Lewis v. Council

• Decision Date: 06 July 1923
• Docket Number: 86.
• Citation: 291 F. 148
• Parties: LEWIS v. COUNCIL.
• Court: U.S. Court of Appeals — Fourth Circuit

291 F. 148

LEWIS v. COUNCIL.

No. 86.

United States District Court, E.D. North Carolina.

July 6, 1923

Rountree & Carr, of Wilmington, N.C., McIntosh & Thrift, of Baltimore Md., and Mann & Tyler, of Norfolk, Va., for plaintiff.

Harry K. Wolcott, of Norfolk, Va., and E. K. Bryan, of Wilmington N.C., for defendant.

CONNOR District Judge.

The pleadings, exhibits, and evidence disclose the following facts:

Plaintiff for several years prior to 1913, was engaged in business at Walnut Point, Northumberland county, Va., selling, through consignment contracts, and otherwise, products of land and sea.

He had prior to said date, been shipping a large part of his output to the Holland-Council Company of Norfolk, Va., to be sold by said company, as his agent, on commission. By the terms of the consignment contract, the goods shipped by plaintiff were to be kept separate from other goods and merchandize held or owned by said company.

The Holland-Council Company was a corporation of which defendant, J. P. Council, was president, and his son, J. R. Council, was secretary and treasurer. During the year 1913, the company became financially involved and was adjudged bankrupt. Plaintiff ascertained that his goods and the proceeds of such of them as had been sold, in violation of the consignment contract, had been commingled with other goods of said company and the proceeds of such as had been sold, resulting in a heavy loss to him. Defendant, J. P. Council, made an arrangement with the creditors of the company and the officers of the bankruptcy court, whereby he took over the remaining assets of said company and caused them to be transferred to a corporation, which he caused to be chartered and organized under the laws of Virginia, called J. R. Council & Co., Incorporated. Defendant entered into an agreement with plaintiff and other creditors of said company, whereby he agreed to pay the amount due them by said bankrupt company, in cash, and annual installments.

The terms and provisions of said agreement so far as they are relevant to the decision of this cause, are set forth in Exhibit A attached to plaintiff's bill. The contract recites the organization of J. R. Council & Co., Incorporated, 'for the purpose of conducting a brokerage and distribution business, dealing principally in groceries,' with a maximum capital of $50,000 preferred and the same amount of common stock, and reciting:

'That the said Andrew J. Lewis desires to sell to J. P. Council, his claim against the said bankrupt estate of Holland-Council Co., Incorporated, and desires to have the said J. R. Council & Company, Incorporated, market his merchandize products in the district formerly covered by said Holland-Council Company, Incorporated.'

'That the said Andrew J. Lewis agrees to market his merchandize products throughout the territory named, exclusively, so long as the said J. R. Council & Company, Incorporated, shall market said products with reasonable business success and account therefor accurately and promptly, in accordance with the agreement of even date with said contract, between J. R. Council & Company, Incorporated, and Andrew J. Lewis. The faithful performance of said agreement and the prompt accounting and payment to the said Andrew J. Lewis for all goods shipped pursuant thereto, is to be secured by the execution and delivery of a good and sufficient bond by the said J. R. Council & Company, Incorporated, as principal and the said J.

P. Council, as surety, in the penalty of at least double the value of all goods shipped on the order of said J. R. Council & Company, Incorporated, at any one time, which bond the said J. P. Council agrees to cause the said J. R. Council & Company, Incorporated, to execute as principal, and to execute himself as surety, and to immediately deliver the said bond to the said Andrew J. Lewis; provided, however, that the said J. P. Council shall not, under the terms of the said contract, or of the said bond, be in any way rendered, or held liable for the proceeds of any goods sold by the said J. R. Council & Company, Incorporated, which shall not have been collected by the said J. R. Council & Company, Incorporated.'

This agreement (Exhibit A) was executed by J. P. Council and Andrew J. Lewis, June 27, 1913.

