57 F.2d 674 | 2d Cir. | 1932
In this action appellant seeks recovery of two payments of money made by the liquida^ tor of A. T. Keywan, Inc., upon the theory, first, that it was unlawfully paid out of the corporation’s funds to satisfy an obligation arising out of a contract of sale made with A. T. Keywan individually; and, second, that if the transaction referred to hereafter was with A. T. Keywan, Inc., it was invalid because preferential under section 15 of the New York Stock Corporation Law.
A. T. Keywan, Inc., was a New York corporation dealing in rugs. Its principal stockholder, A. T. Keywan, died on November 27, 1926; leaving a widow who became adminis-tratrix of his estate. The attorney for the administratrix, who was also attorney for the corporation, attempted to liquidate the corporation. Its liabilities exceeded its assets by $14,128.72. There -was an insufficient sum realized in such liquidation to pay all the creditors up to the time of filing of a petition in bankruptcy in December, 1929. With creditors unpaid, the liquidator gave two checks out of the corporation’s funds to ap-pellee as payment in full for an alleged indebtedness of the corporation. One was made on May 31, 1927, and the other on October
The invoices indicate a consignment of the rugs, and the letters and evidence hear this out. Upon this record it appears that the rugs were on consignment and not on approval. They were shipped out under memoranda and invoices which show that the transaction was to be a consignment and not a sale. The appellee knew that Keywan wanted the rugs for a specific purchaser and not as general stock. The rugs were shipped on October 26, 1026, and November 9; 1926, respectively. As late as May 9; 1927, the appellee in its letter to the liquidator stated that “according to the consignment agreement under which these rugs were sent to the late Mr. A. T. Keywan, these rugs wero to he paid for immediately on receipt of the money by tho consignee torn his customer.” In a letter of December 26,1926, the appellee wrote to Key-wan’s brother stating that tho rugs were given “on approval,” and at the trial testified that such was the understanding between Keywan and him. The contract made is to be determined from the intention of the parties. Crescent Cable Co. v. Pratt Chuck Co., 18 F.(2d) 734 (C. C. A. 2); Bernadette, Joseph & Co. v. Van Buren, 212 App. Div. 702, 209 N. Y. S. 559. In Sturm v. Boker, 150 U. S. 312, 14 S. Ct. 99, 104, 37 L. Ed. 1093, the Supreme Court said: “The recognized distinction between bailment and sale is that when the identical article is to bfl returned in the same or in some altered form, the contract is one of bailment, and the title to the property is not changed. On the other hand, when there is no obligation to return the specific article, and the receiver is at liberty to return another thing of value, he becomes a debtor) to make the return, and the title to the property is changed. The transaction is a sale. * * * The agency to sell and return the proceeds, or the specific goods if not sold, stands precisely upon the same footing, and does not involve a change of title.”
In the invoice consigning these rugs, it is provided: “Tho merchandise shall belong to the consignor until sold and delivered and accepted and all avails shall belong to the consignor until a statement and remittance is received and accepted by the consignor.”
Thus the consignee could return the rugs at the expiration of the stipulated time or before, sell the rugs, and hold the amount of the proceeds in trust for the appellee or buy the rugs himself, in which event he would become a debtor, for then there would be no specific avails. It is provided by the phrase of the invoice that Keywan had the option to purchase but did not have the title. By selling the rugs to his customer, he exercised his option and thereupon became a trustee or a debtor for the invoice price. Hunt v. Wyman, 100 Mass. 198; Baker v. Turner, 19 App. Div. 223, 46 N. Y. S. 25. Upon exercising the option, if he had the rugs upon consignment and made a sale, he was obligated to remit the proceeds to the appellee and his failure to do so made him a debtor. We said in Taylor v. Fram, 252 F. 465, 468: “The general rule, of course, is that wherq a person receives property which he is not hound to return in the identical form in which he reeeives it, but may account therefor in money or other property or thing of value; the transaction amounts to a sale, and not to a bailment. But this rule is not applicable to consignments for sale; the law being that thé owner of a chattel may consign it or deliver it to an agent for sale without creating the relation of vendor and vendee between the parties. * * * In a sale title passes to the buyer, while in an agency or bailment title remains in the principal or bailor, although possession is transferred to the agent or bailee.”
But the testimony of the liquidator concedes that the moneys received for the rugs went into the general corporate funds.
If the transaction was had with Keywan individually, it was unlawful to make payment out of the corporate funds when other creditors were unpaid. In the correspondence, the appellee shows clearly that it considered the transaction one with Keywan personally and changed this attitude only when there was a realization thaf it could not collect from the personal estate because of its financial condition.
The judgment will be reversed and the cause remanded. Upon a new trial to be had, the appellee may, if it can, establish the trust relationship and obligations imposed thereby; ■ otherwise the appellant must recover.
Reversed and remanded.