Levins v. W. O. Peeples Grocery Co.

• Decision Date: 17 August 1896
• Citation: 38 S.W. 733
• Parties: LEVINS et al. v. W. O. PEEPLES GROCERY CO. et al.
• Court: Tennessee Supreme Court

38 S.W. 733

LEVINS et al. v. W. O. PEEPLES GROCERY CO. et al.

Court of Chancery Appeals of Tennessee.

August 17, 1896.

Appeal from chancery court, Hamilton county; W. S. Bearden, Chancellor.

Consolidated suits by S. H. Levins' Sons and others against the W. O. Peeples Grocery Company and others. From the decree, complainants appeal. Affirmed.

Frank Spurlock, Pritchard, Sizer & Bible, White & Martin, T. C. Latimore, and A. W. Gaines, for appellants. A. B. Woodard, Boyd & Peeples, Eakin & Dickey, Edes & Thomas, Clark & Brown, and Robert P. Woodard, for appellees.

WILSON, J.

These causes were argued with great earnestness and ability by counsel representing the interests involved. In addition, full and exhaustive briefs, covering every question of fact and law raised in the pleadings, evidence, and assignments of errors were filed. We have given this large record a careful examination. We now come to its decision by an application of the law to the facts as we find them. We will not be expected to state in detail the numerous bills, amended and supplemental bills, petitions, answers and demurrers, appearing in the record, and the action of the court below in reference to each. But it is proper to state the pleadings in so far as it may be necessary to present the questions of fact and law raised by the assignments of errors.

The first bill was filed by the Cudahy Packing Company, and 15 other corporations, firms, and merchants, against the W. O. Peeples Grocery Company, a mercantile corporation under the laws of Tennessee, and doing business in Chattanooga, Tenn., and W. O. Peeples, D. M. Peeples, W. J. Poe, J. O. Humphreys, George W. Davenport, J. H. Davenport, and A. J. Flemister, trustee, under a deed of trust made by the W. O. Peeples Grocery Company. This bill was filed July 4, 1894, at 9 a. m., and the complainants sought recoveries for goods sold by them severally within the last few months to the W. O. Peeples Grocery Company, aggregating in value nearly $29,000. It is averred, among other things, that the W. O. Peeples Grocery Company had within the last two or three months bought on credit merchandise to the value of over $100,000; that July 2, 1894, at 3:20 p. m., W. O. Peeples filed in the register's office of Hamilton county, Tenn., 11 deeds of conveyance made by him to the W. O. Peeples Grocery Company for the expressed cash consideration of $52,800, and the assumption of the grocery company of the incumbrances on the real estate conveyed to it; that upon the execution of said deeds to it the grocery company executed a deed of trust upon the property so conveyed to it, and all of its properties, to A. J. Flemister, to secure its creditors, whose debts exceeded $116,000, and that this deed of trust was filed for registration July 2, 1894, at 3:20 p. m. It is further averred that July 2, 1894, the W. O. Peeples Grocery Company pretended to sell all of its stock of goods, worth not less than $70,000, to George W. and J. H. Davenport for $54,000 in cash, and that none of this sum was turned over to the trustee, Flemister; and that, if such sum was paid, it was either withheld by the grocery company, and placed beyond the reach of creditors, or had been fraudulently diverted. It is further charged that the Davenports did not pay in cash $54,000, nor near that sum, and that W. O. Peeples was indebted individually to George Davenport in the sum of $25,000, which was taken in part payment. In short, the general result of the charges is that W. O. Peeples, the president and manager of the W. O. Peeples Grocery Company, and practically the owner and controller of all of its stock, conveyed to his company assets of but little value for the expressed consideration of $52,850, and then had the company to sell its fresh stock of goods to the Davenports for about the same sum, taking in part payment a debt of $25,000 he owed George W. Davenport; and that said Davenport aided in, or was cognizant of, his scheme to defraud the creditors of the grocery company. It is insisted that this payment of the debt of W. O. Peeples to him was no valid payment as to the creditors of the corporation, and that the balance was paid in his notes, which were turned over to W. O. Peeples. This bill prays for an attachment to be issued and levied upon the stock of goods then in the possession of the Davenports; that the Davenports, as individuals and partners, and W. O. Peeples be summoned as garnishees, and required to answer what they or either of them are indebted to the grocery company, or whether they or either of them have any of its assets in their possession or under their control; and that W. O. Peeples be enjoined from selling or disposing of any notes or other assets received by him from the grocery company or from the Davenports, or either of them, for or on account of this stock of goods. It is asked that Flemister be removed as trustee, and a receiver be appointed to wind up the deed of trust, and administer any other property that might come into his hands; that the stock of goods be sold, and their debts be paid therefrom and from the other assets. W. O. Peeples, D. M. Peeples, W. J. and W. M. Poe, and J. O. Humphreys are averred to be stockholders and directors in this W. O. Peeples, Grocery Company; that they sanctioned the pretended and illegal purchase of the incumbered real estate from W. O. Peeples, and conveyed at the sale of the stock of goods to the Davenports; and it is asked that they be held individually liable for the debts of complainants. The chancellor, July 3, 1894, at 8:29 p. m., granted a flat for the attachment and injunction under this bill, and these writs were issued July 4, 1894, and levied at 10:30 a. m.

