M.V. Moore & Co. v. Gilmore

• Decision Date: 05 May 1914
• Docket Number: 1224.
• Citation: 216 F. 99
• Parties: M. V. MOORE & CO. v. GILMORE.
• Court: U.S. Court of Appeals — Fourth Circuit

216 F. 99

M. V. MOORE & CO. v. GILMORE.

No. 1224.

United States Court of Appeals, Fourth Circuit.

May 5, 1914

Louis M. Bourne, of Asheville, N.C. (Bourne, Parker & Morrison, and Theodore F. Davidson, all of Asheville, N.C., on the brief) for appellant.

Junius G. Adams, of Asheville, N.C. (Merrimon, Adams & Adams, of Asheville, N.C., on the brief), for appellee.

Before PRITCHARD, KNAPP, and WOODS, Circuit Judges.

KNAPP Circuit Judge.

This is an appeal from a decree of the above District Court confirming the findings and order of the referee in bankruptcy, which disallowed the claim of appellant.

It appears that the Canton Co-operative Company was a North Carolina corporation, organized April 21, 1910, with an authorized capital of $25,000, but which began business about that time, as its charter permitted, with only $10,000 of its stock, consisting of 1,000 shares, subscribed for and issued. The incorporators were M. V. Moore, W. M. Smathers, and Geo J. Williamson, who are the members of the firm of M. V. Moore & Co., the appellant. Moore and Smathers were directors of the corporation, the former being also its treasurer and the latter its general manager, and they continued to occupy those positions until the transaction occurred which gave rise to this litigation. During this period the firm of M. V Moore & Co. held shares to the amount of $5,100, which was a majority of the outstanding stock. M. V. Moore & Co. were located at Asheville, N.C and the corporation carried on its mercantile business at Canton, in that state.

For some reason the enterprise was not successful. That this became apparent before the close of the year is evidenced by the fact that in January, 1911, it was proposed by appellant to sell out the stock of goods in bulk and wind up the concern. The other parties in interest were unwilling to take this course, and the business went on, apparently going from bad to worse during the succeeding six months. In the latter part of August matters came to something like a crisis, and various negotiations followed between the majority and minority stockholders. Without reciting the details, it is sufficient to state here that on or about the 5th of September an arrangement was made by which the corporation itself purchased all the shares of stock held by appellant for $2,000. Of this sum $500 was paid at the time, with money borrowed for that purpose, and the balance by three notes of $500 each, payable in 6, 12, and 18 months, with interest, the notes being secured by a deed of trust covering all the property and assets of the corporation. More & Co. thereupon retired, and a new management took charge. No improvement resulted from this change, the business further declined, and failure occurred not long afterwards. On the 15th of November the corporation made a general assignment for the benefit of its creditors, and on the 5th of December was adjudged an involuntary bankrupt. In due course of administration the appellant filed proof of debt for the three notes mentioned, and claimed a preference for their full amount under the deed of trust given to secure their payment. The entire claim was disallowed by the referee, as above stated.

It is unnecessary to hold that the members of appellant's firm acted in bad faith, or with any fraudulent design in selling their stock. Nor is it shown that they used any improper persuasion to that end. So far as appears they were no more willing to sell than the other parties were to buy, and the latter very likely thought they were making a good bargain. No inventory was taken, and no reliable measures adopted for getting at the true value of the merchandise then on hand whether for continuing or closing out the business, or the amount that could be collected from the unpaid book accounts. The only reasonable...