Taylor v. Fram

• Decision Date: 07 June 1918
• Docket Number: 142.
• Citation: 252 F. 465
• Parties: TAYLOR v. FRAM et al.
• Court: U.S. Court of Appeals — Second Circuit

252 F. 465

TAYLOR v. FRAM et al.

No. 142.

United States Court of Appeals, Second Circuit.

June 7, 1918

This suit is brought by the trustee of the bankrupt to have a certain agreement made between the bankrupt and defendants declared fraudulent and void as against creditors, and that defendants be adjudged to hold in trust certain merchandise delivered to them by the bankrupt, and that they be required to make delivery thereof to the trustee or pay him the value thereof. The defendants were copartners conducting a number of retail shoe stores in the borough of Brooklyn, New York City. They traded under the name of the Boston Shoe Market. They were accustomed to purchase stocks from persons who desired to retire from business, and they were continuously buying and selling shoe stores. They would buy a store and hold a special sale therein, and then close the store and remove the goods which remained to what they called their main store, which was in Brooklyn. They also purchased merchandise from various manufacturers and jobbers.

The bankrupt, Charles Epstein, is a brother of the defendant Epstein, and a brother-in-law of the defendants Snitzer and Fram. In December, 1914, Charles Epstein opened a retail shoe store in Brooklyn. In the beginning he purchased part of his stock from time to time from the defendants; defendants having limited him at the time to $100 credit. In May, 1915 he owed defendants $330.11, and they then refused to extend any further credit to him. Thereupon he asked them to consent to give him an agency and allow him to sell on their account. They consulted their attorneys, and inquired whether they could do so and secure themselves in that manner, without jeopardizing themselves or without giving the bankrupt any credit, as they were unwilling to extend any credit to him. An agreement was drawn by the attorneys, which in substance provided that, from and commencing with the date, all merchandise thereafter shipped to Charles Epstein was to be the property of the defendants; that the merchandise which he should sell should be sold as agent of the defendants only that such merchandise was to be designated when shipped to the said Charles Epstein on memorandum statements, or bills that Charles Epstein was not to sell any of the merchandise for less than the price stipulated on the statement, which sum he was to refund or pay over to the defendants on Monday of each and every week for all merchandise sold during the week; that he was to render an account or a statement whenever requested; that upon demand he was to return and deliver to defendants all the merchandise, delivered to him under the agreement, in his possession; that in no sense was the agreement to be so construed as to vest any interest in Charles Epstein as to the merchandise delivered to him, but that the title was at all times to remain in the defendants that none of the provisions of said agreement were to be changed or altered unless it be expressed in writing; and that all future business relations between the defendants and Charles Epstein were to be governed exclusively by the provisions in the agreement.

This agreement, dated May 27, 1915, was signed by Charles Epstein as party of the first part and by the Boston Shoe Market, Isadore Snitzer, Isador Fram, Albert Epstein, parties of the second part, by Isadore Snitzer. It is this agreement which the trustee alleges to be part and parcel of a device to hinder, delay, and defraud creditors. He alleges that in fact and in truth no agency was created between the bankrupt and the defendants, but that the merchandise mentioned in the agreement was actually sold by defendants to the bankrupt, and that the latter was indebted to defendants therefor. After this agreement was made the bankrupt was in the habit of going to defendants for shoes when needed. Bills were delivered with the merchandise, which did not indicate that the goods were on consignment. Under the agreement the invoices were to contain a memorandum of the price for the merchandise, and they were not to be sold at less than that price. This price was not the selling price, because that was fixed by the bankrupt, but was the cost price to the bankrupt. No stock record was ever kept by either the bankrupt or the defendants. The bankrupt, however, testified that he had a record, which showed the number of pairs of shoes that he received from the defendants, and that he had 'a separate little book, five-cent copy book,' in which he had an account of every pair that was sold. There was contradictory evidence as to whether defendants shipped their goods to the bankrupt, marked so that they should be distinguished from his own stock. The bankrupt testified before the commissioner that the goods were shipped to him unmarked, and that he always marked them B.S.M. (which stood for Boston Shoe Market). In the court below he testified that when he received the goods they came with B.S.M. on them and the cost mark, and that defendants put them on. When his attention was called to his contradictory statement before the commissioner, he said some came marked and some unmarked, and that he himself then put the marks on the corners of the boxes which were unmarked, and that he marked them in letters too small for anybody else to see. The defendants claimed they put the marks on by their bookkeeper, and that individual was not produced at the trial.

The bankrupt, instead of paying on the Monday of each week and every week as the agreement provided, kept the moneys realized from the sale of the property consigned and mingled them with his own funds, and only made remittances when requested to do so; and when remittances were made they were made on account, and they were all in even amounts, as $25, $35, or $50. When payments were made by check no receipt was given, and at no time were the remittances accompanied by any list of the goods sold. The bankrupt dealt with and represented the goods as his own. The photographic copy of the defendants' ledger shows that the relation was regarded as that of debtor and creditor. On the day before the assignment for the benefit of creditors the bankrupt and the defendants had a meeting, at which the bankrupt's financial condition was discussed, and at which the defendants were informed that the bankrupt was insolvent. This condition was ascertained by an inventory taken six days prior to the assignment. At that time the bankrupt had goods worth $1,600 or $1,700. On the day prior to the assignment the goods were shipped back by the bankrupt, who himself packed the goods and hired the truck. A moving van load of goods was sent to defendants, including the cash register. The goods left in the bankrupt's store consisted of mismated and unpacked stock, which at cost was worth only $543.21. The trustee claimed in the court below that the defendants received merchandise to an amount in excess of $1,000. The defendants failed to enter in their books the credit for the goods returned. The books were produced at the trial one year after the goods were returned and they contained no credit for the merchandise returned.

The District Judge has found that the agreement of May 27, 1915 was fraudulent and void as against the complainant and the creditors of the bankrupt, and was intended to hinder, delay, and defraud the creditors, and no agency was created between the bankrupt and defendants, and the legal title to the merchandise was vested in the bankrupt, and that the latter was on January 18, 1916, when he was...