Liebowitz v. Voiello

• Decision Date: 13 November 1939
• Docket Number: No. 44.,44.
• Citation: 107 F.2d 914
• Parties: LIEBOWITZ v. VOIELLO.
• Court: U.S. Court of Appeals — Second Circuit

107 F.2d 914 (1939)

LIEBOWITZ v. VOIELLO.

No. 44.

Circuit Court of Appeals, Second Circuit.

November 13, 1939.

Samuel B. Ohlbaum, of New York City, for plaintiff-appellant.

Avel B. Silverman, of New York City, for defendant-respondent.

Before L. HAND, CLARK, and PATTERSON, Circuit Judges.

CLARK, Circuit Judge.

The present case presents another variation of the repeated attempts of creditors to secure insulation from financial loss in continuing business dealings with a failing concern. The defendant wanted to deliver flour to the bankrupt concern (or those identified with it) for manufacture into macaroni, distribution, and sale; the legal device resorted to was a consignment contract supposed to create only an agency for the processing of the flour and the sale of the completed product. The device was adjudged successful by the District Court, which directed a defendant's verdict when the bankruptcy trustee brought this action for conversion of the bankrupt's assets. We do not believe, however, that under the circumstances the device was sufficiently ingenious to deserve the award of a judicial imprimatur.

The facts as presented to the jury disclose that the defendant, eastern agent of flour companies, had for some years sold flour¹ to the bankrupt corporation. The corporation manufactured the flour into macaroni in its New Jersey factory and then sold it throughout the New York metropolitan area. The officers of the corporation were Peter Cassinelli and Emilio Zuccarini, who, together with their wives, owned all of its capital stock. The bankrupt's finances were never quite healthy, as the defendant well knew. On occasion he had exchanged his own check for that of the corporation, and permitted his own check to be sent to the flour companies in payment for the flour. As the condition of the bankrupt became even more questionable, a plan was worked out and a written agreement prepared with the competent assistance of defendant's lawyer. Under this agreement, defendant was, for his own account, to purchase flour from the companies for which he was agent, and deliver the flour to the individuals Cassinelli and Zuccarini on consignment. They were to convert the raw materials into macaroni and to sell the finished products for the defendant's account. Upon delivery of the flour the individuals were to pay defendant 50 per cent of its value; they were to pay the remainder after the flour was sold, any surplus which they obtained on sale to be their compensation for the processing. By the terms of the contract, the flour and its products were to remain defendant's property; they were to be segregated from other articles on the premises; Cassinelli and Zuccarini were to keep separate inventories ready for defendant's examination; sales accounts were to be kept in separate books; and so on. This agreement was duly signed, with the corporation playing no part therein other than the substantial one of signing (through its president, Cassinelli) an attached guaranty that the individuals would fulfill their obligations under the contract.

In spite of its carefully drawn limitations and restrictions aimed to show a retention of title by the defendant, the validity of this contract, with the corporate guaranty of the individual action, and under all the circumstances, might itself present a problem. But we are not limited to interpretation of an elaborate document, for during the period from the signing of the contract May 15, 1936, until the situation became hopeless in February, 1937, the parties followed a course of conduct more instructive as to their real intent than any written word could possibly be. True, though Voiello continued to deliver flour to the corporation's factory, he carefully addressed his invoices to Cassinelli and Zuccarini "personally" and marked each invoice with the notation, "Contract of May 15." But actually things progressed much as before: the flour was manufactured into macaroni on the corporation's premises; when sales were completed, the corporation made entries on its own books; and the proceeds when collected were invariably commingled with other deposits in the corporation's bank account.

As it sank deeper into debt the company received all of its flour from Voiello, whereas previously it had obtained raw materials from many sources. Cassinelli and Zuccarini found themselves unable to make the required 50 per cent cash payment upon delivery of the flour. Accordingly a supplemental agreement was drafted, in the form of a letter, stating that the two individuals would give their personal notes to Voiello as flour was delivered. These notes were to be for the entire purchase price, but the individuals were to be relieved from their obligations thereunder upon sale of the macaroni and remission of the proceeds to Voiello. In practice when collections were made, the corporation wrote its check to the individuals and they in turn endorsed the checks to the defendant to take up their personal notes. On certain occasions, the defendant, in order to avoid dishonor of the notes by the banks to whom he had transferred them, gave his own check to the corporation to take up these notes.

By February 11, 1937, when he realized that the situation was beyond repair, defendant removed from the premises some $1,200 worth of flour and $6,000 worth of finished macaroni. He also secured an assignment of the accounts receivable, executed by the bankrupt corporation. He claims that the merchandise and accounts transferred represented flour delivered by him to the individuals Cassinelli and Zuccarini under the written agreement of May 15, 1936. On February 18, 1937, a week after the transfer, the company filed its voluntary petition in bankruptcy in the District Court for the District of New Jersey.

The bulk of the record consists of the testimony of Cassinelli and the defendant, Voiello. Both these witnesses contradicted themselves and each other repeatedly, and it took the combined efforts of opposing counsel and the trial judge to elicit from them even the semblance of an orderly story. At the close of the case, both sides moved for a directed verdict, and the plaintiff also moved that the case be sent to the jury if plaintiff's motion for a directed verdict was denied. The trial court denied plaintiff's motions and granted that of defendant.

We think that under the testimony presented, the plaintiff had proven a case strongly indicating that the defendant had conveyed his merchandise to the bankrupt, and that his attempt to reserve an interest therein...