McGann v. Capital Sav. Bank & Trust Co., 1799

• Decision Date: 06 May 1952
• Docket Number: No. 1799,1799
• Citation: 89 A.2d 123,117 Vt. 179
• Court: Vermont Supreme Court
• Parties: McGANN v. CAPITAL SAV. BANK & TRUST CO.

Page 123

89 A.2d 123

117 Vt. 179

McGANN v. CAPITAL SAV. BANK & TRUST CO.

No. 1799.

Supreme Court of Vermont.

May 6, 1952.

Daniels & Reed, Montpelier, Donald M. Newman, New York City, for plaintiff.

Robert H. Ryan, Montpelier, for defendant.

Before SHERBURNE, C. J., and JEFFORDS, CLEARY, ADAMS and CUSHING, JJ.

SHERBURNE, Chief Justice.

This is a proceeding in equity to have the defendant adjudged a trustee of the proceeds of fire insurance received upon certain chairs alleged to have been owned by the plaintiff, and for an accounting therefor. After making findings of fact the chancellor dismissed the bill of complaint, and the plaintiff excepted. The sole question presented is whether the decree is supported by the findings of fact.

So far as here material the findings show the following facts: The Tropical Chair Company, Inc. in 1946 was the owner of patent rights in a type of beach chair. In September of that year it entered into a contract with Vermont Woodcrafters, Inc. of Montpelier, for the manufacture of such chairs, under an arrangement whereby as the Tropical Company received orders for sale of chairs, copies of the orders were to be transmitted to the Vermont Woodcrafters, together with shipping instructions, and payment for the chairs was to be made upon shipment. As the chairs were completed they were wrapped for shipment and placed in the storage facilities of the Vermont Woodcrafters to await shipping instructions. Perry H. Merrill was the president and a director of Vermont Woodcrafters. Harold P. Parker was a director thereof, and was also president, treasurer and principal executive officer of the defendant Bank. The plaintiff McGann was president of the Tropical Company. In February 1947, Merrill made it known to McGann that he was in need of financial assistance, and McGann remined Merrill that the Tropical Company was without funds, and that in the event he should advance money for the manufacture, Vermont Woodcrafters would be regarded as manufacturing chairs for him individually, and Merrill agreed, in behalf of Vermont Woodcrafters, that in the event personal advances were received from McGann, Merrill would provide insurance coverage on the manufactured goods for McGann's protection. By June 2, 1947, the plaintiff had made advances of money and materials in the total amount of $7,827.25. By that date Vermont Woodcrafters had completed the manufacture of 2500 chairs under the Tropical patent. The chancellor expressly finds that the chairs so manufactured were on or before June 2, 1937, appropriated to the contract, that the plaintiff had received and accepted credit for the payment of 2500 chairs, and that the property in the chairs was transferred to the plaintiff on or before that date. According to finding 12, 'Harold P. Parker, as executive officer of the defendant Bank, frequently visited the manufacturing and warehouse properties of the Vermont Woodcrafters, Inc. In connection with his duties as officer of the Bank, Parker examined the stock and inventories. Prior to June 24, 1947, Parker made such a visit and looked over the inventory of the manufactured stock in storage. He learned that the Vermont Woodcrafters had manufactured the beach chairs thus stored for the plaintiff or the Tropical Chair Company. As an officer of the Bank it came to Parker's knowledge that the plaintiff had made substantial advances to the Vermont Woodcrafters by way of cash and materials.' On June 24, 1947, Vermont Woodcrafters executed a chattel mortgage to the defendant upon '2500 lawn or beach chairs in package ready for shipment', and other property, including chairs in various stages of manufacture, to secure a note for $15,000 covering prior indebtedness to the defendant. The mortgage provided that the mortgagor should keep the property fully insured against loss by fire for the benefit of the mortgagee. At the time of its execution the 2500 Tropical beach chairs manufactured at the instance of the plaintiff were in storage facilities of the Vermont Woodcrafters' plant in Montpelier. They were never moved therefrom. On December 22, 1947, the Vermont Woodcrafters' plant burned. The property, real and personal, was covered by policies of insurance to which had been attached riders making the loss payable to the defendant 'as its interest may appear'. Also attached to the policies were standard manufacturers' riders, providing:

'The policy covers property described belonging to Insured or sold but not removed; also on the Insured's interest in and/or legal liability for similar property held by the Insured as follows, viz: In trust or on commission, or on joint account with others, or in storage or for repairs.'

