William Openhym & Sons v. Blake

• Citation: 157 F. 536
• Decision Date: 09 November 1907
• Docket Number: 2,467.
• Parties: WILLIAM OPENHYM & SONS v. BLAKE.
• Court: United States Courts of Appeals. United States Court of Appeals (8th Circuit)

157 F. 536

WILLIAM OPENHYM & SONS v. BLAKE.

No. 2,467.

United States Court of Appeals, Eighth Circuit.

November 9, 1907

This is an appeal by William Openhym & Sons from an order denying allowance of a claim, as preferred, against the estate of the Walkeen-Lewis Millinery Company, bankrupt. Appellants were importers and manufacturers of silks and ribbons at New York City. The millinery company was engaged in the wholesale millinery business at Kansas City, Missouri. In July, 1905 the millinery company, which had previously been a customer of appellants and had paid its bills, sought to purchase additional goods. The company had forwarded a statement dated July 7, 1905, showing in some detail its assets and liabilities. The statement was not satisfactory to appellants, and, in response to a request for a more specific showing of financial condition, the president of the millinery company, who was then in New York to make purchases, made out and delivered a statement dated July 13 1905. Both statements showed the net worth of the company to be $63,161.65 above all liabilities. Certain oral representations were also made. Appellants thereupon sold and shipped to the millinery company goods amounting to $3,125.74. The goods arrived in Kansas City the latter part of July. On August 12th a state court in that city appointed a receiver, who forthwith took possession of the property of the millinery company, and under the orders of that court continued the sale thereof through traveling men and otherwise until the 25th of September. On August 15th certain creditors of the millinery company filed a petition to have it adjudged bankrupt. August 19th the directors of the company met and adopted a resolution admitting its insolvency and inability to pay its debts and expressing a desire that it be adjudged a bankrupt. August 21st the appellants, who had learned of the filing of the petition in bankruptcy asserted that the statements and oral representations made them were false in material particulars, that they had sold the goods relying upon their truthfulness, and they notified the state court receiver that they rescinded the sale. Their demand of him for possession was refused. On the same day they obtained from the state court permission to sue in replevin for the possession of the goods, and they did so. In the execution of the writ but $2,582.80 worth of the goods were found. The sheriff segregated them from the remainder of the stock then in the possession of the state court receiver, and took them into his possession. The receiver thereupon gave a redelivery bond, resumed possession of the goods, and continued the sale thereof with the remainder of the stock. September 23d the millinery company was adjudged bankrupt by the District Court of the United States for the Western district of Missouri. On the same day that court appointed Daniel F. Blake receiver in bankruptcy, and directed him to apply to the state court for an order upon its receiver for the possession of the property, and that before taking possession he should request that court to fix and determine the liabilities which its own receiver had incurred for the benefit of the estate. The order of direction to the receiver in bankruptcy contained this clause: 'The liabilities incurred by the said receiver appointed by said state court which are fixed and allowed by said state court shall be assumed and paid by the receiver appointed herein. ' September 25th the state court ascertained and stated various liabilities incurred by its receiver, giving the names of the parties to whom owing and the amounts, and, in addition thereto, recited the proceedings in the replevin action brought by the appellants, that its receiver had executed a redelivery bond, and had retained the property involved, and found that whatever liability was incurred under the redelivery bond was incurred for the benefit of the estate. It thereupon ordered the surrender of all of the assets of the estate to the receiver in bankruptcy, with a provision that the latter should assume and pay the liabilities recited and also all liability arising under the redelivery bond. The property was delivered to the receiver in bankruptcy under those conditions. October 2d the receiver in bankruptcy sold all of the property of the estate, including that turned over to him as above mentioned. October 13th Blake, the receiver, was selected as trustee. October 27th the court below ruled appellants to show cause November 2d why they should not be enjoined from prosecuting their replevin action in the state court, and temporarily enjoined them from continuing such prosecution. December 1st the temporary injunction was made permanent. December 10th a dividend upon claims allowed was declared, but its payment left the greater portion of the estate in the hands of the trustee. December 21st appellants presented their intervening petition to the court below for the allowance of their claim as a preferred one. They also asked for the allowance, as a general claim, of the value of the goods which had been sold by the millinery company and had not been found by the sheriff; but the action of the court upon this matter is not in controversy here. The court below denied the allowance of the claim for $2,582.80 as a preferred one. Hence this appeal.

I. J. Ringolsky (Morris J. Hirsch, on the brief), for appellants.

Samuel Feller (J. V. C. Karnes, Alexander New, and Edwin A. Krauthoff, on the brief), for appellee.

Before SANBORN and HOOK, Circuit Judges.

HOOK Circuit Judge (after stating the facts as above).

It is clear that the bankrupt induced the appellants to sell and part with the possession of their goods by false and fraudulent representations. The appellants, though diligent in...