Worthen v. Griffith

• Decision Date: 03 November 1894
• Citation: 28 S.W. 286
• Parties: WORTHEN et al. v. GRIFFITH et al.
• Court: Arkansas Supreme Court

Page 286

28 S.W. 286

WORTHEN et al. v. GRIFFITH et al.

Supreme Court of Arkansas.

November 3, 1894.

Appeal from Pulaski chancery court; David W. Carroll, Chancellor.

Action by Burnham, Hanna, Munger & Co., and other unpreferred creditors of the F. P. Gray Dry-Goods Company, a corporation, to have declared void an assignment by it to one Joseph Griffith, in which W. B. Worthen & Co., Wolf & Bro., and the Gazette Publishing Company were named as preferred creditors, and also to vacate judgments confessed in favor of such preferred creditors, by the insolvent corporation, and to have the application for a receiver under them declared void. From a decree as prayed for W. B. Worthen & Co. and Wolf & Bro. appeal. Reversed.

The facts in this case are, in substance, as follows: The F. P. Gray Dry-Goods Company, a corporation created under the laws of this state, being in failing circumstances and insolvent, by its president, acting under the authority of the board of directors, executed on the 12th day of May, 1891, a deed of assignment to Joseph Griffith for the benefit of its creditors, by which it conveyed to him a stock of merchandise in Little Rock, certain store fixtures, a safe and office furniture, one horse and a delivery wagon, and certain notes and accounts described in a schedule thereto attached. By the terms of the assignment the assignee was to pay: First. The cost of administering the trust. Second. Various sums to W. B. Worthen & Co., amounting to about $22,000; to Wolf & Bro., $2,273.89; and to the Gazette Publishing Company, $391.01. Third. After paying above debts in full, the deed of assignment provided that the residue of the proceeds of the assigned property should be applied equally to the payment of all the other debts of said company, without any preference whatever. At the time this assignment was executed the stockholders of said company were James A. Gray, F. P. Gray, and L. L. Boone. The board of directors was composed of the same persons, and F. P. Gray was president of the company. The assignee gave bond, and took possession of the assigned property. On the same day that the assignment was executed, said company, by its president, acting under authority of the board of directors, confessed judgments in the Pulaski circuit court in favor of W. B. Worthen & Co. and Wolf & Bro. for the amount due each of them, respectively. Executions were at once issued on these judgments, and were placed in the hands of the sheriff either just before or just after the delivery of the deed of assignment. The appellants W. B. Worthen & Co. and Wolf & Bro., on the same day that said assignment was executed and judgment confessed, filed their complaint in the chancery court of Pulaski county against said Joseph Griffith and the dry-goods company, alleging the fact of the assignment, judgment, and executions; that the property consisted of a great variety of goods and merchandise; that many of the goods were perishable; that it could be greatly to the interest of all the creditors to have the trust managed under the control and direction of the chancery court, so that purchasers might be assured that they would obtain a good and reliable title to the property sold; and praying that the assignee might be invested with the power of a receiver to take charge of the assigned assets, and, under the order of the court, distribute the proceeds as provided in the deed of assignment and for other proper relief. The defendant Joseph Griffith and the dry-goods company, on the same day the complaint was filed, entered their appearance, and consented to the relief prayed; and thereupon said Joseph Griffith was appointed receiver by the court, and ordered to advertise for bids for the sale of the assigned property. Afterwards Burnham, Hanna, Munger & Co., and other creditors, filed their intervening petitions, reciting the fact of said assignment, judgment, and appointment of a receiver, and alleging that the assignment was fraudulent and void; that at the time of the assignment, and long before, the said dry-goods company was insolvent, and unable to pay its debts; that the assignment, judgment, and application for a receiver were a part of a general scheme to cover up the assets of the dry-goods company; that for a long time previous to said confession of judgment and assignment the officers of said company had been fraudulently disposing of its property, and secreting and withdrawing it from the assets of the corporation, and appropriating it to their own use; that Worthen & Co. held the notes of the dry-goods company for a portion of the indebtedness claimed to be due them, and that said F. P. Gray and James A. Gray, two directors, were individual indorsers on said notes, and that for other debts, not so indorsed, F. P. Gray had deposited property with said Worthen as collateral security; that, in order to relieve said individual liability of said F. P. and James A. Gray, said dry-goods company had purchased large amounts of goods, in order that the same might be included in the assignment, so as to pay off the debts of said preferred creditors; that both James A. and F. P. Gray attended the meeting of the board of directors which authorized said assignment and confession of judgment, and voted for the same. They further alleged that they had brought suit in the Pulaski circuit court against said dry-goods company, and had caused writs of attachment to issue, which had been placed in hands of the sheriff of Pulaski county, but that, as the assets were in the hands of a receiver, no levies could be made. They prayed that the assignment, judgment, and application for a receiver be declared void, and that a sufficient amount of the proceeds of the sale by the receiver be paid over to the interveners to satisfy their claims, and for other relief. The appellants, W. B. Worthen & Co. and Wolf & Bro., filed separate responses to the intervening petitions, admitting that F. P. Gray and James A. Gray, directors, were indorsers on some of the notes due Worthen & Co., and that F. P. Gray had also deposited a small amount of property as collateral security for the payment of those notes, but denying the other material allegations of said intervening petitions, and alleging that amounts for which they recovered judgment were justly due. The case was heard on the pleadings, exhibits, and depositions. The chancellor found that the assignment was fraudulent, both in fact and law, and declared that the same was void, and ordered the proceeds of assets in hands of receiver distributed first to the payment of the claims of the interveners who had filed attachment suits, and, after the payment of those claims, the remainder of the funds to be distributed in accordance with the decree. Although the assignment was held void, the chancellor found that debts claimed by Worthen & Co. and the other creditors preferred by the assignment were justly due from the dry-goods company, and ordered that they be allowed a share in the distribution of the remainder of the proceeds left after paying claims of creditors that had filed attachment. Worthen & Co., Wolf & Bro., and Joseph Griffith appealed from the decree.