Following the fire there was paid to the defendant in settlement of the insurance loss the sum of $24,526.05. 'Of this sum $4,079.54 was paid for fire damage to the real estate and $20,446.51 for damage to the personal property. All of the money received by the defendant Bank was applied on direct or indirect indebtedness of Vermont Woodcrafters Corporation, except the sum of $6,779.54, which was paid over by the defendant Bank to Vermont Woodcrafters, Inc. In the payment of $20,446.51 for damage to personal property $8,938.80 was paid by the Insurers for damage to 2483 finished chairs. 2383 of such chairs were chairs manufactured under the Tropical patent.' The plaintiff has received none of the proceeds of such insurance.

There is no express finding that the defendant Bank had notice of the plaintiff's title to the 2500 Tropical beach chairs. We do not for the purpose of reversing a judgment read into the findings of fact something which is not there, and which is not a necessary inference from the facts found. Hinsman v. Marble Savings Bank, 102 Vt. 217, 223, 147 A. 270; Watkins' Estate v. Howard National Bank, 113 Vt. 126, 137, 30 A.2d 305. But we are bound to construe a record reasonably, and this requirement applies to every part of the record, including the findings of fact. St. Albans Hospital v. City of St. Albans, 107 Vt. 59, 62, 176 A. 302. Corporations can do business only through officers or agents, and any notice or knowledge imparted to an officer or agent authorized to receive the same is actually imparted to the corporation. Pellon v. Connecticut General Life Ins. Co., 105 Vt. 508, 520, 168 A. 701. There can be no question about Parker's being such an officer. Although a director of Vermont Woodcrafters, the findings show that Parker was acting for the defendant Bank in taking the chattel mortgage, hence any knowledge received by him while so acting became, by imputation, known to the defendant Bank. Rawleigh Co. v. Pierce, 92 Vt. 44, 47, 102 A. 96.

It is a rule of general application that one who has knowledge of facts sufficient to induce a prudent man to inquire in respect to other facts germane to the matter in hand, will be charged with knowledge of such other and further facts as he might have learned by reasonable diligence in prosecuting his inquiry in the right direction. Gifford v. Rutland Savings Bank, 63 Vt. 108, 114, 21 A. 340, 11 L.R.A. 794; Farmers Exchange v. Walter M. Lowney Co., 95 Vt. 445, 450, 115 A. 507. Taking it by its 'four corners', finding 12, if it does not show actual notice to the defendant Bank of plaintiff's title to the 2500 chairs, it at least shows knowledge of facts sufficient to compel the inference that the defendant Bank could have learned by diligent inquiry that the plaintiff owned the chairs. Under the circumstances the defendant Bank must be charged with knowledge of the plaintiff's title.

Under our decisions the continuance of the vendor in possession of chattels after a sale renders the sale fraudulent per se and void as against his creditors and as to bona fide purchasers without notice. A few of our cases so holding are Hart v. Farmers' & Mechanics' Bank, 33 Vt. 252, 263; Daniels v. Nelson, 41 Vt. 161, 164; Foss v. Towne, 98 Vt. 321, 127 A. 294; Hyatt v. Wiley, 107 Vt. 120, 176 A. 119; Newton v. Thomas, 111 Vt. 259, 264, 15 A.2d 589; Coburn v. Drown, 114 Vt. 158, 159, 40 A.2d 528. In such case a creditor with full knowledge of the sale may attach the chattels sold. Hutchins v. Gilchrist, 23 Vt. 82, 89; Rice v. Courtis, 32 Vt. 460, 469; Hart v. Farmers' & Mechanics' Bank, supra; Perrin v. Reed, 35 Vt. 2, 8, 9. The placing of the chairs wrapped for shipment in storage on the Vermont Woodcrafters' premises was not a change of possession so open, visible, unequivocal, exclusive and continuous as to apprise the community, or those accustomed to deal with the vendor, that it had ceased to be the owner of the chairs, according to the test stated in Foss v. Towne, supra. Nor were the chairs shown to be ponderous objects, incapable of personal possession and difficult of removal, as in the cases reviewed in Hyatt v. Wiley, supra. The retention of the chairs made the sale to the plaintiff fraudulent per se and void as to creditors, and the chairs remained liable to attachment by the creditors of Vermont Woodcrafters.

In so far as it has been called to our attention, all of our cases, except Coburn v. Drown, supra, in holding such sales fraudulent and void as to creditors, had to do with the validity of attachments by creditors. The defendant calls our attention to § 26 of the Uniform Sales Act, V.S.1947, § 7879, which reads:

'Where a person having sold goods continues in possession of the goods, or of negotiable documents of title to the goods and such retention of possession is fraudulent in fact or is deemed fraudulent under any rule of law, a creditor of the seller may treat the sale as void.'

It argues that in treating the sale as void the defendant was not limited to its remedy by legal process, but because it was a creditor it could, with notice of the prior sale of the chairs, take a valid mortgage thereon, or, in other words, as a creditor with notice it can get as good a mortgage as a bona fide mortgagee...