Bamberger v. Schoolfield

The controversy below was what is known, in the jurisprudence of Alabama, as a 'statutory claim suit,' and grew out of an attachment proceeding instituted by plaintiffs in error against one Henry Warten. Under the writ, a levy was made on certain merchandise, treated as belonging to Warten. The defendants in error intervened, and claimed the things seized, and thereby an issue was formed as to whether they were owned by the defendant in attachment or were the property of the claimants. The undisputed facts are as follows: Henry Warten embarked in trade at Athens, Ala., in 1881. His business consisted of a general country merchandise store, of advancing to farmers money or provisions wherewith to cultivate and market a crop of cotton, of buying and selling cotton on his own account and as agent for others. Almost at the opening of his career at Athens, Warten began a course of dealings with the commercial firm of Schoolfield, Hanauer & Co., of Memphis, Tenn. (whom we designate hereafter as the 'Memphis firm'). They became his general factors, selling him merchandise, loaning him money, cashing his sight drafts given to others in payment of merchandise bought by him or for debts due, he consigning them cotton for sale, the proceeds passing to the credit of his account. This course of dealing continued until April, 1889, when the Memphis firm went into liquidation. There was then formed, under the laws of Tennessee, a corporation styled the Schoolfield-Hanauer Company, designated hereafter as the 'Memphis company,' with whom Warten carried on business of the same general nature as that previously conducted with the firm.

The cotton crop of 1889, in the region of country where Warten dealt, was a disastrous failure, and in consequence of this fact, by the month of December of that year, Warten had a large amount of outstanding debts due him by unsecured accounts, which were either permanently lost, or were unavailable as quick, realizable assets. At this time he owed a large amount of money for merchandise and for money borrowed during the course of his business. This condition of things produced disorder in his affairs, and a state of actual, if not ultimate, insolvency. By the 20th of December, 1889, Warten owed the Memphis firm a considerable debt, evidenced by four notes, three of which were dated May 22, 1889. Two, for $5,000 each, were past due. One, for $3,794, was to become due on January 1, 1890. The other, for $2,500, was dated June 10, 1890, and had also matured.

The last-mentioned note (dated June 10, 1890) had been made by Warten to the order of the Memphis house, was by it indorsed, and had been discounted by the Memphis company, who put the proceeds to the credit of Warten, he thereafter drawing against the credit to the full extent thereof. Warten, at that time, also owed the firm of Bamberger, Bloom & Co., of Louisville, hereafter called the 'Louisville firm,' a past-due note, amounting to $4,719.36, and an open account, both together making the total of his indebtedness to that firm between $6,500 and $7,000. The embarrassed condition of Warten's affairs was known to the Memphis and the Louisville firms. Late in December, after conferring with his creditors in Memphis, Warten went to Louisville for the purpose of asking an extension from the Louisville firm, and delivered to them the following letter:

'Memphis, Tenn., December 27, 1889. Messrs. Bamberger, Bloom & Company, Louisville, Ky.-Dear Sirs: Our mutual friend and customer, Mr. Henry Warten, through, we believe, no fault of his own, but owing to disastrous failure of crops in his own section, finds himself forced to ask for extension, of his particular friends, and he recognizes you among that number, and from whom he can ask that favor. Having confidence in his honor and integrity, and business qualifications, we have agreed to give him extension, provided you will do so. He informs us that one of his creditors has agreed to give him extension, and he will only ask it of three houses, viz. yourselves, ourselves, and the party who has agreed to. Yours, very truly, The Schoolfield-Hanauer Co.'