Rose, Hemingway & Rose, Jacob Erb, and Morris M. Cohn, for appellants. Sterling R. Cockrill, Geo. H. Sanders, C. B. Moore, Dan W. Jones, and Mr. McCain, for appellees.

RIDDICK, J. (after stating the facts).

The assignment in question in this case has been assailed on several grounds. We will first consider the question whether the evidence is sufficient to support the contention that F. P. Gray, president of the F. P. Gray Dry-Goods Company, while contemplating an assignment by said company, purchased large quantities of goods, with a view to include them in said assignment, so that the preferred debts might be paid in full, and thus relieve himself of liability on his indorsement. Outside of the fact that the dry-goods company was in an extremely insolvent condition at the time of the assignment, and that Gray, who was himself insolvent, and of no worth financially, was an indorser on some of its preferred notes, the only evidence directly bearing on this point was the testimony of witnesses Boone and Lambert. Boone was the secretary of the company. He testified that he had a conversation with Gray when he started for New York, in March, before the assignment was made; that Gray said that he intended to buy very few goods; that afterwards, while in New York, he bought about $22,000 worth of goods, including a bill he had ordered from Kansas City just before he started for New York. When asked, on cross-examination, whether the amount bought was materially larger than witness expected him to buy, he replied: "I am not a judge of that, but I am satisfied in my own mind, from what I heard him and the clerks say, that he did not need near the goods." On the other hand, Lambert, who was a manager of two of the departments of the company's store, testified that it was the custom of Gray to ask the heads of the different departments what goods were needed, before going on to purchase them; that before leaving for New York, in March previous to the assignment, Gray had, as usual, asked him to state the amount of goods needed for his departments. In the conversation, Gray instructed witness to make the order as small as possible, and not to order any goods unless they were absolutely needed. He further testified that Gray only purchased about half the goods he requested him to purchase. Gray returned from New York the latter part of March, and the assignment was made on the 12th of May following; about a month and a half after his return. We do not think this evidence sufficient to show that Gray contemplated the assignment at the time the goods were purchased, or that he made the purchase with the intention not to pay for the goods. But, if such an intention on the part of Gray was shown, it is doubtful if any one except the creditors...