On the same day, Andrew J. Lewis and J. R. Council & Co., Incorporated, executed an agreement reciting that--

'Whereas the said Lewis, principal, was about to turn over to said J. R. Council & Co., Incorporated, agent, certain goods, wares and merchandize this day acquired by him from the receiver, of the said Holland-Council Company, Incorporated, bankrupt, a list of which is hereto attached, and has intrusted the same to the care of the said agent, and will from time to time hereafter in the manner herein provided, intrust to the said agent to sell and dispose of certain other goods, wares and merchandize.'

J. R. Council & Co., Incorporated, thereupon agreed with Lewis, principal, to sell and dispose of all such merchandise as the said Lewis shall consign to it, to the best advantage and for the most money it can obtain therefor, at not less than the prices fixed for the same by Lewis, and that it will forthwith, and within 10 days from any such sale, remit the proceeds of such sale to the said Lewis, or such person as he may direct, together with the proper account of sales therefor, subject to the deductions named.

J. R. Council & Co., Incorporated, agrees that it will render to Lewis, principal, just and proper accounts of all goods which may have been consigned to it by said Lewis and which remain unsold on the last day of any month, and that it will keep true and proper accounts in proper books which shall be accessible to said Lewis and open to his inspection or of his duly authorized agents, and to remit to said Lewis, within the time specified, for all goods, etc., so consigned, regardless of whether said agent shall collect or be able to collect therefor from the persons to whom it has sold such goods, etc., 'it being the intention of this clause of the agreement to make said agent responsible to the principal for the payment of said goods,' and further agrees that it will keep all goods consigned by Lewis separate and apart from other goods handled by it, and 'that it will give to the said principal a bond in the penalty of at least double the value of all goods so consigned to it by said principal which may be in its possession at one time for which the proceeds have not been properly remitted to the principal in the manner above provided, with J. P. Council as surety, conditioned for the faithful performance of this agreement and the prompt accounting for and payment to the said principal, for all such goods and the proceeds thereof, as may be consigned to the said agent by the said principal, provided, however, the said surety shall not be held liable hereunder or under said bond for the proceeds of any goods sold by said agent which shall not have been collected by the said agent. ' Exhibit A.

Pursuant to the provisions of the two agreements (Exhibits A and B), J. R. council & Co., Incorporated, on June 27, 1913, executed, with defendant J. P. council as surety, a bond payable to plaintiff in the sum of $30,000. The condition of said bond is such that--

'Whereas the said J. R. Council & Co., Incorporated, has, by an agreement of even date herewith, entered into a certain contract with the said Andrew J. Lewis, for the sale, on consignment, of certain goods, wares and merchandize, in said contract set forth, which said contract is hereto attached as a part of this bond, as fully as if the same were herein set forth at length.

'Now, therefore, if the said J. R. Council & Co., Incorporated, shall well and truly, perform all of its agreements in the said contract set forth and contained, this obligation shall be null and void, otherwise to remain in full force and virtue; it being understood and agreed however that the said J. P. Council, as surety, shall not be held liable under said contract, or to any other person, for the proceeds of any goods sold by the said J. R. Council & Co., Incorporated, which have not been collected by the said J. R. Council & Co., Incorporated.'

Plaintiff alleges that--

'Your orator at that time having turned over to the said J. R Council & Co., Incorporated, goods of the value of $15,000, a bond in the penalty of $30,000 with the said John P. Council, as surety, was then given to your orator as a further assurance that said contract would be faithfully complied with. That he has continuously since that time shipped to the said J. R. Council & Co., Incorporated, goods, etc., upon consignment in accordance with the terms and provisions of said contracts. That prior to March, 1920, he continued to ship goods to J. R. Council & Co., Incorporated. That not having received any account of sales or remittances for such goods, such as were received being in the form of trade acceptances, payment of which were refused at maturity, he, with his attorney, went to Norfolk in October, 1920, to make an examination of his account. He found that the contract with said J. R. Council & Co., Incorporated, had been violated in every particular; that his goods had been intermingled with other goods and accounts of said company, so that complete identification thereof was impossible; that the proceeds of his goods had been misappropriated and converted to the use of the said company, its officers and shareholders; that the books and accounts had been so kept as not to reflect the true condition of the affairs of the said company and in no degree to show the true condition of plaintiff's accounts. Plaintiff was informed by J. R. Council & Co., and from such records as the...