Union Securities, Inc. v. Merchants' Trust and Savings Co.

• Decision Date: 29 March 1933
• Docket Number: 25,969
• Parties: Union Securities, Inc. v. Merchants' Trust and Savings Co
• Court: Indiana Supreme Court

185 N.E. 150

205 Ind. 127

Union Securities, Inc. v. Merchants' Trust and Savings Co

No. 25,969

Supreme Court of Indiana

March 29, 1933

Rehearing Denied June 20, 1933, Reported at: 205 Ind. 127 at 139.

1. SALES---"Sale" Defined.---A sale is the transfer of the absolute property, as distinguished from a special property, in a thing for a price in money. p. 134.

2. CONTRACTS---Loan of Money---Definition.---A loan of money is a contract by which one delivers a sum of money to another and the latter agrees to return at a future time a sum equivalent to that which he borrows. p. 135.

3. SALES---Contract---Construction---Whether Sale or Loan.---Where a written contract calls the transaction a "sale," courts will ordinarily assume that the term is correctly used in its technical sense, but if it clearly appears from the facts of the transaction that it is in fact a loan and not a sale, it must be construed according to the real nature of the transaction without regard to the terms applied to it by the parties. p. 135.

4. RECEIVERS---Claims---Preference---Collections on Book Accounts Claimed by Alleged Purchaser.---Where a purported sale of book accounts was in fact a loan, the book accounts in effect being pledged as security, the purchaser as claimant, was not entitled to a preferred claim against the seller's subsequent receiver for collections made by the seller and not remitted to claimant. p. 137.

5. SALES---Contract---Construction---Whether Sale or Loan---How Tested.---Whether a written contract was a loan or a sale must be determined by the intention of the parties, to be ascertained from the whole transaction, including the conduct of the parties as well as their written agreement. p. 137.

6. TRUSTS---Right to Follow Trust Property or Proceeds---Commingled with Funds of Insolvent Trustee.---If trust property, either in its original or substituted form can be traced into the assets of an insolvent trustee, or of his assignee, the fiduciary may have a lien establish or a preference decreed over claims of general creditors although the identity of the trust fund is lost, but it must appear that the trust property is actually represented in the assets. p. 139.

7. RECEIVERS---Claims---Preference---Trust Funds---Failure to Trace Funds.---Where a receiver's insolvent collected book accounts which had been assigned to claimant as collateral, claimant was not entitled to a preferred claim against the receiver for such funds in the absence of proof that the funds were actually represented, in the assets coming into the receiver's hands. p. 140.

8. APPEALS---Review---Special Findings---Inferences.---No inference or intendment will be indulged in favor of a special finding. p. 140.

From Delaware Superior Court; Robert F. Murray, Judge.

Action by Varney Electrical Supply Company against Retherford Manufacturing, in which a receiver was appointed and Union Securities, Incorporated, filed an intervening petition. From an adverse judgment upon its petition, Union Securities Incorporated, appealed. Transferred from Appellate court under § 1351, Burns 1926.

Affirmed.

B. D. Emanuel, for appellant.

Silverburg, Bracken & Gray and Bracken, Gray & De Fur, for appellee.

Roll, J. Treanor, J., Martin, J.

OPINION

Roll, J.

This action is in the nature of an intervening petition filed by appellant in the case of Varney Electrical Supply Company v. Retherford Manufacturing Company, in the Delaware Superior Court, wherein appellee, The Merchants Trust and Savings Company, was appointed receiver for the defendant. Appellant in this action seeks to establish a preferred claim against the assets and property in possession of the receiver for amounts collected by the Retherford Manufacturing Company prior to the appointment of a receiver, upon accounts previously assigned by said company to appellant, contending that the amounts so collected by said company constituted a trust fund in the hands of appellee.

The issues were presented by appellant's second amended intervening petition and answer by appellee receiver in general denial.

There was a special finding of facts upon which the court stated four conclusions of law.

Appellant reserved exceptions to the conclusions of law and filed a motion for a new trial, and assigned therein the following reasons: first, the findings of the court are not sustained by sufficient evidence; and second, that the findings of the court are contrary to law. The court overruled the motion for a new trial, and appellant duly excepted.

