Rennells v. Potter

Kuhn, C. J. (after stating the facts). By elaborate argument at the hearing and in well-prepared briefs counsel for the appealing defendants earnestly contend that these findings of the trial judge and the relief granted were without justification, and that there was no testimony to warrant the conclusion that these parties were engaged in a conspiracy to defraud creditors, but that rather the parties acted honestly in their [56] dealings and established the new business, to wit, the Furniture City Tea Company, not with the idea of taking over the business of the De Witt-Potter Company, but for the legitimate purpose of establishing a new business and getting their customers wherever they could. With these contentions we cannot agree. This record cannot be read, in our opinion, without irresistibly coming to the conclusion that the alleged sale and transfer of the horses, wagons, and harnesses in July, 1914, was fraudulent in fact. Clearly the sale was made when the De Witt-Potter Company was insolvent ; it was made to the father of one of the partners and an employee of the firm, who knew, or ought to have known, of its financial condition. It also appears that the sale was made for an inadequate consideration. It appears that property worth $1,155 was sold for $700. It is claimed that the defendant William H. Potter had loaned the De Witt-Potter Company the sum of $700, that this loan was made in two installments of $800 and $400, respectively, in the months of February and March, 1914, and that the De Witt-Potter Company gave William H. Potter its note or notes to cover that amount. It appears that on March 1, 1914, the De Witt-Potter Company gave the Musselman Grocer Company a financial statement for the purpose of securing credit, and, according to this statement, William H. Potter was not a creditor of the firm. Furthermore, the books of the company fail to show that William H. Potter was a creditor to any amount, although the alleged transfer of property was carefully recorded. The horses and wagons did not change possession after the sale, and no creditor was given any notice of them, and the bill of sale was never recorded, and did not make its appearance until after the bankruptcy, and Mr. Voss, one of the drivers, testified that Mr. Rennells told him that it was dated back. [57] Late in September following the sale of the horses, etc., we find negotiations pending for the purchase of the little grocery stock at 609 Lyon street, in which negotiations John E. Rennells, Bert Potter, and William H. Potter are active. The circumstances, which the record discloses took place at the old store and at the new place of business, in our opinion clearly indicate that this whole move was carefully planned and premeditated. On the evening of October 19th, when the drivers came to the office, they were paid for one day’s work, and were told by Mr. Rennells that the De Witt-Potter Company was going to close up, that they would not be needed any longer, and that they could get a job at the Furniture City Tea Company if they would report at 609 Lyon street the next morning. In the meantime this little grocery business had been transformed into a tea and coffee store, prize tickets had been printed, and other preparations had been made to start the business full fledged as a tea and coffee store on the 20th. It is unnecessary for the purposes of this opinion to attempt to review all the circumstances and facts which sustain the theory that the change was not'sudden, unexpected, or unpremeditated. It is sufficient to say that, as a result of these acts, the De Witt-Potter Company was forced into bankruptcy, and what assets were left to the estate had to be sold for about $1,300, and there was thus left less than $1,500 to pay debts amounting to more than $12,000. We think it is clear that fraud permeated this entire transaction and every detail of it, that the findings and conclusions of the circuit judge are fully justified, and agree with his conclusion that “to permit this attempt to be consummated would be a reproach upon the law and a perversion of justice.” Considerable complaint is made because the decree did not provide for the payment of the debts and obli [58] gations of the Furniture City Tea Company and the claims of Mr. William H. Potter. The lower court found and decreed that the Furniture City Tea Company is the í)e Witt-Potter Company under a new name, which, as we have already said, we believe the evidence fully justified. William H. Potter and all others who had dealings with this bankrupt, if they have any claim, should go into the bankruptcy court and have their rights there determined. It is also contended by the appellant that the bankruptcy act was not properly in issue in this case, because it appears that the bill of complaint was filed in October, 1914, and the petition for bankruptcy was not filed until in November, 1914, and that the trustee in bankruptcy should have been brought before the court by way of supplemental bill, and not by way of amendment to the original bill. In the case at bar the trustee, after having been authorized to do so by the bankruptcy court, petitioned the lower court for the right to intervene, and this right was granted by an order of the court. See Stone v. Ingham Circuit Judge, 105 Mich. 234 (63 N. W. 79); Earl v. Jacobs, 177 Mich. 163 (142 N. W. 1079). The intervener having by leave of the court become a party, he becomes suchi for all purposes of the suit, and thus carries with him his character as trustee in bankruptcy. 16 Cyc. p. 203. The rule with reference to a supplemental bill is thus stated by Mr. Jennison in his work on Chancery Practice, p. 359: “A supplemental bill is used for the purpose of supplying some irregularity or defect discovered in the frame of the original bill,-or in some proceedings under it, or where by an event subsequent to the commencement of the suit a new interest in the matter in litigation is claimed by an existing party to the suit, or a new party claims, but not by mere operation of law, the interest which was claimed by an existing party.” [59] The trustee in bankruptcy was a new party claiming only such interest as acquired by mere operation of law, in which case, in our opinion, it is not necessary that a supplemental bill be filed, it appearing that, aside from the adjudication in bankruptcy and the trustee’s election and qualification as such, the facts set up by the complainant’s second pleading are facts which existed at the time the original bill of complaint was filed, but which were not then known to the complainant, for the reason that they were concealed by the debtors themselves. Under these circumstances it is entirely proper to present them to the court by way of amendment instead of by supplemental bill. We are of the opinion that the trial judge has reached an equitable and just conclusion, and therefore affirm his decree, with costs to the appellee. Stone, Ostrander, Bird, Moore, Steere, Brooke, and Fellows, JJ., concurred.