Mish v. Main

Roberts, J., delivered the opinion of the Court. This suit was brought by the appellant, as receiver of the Surbridge Manufacturing Company, to recover possession of a number of bicycles. The facts are sufficiently set out in the reporter’s statement and need not be again repeated. The record contains ■ nine exceptions, eight of which relate to the admissibility of the proof offered, and the ninth exception is taken to the granting by the Court of the appellee’s prayer, by which the case was taken from the jury. It will not be necessary to examine in detail the various exceptions to the testimony offered, as most of them are closely analagous and can in most instances be considered together. The first exception is taken to the appellant’s offer to prove by a notary public the fact of his having protested for nonpayment the negotiable paper of the Surbridge Company, and to prove how much of said paper he had protested and when the same had been done. One of the questions in issue in the cause was the insolvency vel non of the company. It has been repeatedly held in this State, and by the Supreme Court of the United States, that a merchant or trader who is unable to pay his debts as they become due in the ordinary course of business, is insolvent, Castleberg v. Wheeler, 68 Md. 277; Toof v. Martin, 13 Wall. 40; and if insolvent, how can the fact be better established than by one who has direct information as to the protest for non-payment of the company’s negotiable paper. At common law the notary was a competent witness to establish the fact of the protest for non-payment of such paper. Cookenderfer v. Preston, 4 How. (U. S.) 317; Johnson v. Harth, 2 Bail (S. C.) 183. There is nothing in the law of this State which affects the notary’s status as a witness, although it may have enlarged the scope of his special acts. This proof the appellant should have been permitted to give. The second exception presents the same question already disposed of in considering the first exception, ánd in addition thereto the appellant offered to prove the facts set out in the statement of the reporter. [44] In seeking to establish a right to the possession, of the bicycles in controversy, the appellant offers to prove not only that the company was hopelessly insolvent, but that the directors, and especially the appellee, had full knowledge of the exact financial status of the company, and yet, possessed of this information, the directors sold all of the property and effects of the company to Surbridge, after whom the company was named, and who was then a director in and president of the same, on the following terms of sale: Surbridge, the president and director of the concern, was to pay for the stock subscribed or held by the other directors at the rate of twenty per cent, of the par value of the same, by giving his personal notes, which were to be paid in bicycles, to be manufactured out of material bought by the company prior to such sale. That the bicycles manufactured by said Surbridge, as aforesaid, were delivered to the appellee and by him removed during the night-time fro'm the premises of the company, and are the same replevied in this case. It is scarcely necessary to discuss a question of this character, as it speaks for itself, and the proof offered should have been admitted. We fail to see the importance of the third exception. It is quite immaterial, so far as we can perceive, as to how many hands were working for the company, and we find no error in the ruling of the Court in refusing to allow the question to be asked. The very gist of this action, as indicated by the appellant’s offers of proof, is the fraudulent misconduct of the directors in effecting a sale of the. company’s effects to one of their own number, by which the rights of its creditors were utterly ignored and sacrificed. In this state of the case it was clearly cpmpetent for the appellant to show- the actual value of the property sold to Surbridge and replevied in this case, as compared with the amount to be paid by him for the bicycles. This offer constitutes the fourth exception, and we think the testimony was clearly admissible. [45] The fifth exception is taken to the refusal of the Court to permit the appellant to read to the jury the notes payable in bicycles, which the witness, Schindel, had accepted from Surbridge in payment of his stock in the company. Schindel had previously testified without objection, that he was one of the original incorporators of the company and one of the directors, who, together with others, had participated in the sale of the company’s effects and property made to Surbridge, who had paid none of the purchase notes. We think the Court erred in refusing to allow the appellant to read these notes to the jury, for the reason that the controversy with the appellee is but part of a general intrigue to cheat and defraud the creditors of the company, and all of the directors who participated in the consummation of the fraud are in a greater or less degree affected by it. So that, whilst Schindel’s notes were unmistakable evidence of his own misconduct, they were more. Taken in connection with the other proof in the record, they clearly demonstrate that they are only integral parts of a common design for wrong doing, in which the appellee is shown to have been an active participant. It is only necessary to say the sixth, seventh and eighth exceptions should have been overruled. We think the mortgages, judgments and account should have been admitted. The issue here is one of fraud, and the proof offered is clearly applicable to the issue, and on that issue directly depends the right to the possession of the property replevied. The admissions of the appellant receiver contained in the record do not affect or impair the rights of creditors, whose protection it was his duty to enforce. The assets of the company, insolvent as it manifestly is, must be applied, not to reimburse to directors any losses which they may have sustained, but they must in good faith be applied to the payment of the creditors of the company according to their respective legal rights. It might as well be said here, at the conclusion of this [46] somewhat remarkable case, that it matters not how the assets of the company have been concealed, misappropriated or misapplied, it is the duty of the appellant receiver to strike down all disguises and contrivances which ingenuity has suggested, and which have been resorted to for the purpose of depriving the creditors of their legal rights, that the directors might profit thereby. In this case the remedy by action of replevin is appropriate and proper. (Decided March 26th, 1895.) The instruction granted by the Court was, we think, erroneous, and should not have been granted. There was sufficient evidence before the jury for the case to have been submitted to them. Our conclusion is .that the judgment below must be reversed. Judgment reversed and new trial awarded.