After arriving at Louisville, Warten telegraphed the Memphis company that the Louisville firm refused the extension unless he paid $3,000 in cash, and the company replied that they could not give him the money. A settlement was made on the 30th of December between Warten and the Louisville firm, by which the outstanding past-due note was taken up, and Warten furnished and acceptance, due on the 15th of January, for $1,000 and four other acceptances, for $500 each, maturing on the 1st and 15th of February and 1st and 15th of March, following, and the balance of the debt, except an item of about $200, was settled by acceptances maturing the following November and December. At the time of making this settlement, or thereafter (up to the 13th of January), the Louisville firm made no reply to the letter from the Memphis firm. From January 1st the embarrassment of Warten became rapidly more fiagrant, in consequence of the results of the crop disaster becoming absolutely assured. On the 13th of January, 1890, at about 6 o'clock in the morning, Warten sold to the Memphis firm his stock of goods, safe, and store fixtures at Athens, with also a small stock and store fixtures owned by him at Elkmont, and certain accounts, a lot of mules, and an interest in real estate, for the price of $17,032.40, this being the amount of the principal and interest of the notes held by the firm, which have been already mentioned. The sale was accepted in full acquittance and discharge of the debt. A member of the firm, who had come from Memphis, took possession of the property. On the same day Warten sold to the Memphis company certain assets in full payment of an open account due by him, and other transfers of assets, in payment of other debts to various creditors, were also made at or about that time. On the same day as the sale to the Memphis firm (13th of January, 1890), between 11 and 12 o'clock, Warten made a general assignment of all but his exempt property in favor of his general creditors, the assets covered by this assignment being open accounts due him, and the remaining avails of his business, amounting to the face value of about $50,000; the claim of the creditors, in whose favor this assignment was made, including that of the Louisville firm, aggregating about $15,000. Of the accounts assigned, about $30,000 were debts due Warten for business of the current crop year.

A few days after this sale the Louisville firm attached the stock of goods in the Athens store as being yet the property of Warten. The Memphis firm claimed the property seized, and bonded it, thus raising the issue to which we have in the outset referred. After the sale by Warten to the Memphis firm, he acted as an employ e in the store, generally assisting in the conduct of the business, continuing to do so until the 10th of June, 1890, when what remained of the stock, and some other of the property which had been sold to the Memphis firm, was resold to the wife of Warten. Although there is no dispute as to the foregoing facts, on every other question of fact there is conflict. The claimants' evidence tended to show that the sale by Warten to them was real, was made for a just price, and that it absolutely extinguished their debt, and that no benefit, or expected benefit, was expressly or impliedly reserved to the seller; that actual delivery was made of the property sold, and that they were in possession, as owners, at the time of the attachment; that the employment of Warten was simply in a clerical capacity, and was rendered advisable from his knowledge of the business, and consequent ability to assist the vendors in converting the stock and assets into cash. On the other hand, the evidence of the attaching creditor (the Louisville firm) tended to show, by a mass of circumstances, that the sale was intended to and did reserve a benefit to Warten; that his presence in the store after the sale, while ostensibly in the capacity of an employ e, was really in that of an owner, or of one having an expectancy of ownership. As to the facts connected with the settlement made by the Memphis firm, there was also much conflict in the evidence, Warten swearing that, when he presented the letter from the Louisville firm, the extension to the next crop year asked by him was refused, unless he paid $3,000 cash, and that it was in consequence of this demand that he telegraphed the Memphis company that the Louisville firm refused the extension and asked $3,000. That, when he could not procure the amount of the cash payment demanded, then the settlement was effected,-the short-term acceptances for $3,000 having been given by him as an equivalent of the cash demanded; the remainder of the debt, except a small sum, having been extended to the next crop season. On the other hand, the testimony of a member of the Louisville house was that no demand of cash was made, and that the extension asked by Warten was granted, without objection, and was evidenced by the acceptances.

There was a verdict for the claimants (the Memphis firm), and the seizing creditors (the Louisville firm) prosecute this writ of error, on which they assign 36 errors, 12 of which are predicated on erroneous rulings asserted to have been made in admitting or rejecting testimony, and the others are directed to the charge of the court to the jury. Only a fragment of the general charge is in the record. Each party, however, presented a series of requests, stating the propositions of law which they, respectively, deemed applicable to the facts; and all the errors assigned, growing out of the charge of the court, involve the correctness of the court's action in having substantially given the special charges asked by the claimants (the Memphis firm), and rejecting those presented by the attaching creditors (the Louisville firm).

    Milton Humes, for plaintiffs in error.

[Argument of Counsel from pages 155-157 intentionally omitted]

Lawrence Cooper, for defendants in error.

Mr. Justice WHITE delivered the opinion of the court.