Ticonic Nat. Bank v. Fashion Waist Shop Co.

• Citation: 124 A. 308
• Parties: TICONIC NAT. BANK v. FASHION WAIST SHOP CO. et al.
• Decision Date: 22 April 1924
• Court: Maine Supreme Court

124 A. 308

TICONIC NAT. BANK

v. FASHION WAIST SHOP CO. et al.

Supreme Judicial Court of Maine.

April 22, 1924.

Exceptions from Supreme Judicial Court, Androscoggin County, at Law.

Action by the Ticonic National Bank against the Fashion Waist Shop Company, Hyman Margolin, trustee. To the findings of the trial justice, both plaintiff and trustee excepted. Exceptions overruled, and case remanded, with directions.

Argued before CORNISH, C. J., and SPEAR, HANSON, PHILBROOK, and WILSON, JJ.

Bradley, Linnell & Jones, of Portland, for plaintiff.

Harry Manser, of Auburn, and Benjamin L. Berman, of Lewiston, for defendant and trustee.

WILSON, J. An action brought to recover of the principal defendant on two promissory notes signed by it and payable to its treasurer, one Charles J. Clukey, and by him indorsed and discounted at the plaintiff's bank, said notes being respectively dated August 3, 1921, and September 12, 1921, and maturing in two months after date.

On December 30, 1921, the principal defendant, through its treasurer, negotiated a sale of all its business, including its stock in trade, fixtures, lease, and good will to the trustee in this action for the sum of $5,000. No inventory of the stock sold was made, nor were the creditors of the defendant notified in accordance with the provisions of section 6, c. 114, R. S., which is commonly known as the Bulk Sales Law.

However, for the apparent purpose of carrying out the intent of the statute, the purchase price was deposited with the counsel who acted for both parties in the transaction, and a list of creditors, represented to be complete, was furnished counsel by the treasurer of the defendant company, but which did not include the plaintiff, and the entire purchase price, not only of the stock in trade, but of the fixtures, lease, and good will, except $8.75, was, prior to May 22, 1922, disbursed by counsel among the creditors of the defendant company according to the list furnished by its treasurer, and in full of their respective claims.

On May 22, 1922, counsel for the trustee received notice of the claim of the plaintiff bank, which it does not appear had any notice of the sale and deposit of the purchase money with counsel prior to its disbursement, unless knowledge of Mr. Clukey was notice to the plaintiff, he being a member of its board of directors during the entire transaction.

On June 8, 1922, this action was brought, on which the purchaser, Hyman Margolin, was summoned as trustee of the defendant. It also appears that at the time of the bringing of the action practically all of the stock purchased had been sold by the trustee in the usual course of trade.

The writ was made returnable at the September term, 1922, at which term the trustee appeared and filed his written statement in the usual form, setting forth that there were no goods and effects in his hands belonging to the defendant, and submitting himself to an examination on oath. It does not appear that he gave notice to the plaintiff's attorney or caused it to be minuted upon the docket of the court in accordance with rule 12 of the Supreme Judicial Court.

Nothing more was done at the return term, except the defendant was defaulted for want of appearance in his behalf. At the January term, 1923, it was agreed that the question of whether the trustee should be charged might be heard by a justice of the court in vacation. On February 5, 1923, the trustee was examined and his disclosure taken by a stenographer and duly sworn to, and notice given by the trustee that at the hearing before the justice allegations would be filed by the trustee under section 30, c. 91, R. S., and further evidence offered in their support.

On coming before the justice on February 12th the trustee filed allegations setting forth certain facts, upon which, being proved, he contended he should not be adjudged trustee, and offered evidence in their support. Counsel for plaintiff objected to the filing of such allegations at this time and to the introduction of the evidence. The justice, however, allowed them to be filed and received the evidence.

The justice upon the disclosure of the trustee and the evidence in support of the allegations found that the purchase by the trustee was made in good faith, without any intent to delay or defraud the defendant's creditors, that the price of $5,000 was an adequate consideration, and that the value of the stock in trade so sold was $2,000, that the trustee should be charged, but only for the pro rata amount of the value of the stock of goods that the plaintiff's claim bore to the total indebtedness.

The trustee at the hearing before the justice offered evidence in support of allegations that the plaintiff was not a creditor of the defendant, that the defendant did not owe its treasurer, Clukey, any money when the notes were given, and that Mr. Clukey, to whom the notes were made payable, was at the time, and since has continued to be, a director of the plaintiff bank, which was excluded. The court found that the plaintiff was a bona fide creditor of the defendant, and as such was entitled to share in the funds obtained from the proceeds of the sale of the goods by the trustee.

The plaintiff excepts to the ruling of the court that allegations might be filed by the trustee after his disclosure and to the receipt of any evidence in support thereof; also to the ruling or finding of the court that the value of the stock of goods was $2,000, and to the ruling by the court that the trustee was only charged for the pro rata amount of the plaintiff's claim, contending that the trustee should be charged for the full value of the goods sold, that he had no right of subrogation or set-off by reason of any sums disbursed to other creditors.

The trustee excepted to the ruling of the court excluding the evidence in support of his allegations that the defendant at the time the notes were given was not indebted to Mr. Clukey, that it was a mere accommodation maker, and that Mr. Clukey at the time was a director of the plaintiff bank, for the purpose of bringing home knowledge to the plaintiff of want of consideration as between Clukey and the defendant, and to the ruling that the plaintiff was a bona fide creditor. The trustee also excepted to the ruling of the court that the trustee should be charged for the pro rata amount of the plaintiff's claim his contention being that he should be allowed to set off, under section 64, c. 91, R. S., the entire amount to be paid out to the other creditors.

Exceptions having been filed, the whole case comes before this court for examination, and the court may, under section 79, c. 91, R. S., correct any errors, either in law or fact. Meserve v. Nason, 96 Me. 412, 52 Atl. 907; Thompson v. Shaw, 104 Me. 85, 95, 71 Atl. 370.

Reviewing the case, however, upon the points raised by the exceptions of both parties, we find no occasion for reversing or modifying the rulings and findings of the court below.

Allowing allegations to be filed at the time of the hearing, while not commendable practice, was, we think, discretionary with the court, and no abuse of judicial discretion appears in this case. The receipt of relevant evidence in their support follows, then, as a matter of course. Nor do we find any adequate reason for disturbing the finding of the court below as to the value of the stock in trade. Certainly the testimony of the treasurer, who negotiated the sale, that the goods were alone worth $8,000, after agreeing to the sale of the fixtures, the assignment of the lease, and the conveyance of the good will, together with the stock in trade, for $5,000, is not entitled to great weight.

Nor do we think that the plaintiff's contention that the trustee should be charged to the full value of the stock sold regardless of the sums paid, to the other creditors is one which should prevail; or on the other hand, that the trustee's claim should be allowed, that he be permitted under a right of subrogation or under section 64 of chapter 91, R. S., to set off the entire amount disbursed by him to other...