Sigmon Furniture Mfg. Co. v. Massey

• Decision Date: 11 May 1943
• Docket Number: 30656.
• Parties: SIGMON FURNITURE MFG. CO. v. MASSEY.
• Court: Oklahoma Supreme Court

137 P.2d 793

192 Okla. 436, 1943 OK 181

SIGMON FURNITURE MFG. CO. v. MASSEY.

No. 30656.

Supreme Court of Oklahoma

May 11, 1943

Syllabus by the Court.

11 U.S.C.A. § 52, subsection b, makes it a penal offense punishable by fine or imprisonment for a person knowingly and fraudulently to receive or attempt to obtain any money or property, remuneration, compensation, reward, advantage, or promise thereof, from any person, for acting or forbearing to act in a bankruptcy proceeding; therefore, where an oral contract was entered into on behalf of a bankrupt corporation to guarantee payment of an amount claimed by a creditor to be due him from said bankrupt, where a distribution order provided for payment of a lesser amount to said creditor, and where said guaranty was made pursuant to an agreement by said creditor that he would forego his right to appeal from the distribution order and that he would do nothing to hinder or delay adjudication of the case and reorganization of the bankrupt corporation, it is held that said oral guaranty contract is unlawful and unenforceable.

Appeal from District Court, Oklahoma County; Frank P. Douglass Judge.

Action by G. E. Massey against the Sigmon Furniture Manufacturing Company to recover on an oral contract of settlement of a claim. Judgment for plaintiff, and defendant appeals.

Reversed and remanded with directions.

Roger L. Stephens and Ted Foster, of Oklahoma City, for plaintiff in error.

J. D Lydick, of Oklahoma City, for defendant in error.

OSBORN Justice.

This action was instituted in the district court of Oklahoma County by G. E. Massey, hereinafter referred to as plaintiff against the Sigmon Furniture Manufacturing Company hereinafter referred to as defendant, wherein plaintiff sought recovery upon an oral contract of settlement of a claim whereby he was guaranteed payment of the sum of $297. It was alleged that the contract was made in behalf of defendant corporation by C. T. Sigmon, the president and managing officer of the corporation, at a time when the corporation was in bankruptcy. Issues were joined, the cause was tried to a jury, and a verdict was entered in favor of plaintiff. From a judgment on the verdict, defendant has appealed.

Defendant is a corporation engaged in the wholesale furniture business. On December 27, 1927, the corporation floated a bond issue of $175,000, which bonds were secured by a deed of trust mortgage wherein the Mississippi Valley Trust Company of St. Louis, Missouri, was trustee. Plaintiff was the owner and holder of bonds of this issue of the face value of $13,500. In May, 1931, in an action pending in the Federal district court, one B. C. Housel was appointed receiver for defendant corporation. The receivership continued until the fall of 1937 when a proceeding was commenced under the Bankruptcy Acts for effecting a plan of reorganization and Housel was appointed trustee in the bankruptcy reorganization proceeding.

Prior to July 30, 1938, defendant filed in the bankruptcy case a plan for reorganization and composition with its creditors, wherein it was provided that there was "to be paid to the holders of the first mortgage bonds the sum of sixty-one cents on the dollar." It was proposed, in said plan for composition, that an organization known as the "Bondholders Committee" should be paid, as fees and expenses for representing the bondholders in the bankruptcy proceeding, a sum equal to $22 for each thousand dollars of the outstanding bonds. The plaintiff Massey contended that said committee had not represented him and therefore no portion of said fees and expenses should be charged against the amount payable to him. The theory upon which plaintiff relies for recovery is stated in his petition as follows: "*** during the later part of December, 1938, or the first ten days of January, 1939, the exact date now being unknown to him, and in order to compromise and settle the claim and contention he made as aforesaid it was agreed by and between him and the defendant company that if he would accept said sum of $7,456.75 and forego his right to appeal to the Court in said cause No. 77034 for a modification and correction of its order of distribution, or an interpretation thereof, and an appeal to the Circuit Court of Appeals, if he failed in such an effort in the lower court or the judgment thereof was adverse to the contention he then made, and if he would do nothing to delay or hinder the adjudication of the case necessary in the complete reorganization of the defendant company (and which complete reorganization did subsequently follow) that it would compromise and settle his claim by agreeing to pay said sum of $297.00 if he was not paid by the said Mississippi Valley Trust Company or Bondholders' Protective Committee within one hundred twenty days from February 4, 1939."

Plaintiff further alleged that the settlement and compromise was verbal and was made between plaintiff and C. T. Sigmon, president and manager of defendant corporation, and the attorney for said corporation; that a written memorandum of the agreement was made on February 4, 1939, which was attached to the petition as Exhibit "A". The memorandum referred to is a letter dated February 4, 1939, from defendant's attorney to the plaintiff wherein it is stated that "Agreeable with my telephone conversation with you this morning, I am writing to advise you that Sigmon Furniture Manufacturing Company will guarantee you the payment of the above amount ($297.00) not later than one hundred twenty days from this date."

As the first proposition for reversal of the judgment, it is contended that the contract sued on was an illegal contract proscribed by the statutes of the United States. Attention is directed to 11 U.S.C.A. § 52, subsection b, which, in part, provides: "A person shall be punished by imprisonment for a period of not to exceed five years or by a fine of not more than $5,000, or both, upon conviction of the offense of having knowingly and fraudulently *** received or attempted to obtain any money or property, remuneration, compensation, reward, advantage, or promise thereof from any person, for acting or forebearing [forbearing] to act in any proceeding under this title; ***."

15 O.S.1941 § 211 provides, in...