock in the business, except the amount he gave to his sons, there was any promise, agreement, or understanding exacted or had between B. & H. Berger and Leopold Berger that the sum left was to be repaid at all events or at any time; but it appears that it was left on the security of the business, and not on the personal responsibility of B. & H. Berger. On the 21st of February, 1892, the main store house and stock of goods of the firm was consumed by fire, and the firm lost heavily, though it received $32,000 in policies of insurance, and shortly before this note was given to Leopold Berger, as above stated, — in August or September, 1892, — they had bought a large stock of goods of Ben Berger, upon which they sustained loss, and had assumed some $17,000 of Ben Berger's indebtedness, including a note to Leopold Berger, other than the note above mentioned, for $7,600. After the fire they had erected a store house at a cost of $12,000, thus diminishing their available assets, and kept their employés at a cost of $3,000 till their house was completed, and in the meantime their business was not paying expenses. They estimate their indebtedness at the time of the fire at $41,000, and their assets at $69,226. They commenced buying goods immediately after the fire, and, while they owed at that time about 90 different firms, at the time of the assignment they owed 140 different firms, and had increased their indebtedness $69,692, — in the aggregate, to the sum of $110,692. On the 18th of August, 1879, Leopold Berger published in a paper at Malvern, Ark., the following notice, to wit: "Firm Changed. I have this day sold out the Red Store, in Malvern, Arkansas, to my sons, Ben and Henry Berger. Thanking the people for past favors, I hope the same patronage may be bestowed on my successors. I will continue to buy for B. & H. Berger, and keep them supplied with the best and cheapest goods produced in this country. St. Louis, August 18, 1879. L. Berger." It appears that nothing was paid to B. & H. Berger, but that L. Berger gave them his accumulated profits of the business, leaving in it, to be used as a part of the capital of the firm, his original capital of $4,000, and that he was to receive a per cent. of the profits of the business, and was to do the buying for the firm. After 1888 there does not seem to have been any material change in the business, except that, his health having failed, L. Berger ceased to be active in the business. As before, he seems to have left it to his sons to give him what the business would justify, as his share of the profits. In reference to selling out the business to his sons, L. Berger, when asked on cross-examination, "What was the price agreed upon for said business so sold by you to them?" answered, "There was no price agreed on at all, as I did not sell the business to them, as I have just stated." Henry Berger admitted that he had testified in the federal court that L. Berger was a silent partner of B. & H. Berger; that he did not know how he would be considered; that up to 1887 part of the profits were allowed him; that after 1887 or 1888 he could not participate any further in the buying, and took no active part in it, and that he withdrew and left his money for the interest; that "he withdrew from the business actively." After the assignment was made, and T. T. Johnson was appointed receiver, the appellees attached the property of the firm, and, the goods, etc., having been sold by order of the court, intervened and attacked the assignment for fraud, and now insist, among other grounds, that L. Berger was a partner of B. & H. Berger at the time of the assignment, and that...