The next bill was filed July 4, 1894, at 11 o'clock a. m. by S. H. Levins' Sons, Sorver, Damon & Co., and the Armour Packing Company against the W. O. Peeples Grocery Company, A. J. Flemister, assignee of said grocery company, and J. H. and George W. Davenport as partners. This bill is filed as a general creditors' bill, and avers, among other things, similar to the charges in the first bill, that the sale to the Davenports was to defraud creditors, and that the Davenports were in collusion with the managing officers and controllers of the grocery company; that a large debt due one of them was issued in the pretended purchase by them; that Flemister was unfit to act as assignee under the assignment of the grocery company and ought to be removed, and a receiver appointed. An attachment is prayed, and that all the assets be administered for the benefit of creditors; and that the Davenports be required to account for the value of the stock of goods. The complainants in this bill represent or claim debts from the W. O. Peeples Grocery Company aggregating over $5,000. These parties filed an amended bill at 12:30 p. m. on the same day their original bill was filed. They reiterate in substance their original bill, and then charge that W. O. Peeples, just prior to or at the time of the failure of the grocery company, acting for himself as an individual and as president of the grocery company, sold certain real estate owned by him to his company; and that this sale consumed a large part of the cash assets of the company, for which it received in return nothing of value, because of the heavy incumbrances on the real estate equaling or exceeding its market value. That these sales were illegal as to the creditors of the company, and were intended to, and did hinder, delay, and defraud them, and deprive them of the cash assets of the corporation, which were a trust fund for the payment of its debts. It is charged that the grocery company was burned out in January, 1894, and collected a large amount of insurance money; that soon thereafter it resumed business, and bought and sold goods recklessly, with the intent to realize large sums in cash, and to defraud creditors for the benefit of W. O. Peeples and certain of his creditors whose debts had been paid. It is further charged that, while there were other small stockholders of the grocery company, W. O. Peeples and D. M. Peeples owned nearly all of its stock, and had absolute control of its affairs, and did control it as a close corporation, and they are called upon to answer seven specific interrogatories, and attachment and receiver are asked for, and that their bill be treated as a general creditors' bill. The chancellor granted the attachment prayed for, and set Friday, July 6, 1894, at the master's office, for acting on the application to declare the bill a general creditors' bill, and for the appointment of a receiver.

The next bill was filed July 5, 1894, at 8:35 a. m., by the American Manufacturing Company and several other corporations and firms against the W. O. Peeples Grocery Company, W. O. Peeples, D. M. Peeples, W. J. and W. M. Poe, J. O. Humphreys, George W. and J. H. Davenport, A. J. Flemister, and the complainants in the other bills. This bill, after setting out the debts due the complainants, avers that the W. O. Peeples Grocery Company, July 2, 1894, executed a deed of trust or assignment to A. J. Flemister, covering various tracts or parcels of real estate, bills and accounts receivable, aggregating some $60,000 in nominal value, and a quantity of almost worthless stocks and bonds; that this conveyance embraced practically all the property of the grocery company, except as stated; that the list of debts secured aggregated $36,000, and the property conveyed would not realize more than $30,000 or $40,000; that the trustee is put under bond for only $10,000, and is given 12 months to wind up the trust. The bill then avers the sale by the grocery company, by and through its president and controlling spirit, W. O. Peeples, to George W. and J. H. Davenport, of its stock of goods, on the same day it executed its deed of trust to Flemister, for the consideration, as claimed by the parties, of $56,000; that the purchasers claimed...