The errors assigned are, (1) that the court erred in each of its conclusions of law, (2) the court erred in overruling appellant's motion for a new trial.

The facts found by the court show that the Retherford Manufacturing Company, hereinafter called the company, was an Indiana corporation and as such was engaged in the manufacture and sale of lighting fixtures and similar commodities and located in the city of Muncie, Indiana. That the Union Securities, Incorporated, was also an Indiana corporation, authorized by law to borrow and loan money, to buy and sell promissory notes, accounts, choses in action, and other evidences of indebtedness. That on October 7th appellant and the Retherford Manufacturing Company entered into a verbal agreement, purporting to be an agreement for the purchase by appellant of certain accounts receivable from said company. Thereafter from time to time appellant delivered to appellee for an amount equal to the face value thereof, after deducting ten per cent therefrom and an additional two per cent from the remaining balance, the said ten per cent to be held by appellant as collateral for the payment of said account until payment in full had been received, when said ten per cent would be returned by appellant to said company, but the two per cent so deducted was to be retained by appellant as a discount charge and profit on the transaction. The assignment of said accounts to appellant was to be made on printed forms supplied by appellant and the collection of said accounts was to be made by the seller at its own expense, and the proceeds therefrom remitted to appellant.

That the merchandise represented by the account so assigned to appellant had been sold to the customers of said company on thirty days' credit and in the schedule assigning said accounts to appellant a date thirty days from the date of each schedule was inserted as the date when the company became surety for the payment of the accounts assigned.

That a few days prior to the end of each thirty-day period on each of said schedules, appellant mailed to the company a notice of the amounts remaining unremitted to appellant upon the accounts assigned by each particular schedule, at which time said company was granted the option by appellant of paying the full amount then remaining unremitted on each schedule, or, paying appellant an amount equal to two per cent of the unremitted balance on each schedule, and that, pursuant to such option, said company at the end of each thirty-day period, did mail to appellant remittances covering two per cent of the amount remaining unremitted to each particular schedule which amounts were received by appellant, accepted and retained by it as additional discount and profit and was not credited upon the account so assigned.

That after said oral contract was entered into, and in pursuance thereof said company at various times during the year 1925 and up until the latter part of June, 1926, transferred and assigned to appellant certain accounts receivable held by it representing merchandise sold to its customers, the face value of said accounts totaling $ 7,610.77.

That the assignment of said accounts was made upon printed schedules furnished by appellant. Said schedule, when made up, contained the seller's number, the date thereof, name and addresses of the debtor, date of delivery, the amount of the original purchase and the date upon which the company would become surety thereon. Following the schedule of the accounts appeared the following printed matter to be signed by the company:

"For value received, the undersigned hereby sells, assigns and transfers the above listed accounts, notes, contracts, leases and mortgages to UNION SECURITIES, Inc., and to induce UNION SECURITIES, Inc., to purchase the accounts, notes, contracts, leases and mortgages listed above and owned by the undersigned, hereby certifies and guarantees that said undersigned has proper legal authority to make said sale, assignment and transfer; that the balance due on said accounts, notes, contracts, leases and mortgages are correctly set out in the above schedule, that full delivery has been made of the property covered by said accounts, notes, contracts, leases and mortgages in accordance with the specifications of the buyer or lessee; that the balances thereon are net and are not disputed by the debtor and are not past due, and that there are no contra accounts, setoffs or counterclaims whatsoever against any of them; that the payment of said balances is not contingent on the fulfillment of any contract, past or future. The undersigned agrees that entries disclosing this absolute sale to said UNION SECURITIES, Inc., will immediately be made on the books of the undersigned, that said UNION SECURITIES, Inc., shall have the right, at its election, to audit said books and become surety for the payments thereon on the day of -----, 192-"

That the accounts so assigned were made on thirty days' credit, except two, which were made on sixty days' credit. That duplicate invoices of said accounts so assigned were attached to each schedule and delivered to appellant upon receipt thereof appellant remitted to the company an amount equal to the aggregate face value...