Ross v. H. MICHAELYAN INC.

• Decision Date: 11 April 1932
• Docket Number: No. 311.,311.
• Citation: 57 F.2d 674
• Parties: ROSS v. H. MICHAELYAN, Inc.
• Court: U.S. Court of Appeals — Second Circuit

57 F.2d 674 (1932)

ROSS v. H. MICHAELYAN, Inc.

No. 311.

Circuit Court of Appeals, Second Circuit.

April 11, 1932.

David Haar, of New York City, for appellant.

Percival S. Jones, of New York City (William W. Cantwell, of New York City, of counsel), for appellee.

Before MANTON, L. HAND, and SWAN, Circuit Judges.

MANTON, Circuit Judge.

In this action appellant seeks recovery of two payments of money made by the liquidator of A. T. Keywan, Inc., upon the theory, first, that it was unlawfully paid out of the corporation's funds to satisfy an obligation arising out of a contract of sale made with A. T. Keywan individually; and, second, that if the transaction referred to hereafter was with A. T. Keywan, Inc., it was invalid because preferential under section 15 of the New York Stock Corporation Law.

A. T. Keywan, Inc., was a New York corporation dealing in rugs. Its principal stockholder, A. T. Keywan, died on November 27, 1926, leaving a widow who became administratrix of his estate. The attorney for the administratrix, who was also attorney for the corporation, attempted to liquidate the corporation. Its liabilities exceeded its assets by $14,128.72. There was an insufficient sum realized in such liquidation to pay all the creditors up to the time of filing of a petition in bankruptcy in December, 1929. With creditors unpaid, the liquidator gave two checks out of the corporation's funds to appellee as payment in full for an alleged indebtedness of the corporation. One was made on May 31, 1927, and the other on October 19, 1927, in payment for two rugs, and the latter check was marked: "In full for any and all claims and demands to and including this date against A. T. Keywan, Inc." Demands were made by letters after the death of Mr. Keywan for the return of the rugs in which were stated their respective values and the amounts paid by the liquidator. The correspondence between the appellee and the liquidator has led to a dispute as to whether these rugs were sold or placed on consignment, and whether the transaction was with Mr. Keywan individually or with his corporation, the appellee. The appellee's letters emphasize that the transaction was with Mr. Keywan personally. The liquidator testified that he paid the moneys because he found that the goods had been delivered on memorandum and that the money received from the sale of the rugs had been collected and put into the corporation's assets, and that "the only honorable thing for us to do was to pay the bill." The appellee's testimony supports the claim that credit was given for the rugs to Keywan individually. The court below found that the transaction was a consignment sale and that the liquidator was justified in paying the full amount to the appellee even though other creditors could not be paid in full.

The invoices indicate a consignment of the rugs, and the letters and evidence bear this out. Upon this record it appears that the rugs were on consignment and not on approval. They were shipped out under memoranda and invoices which show that the transaction was to be a consignment and not a sale. The appellee knew that Keywan wanted the rugs for a specific purchaser and not as general stock. The rugs were shipped on October 26, 1926, and November 9, 1926, respectively. As late as May 9, 1927, the appellee in its letter to the liquidator stated that "according to the consignment agreement under which these rugs were sent to the late Mr. A. T. Keywan, these rugs were to be paid for immediately on receipt of the money by the consignee from his customer." In a letter of December 26, 1926, the appellee wrote to Keywan's brother stating that the rugs were given "on approval," and at the trial testified that such was the understanding between Keywan and him. The contract made is to be determined from the intention of the parties. Crescent Cable Co. v. Pratt Chuck Co., 18 F. (2d) 734 (C. C. A. 2); Bernadette, Joseph & Co. v. Van Buren, 212 App. Div. 702, 209 N. Y. S. 559. In Sturm v. Boker, 150 U. S. 312, 14 S. Ct. 99, 104, 37 L. Ed. 1093, the Supreme Court said: "The recognized distinction between bailment, and sale is that when the identical article is to be returned in the same or in some altered form, the contract is one of bailment, and the title to the property is not changed. On the other hand, when there is no obligation to return the specific article, and...