224 F. 598 | E.D. Pa. | 1915
This case presents the phenomenon observed in those ingeniously devised advertising signs which show the form of different letters and in consequence convey a different meaning according to the viewpoint of the observer. The metal or other substance of which they are composed is fixed and certain. The reading varies as the position of the observer changes. The real facts in this case, as distinguished from the deductions and inferences made and drawn therefrom, are these:
J. Cameron Ranee bought of the George F. Ranee Company a stock of lumber, for which he gave his promises to pay in the form of promissory notes. The purchase was made with the avowed plan in mind to form a lumber company, which, when formed, was to take over the stock of lumber thus bargained for and be substituted as the purchaser. Such a corporation was organized under the name of the Ranee Rumber Company, and its notes were exchanged for those of the purchaser in accordance with the original plan. These corporate notes were executed by the same J. Cameron Ranee as treasurer. They were renewed from time to time for reduced amounts. The payments made were by checks of the corporation, likewise signed by J. Cameron Ranee as its treasurer, as long as he was connected with the company. The later notes and checks were signed by his successor in office. The transaction in all of its successive steps was made the subject of formal corporate action by the George F. Ranee Company. The original sale was duly authorized and the novation of the debt accepted by resolution of its board of directors, which was duly entered upon its minutes. The stock of lumber remained stored on tlie premises of George F. Ranee Company and was taken therefrom by the new company. The Rauce Rumber Company having gone into bankruptcy, the George F. Ranee Company presented the unpaid last note in this series as a claim against the bankrupt estate.
The meaning which the trustee extracts from these facts is this:
J. Cameron Ranee, being indebted to George F. Ranee Company, and being also treasurer of the Ranee Rumber Company, fraudulently issued the notes and checks of the latter company in payment of his individual debt. The George F. Ranee Company had knowledge of
The position taken by the bankrupt estate, and the argument in support of it deduced from these facts, is this:
The debt started as the debt of J. Cameron Lance. It was known to the holder of the notes to be his debt. The Lance Lumber Company could not, because it lacked the legal power so to do, assume and pay the debt of another. On the very face of the transaction this was what it was attempting to do, even if what was done had been in fact the act of the corporation. The real fact, however, is that what was done was not the act of the corporation, but was wholly the fraudulent act of one of its officers in issuing the notes of the corpora-titin to pay his individual debt. The argument seeks, therefore, to place George F. Lance Company between the horns of this dilemma: If the transaction is taken for what it appeared to be, the corporation was attempting to do what it lacked the legal power to do. If the transaction is to be viewed as what it really was, then the giving of the corporation note was the fraudulent act of J. Cameron Lance, and of him alone. The argument meets the anticipated observation that a denial of the claim would under the circumstances work a hardship to George F. Lance Company by the statement that the latter had the means of the verification of the facts at hand, and if they chose to accept of the representations of J. Cameron Lance, without inquiry as verity, they are visited with the consequences. The inference is also intimated, if not expressly drawn, that George F. Lance Company knew that the corporate notes had Seen issued without authority, or through the fraud of its treasurer, because George F. Lance Company at first declined to accept the corporation notes in payment for the lumber and to give up the individual notes of J. Cameron Lance which it at the time held. The referee accepted this view and rejected the claim of George F. Lance Company.
From the viewpoint of the holder of the notes the situation is this:
The original sale as made contemplated the doing of the very thing which was done. The transaction on its face was in the regular course of business. The thing done was well within the legal power'of the corporation to do. It was incorporated to engage in the lumber business. The purchase of lumber was in the regular course of that business. J. Cameron Lance had to the knowledge of the George F. Lance Company lumber to sell. The Lance Lumber .Company had full legal power to purchase lumber and issue its notes in payment therefor. When, therefore, the notes-were passed over to George F. Lance Company in apparent good faith and in the regular course of business, the latter was justified in like good faith in accepting them,
All there is to remove this impression is, first, the absence of any formal corporate; act, evidenced by an entry upon its minutes, that it had undertaken to pay George F. Fance Company. This is in itself a mere' circumstance, entitled to consideration, of course, but in itself of little weight. Another fact is that the lumber company by formal action authorized and directed the purchase of this lumber to be made in consideration of the issuance to J. Cameron Fance of certificates of stock representing all its authorized capital. It is this circumstance which lends color to the theory that the lumber company
Notwithstanding this, however, the corporation assumed this very right and power which it did not possess, and undertook without the authority or sanction of the subscribers to more than half the stock to issue certificates for the whole of it to J. Cameron Lance. If certificates had actually issued in accordance with and in pursuance of this resolution, the subscribers might be presumed to have waived their rights. At least no one else would have been in a position to have complained of the issue. There is, however, absolutely no evidence in this case that the certificates of stock were so issued, and the only evidence we have on the subject is the testimony of J. Cameron Lance, who positively denies that the stock was ever issued to him, and professes ignorance of this plan to purchase the lumber. All we know of the methods and practices of many people in the organization of corporations lends plausibility to the theory that the proposition itself was never a real one, but was merely a plan emanating from counsel, and indicating a method by which the stock might be issued. It further lends equal plausibility to the theory that the plan thus outlined never was carried out, and that there was substituted for it the plan of the corporation paying for the lumber by assuming the payment of the J. Cameron Lance notes, and issuing to J. Cameron Lance the few shares of stock which appeared to have been issued to him. This leaves the corporation in position to enforce the payment of the unpaid stock subscribed for.
The only other fact given us as a circumstance supporting the finding of fraud, and visiting knowledge of that fraud upon George F. Lance Company, is the letter written by George F. Lance Company to J. Cameron Lance, in which they at first declined to accept of the notes of the lumber company in payment of the notes which they then held. We cannot see in this fact the significance which the referee has given to it. On its face it is nothing more than an expression of
We' cannot escape the conviction that if George F. Lance Company had brought suit against the corporation on these notes, and it had been shown that the consideration was this stock of lumber which the-corporation had received, that the lumber company had not only given its notes, but had renewed them from time to time, making partial-payments by its checks, and thus given recognition of the debt after J. Cameron Lance had severed all connection with the corporation,, and nothing appeared upon the other side except a proposition to purchase the lumber from J. Cameron Lance by issuing to him certificates of stock, which proposition was never carried out and the certificates never issued, and the letter above’referred to, written by George F. Lance Company, and if the question of fact as to whether the corporation had assumed the payment for the lumber had been submitted to a jury, the verdict would have been for the plaintiff, and judgment on the verdict would have been entered by the court.
On the like evidence we feel persuaded of our duty to make a like finding, and the findings made by the referee and his order thereon are accordingly reversed, and the proceedings are remanded, with instructions to the referee to proceed in the case in accordance, with this opinion and the order now made.