McGirr v. Humphreys Grocery Co.

KIEIJTS, District Judge. The exceptions in this case deal very largely with the special master’s conclusions of fact subsidiary to the ultimate fact upon which only can his conclusion of law be founded, wherefore the court need not follow the laborious and detailed argu [56] ment of counsel for defendant in which error in the master’s conclusion as to matters purely evidential or subordinate to the final analysis of the case is attempted to be shown. The master may have-erred in his detailed statement of the effect of the testimony many times, and yet have reached a right conclusion as to the ultimate fact. [1] Before the relief demanded by the trustee may be had, these three questions must be answered in the affirmative: Was Z. É. Rollins insolvent at the time of the payment to' defendant? Did the payment operate as a preference to defendant? Did the defendant at the time know, or have reason to know, of the insolvency? The first two need no discussion. That each should receive an affirmative answer is not open to dispute. The whole case hinges on the application of the testimony to the third. Two propositions are in force to work an answer to this question, from the facts before us: First, that the doctrine of responsibility for inquiry is of full force in such a case as this; and, second, that we may concede and use judicial notice of business customs and methods as criteria for valuing facts as imposing the duty of inquiry. Applying these propositions, we very readily see from the testimony that the special master was right in finding an answer to this third question. 'Considering the history of Rollins’ account with the Humphreys Grocery Company, how it increased steadily on the debit side, it is inconceivable that the defendant should not have reached an apprehension that its customer was failing. This was' apparently defendant’s state of mind when it demanded that Rollins should deal with, it exclusively. That arrangement, it seems to us, peculiarly and especially thereafter, put the company on inquiry, a relation it occupied' With increasing emphasis, as still the unfavorable balance grew. [2] When once the duty to inquire occurred, it was not met, under the circumstances of this case, by inquiry alone of Rollins. It is not readily credible that a man with capacity sufficient to appoint him to the work of salesmanship for a wholesale house may be held to accept Rollins’ word and inquire no farther, in the face of things which he might see every day, had be been but reasonably curious. Modern business is more alert than this. One charged with the duty of inquiry is not excused by the acceptance of an answer which could so readily have been tested for untruth as could that of Rollins, which McConahy says he blindly acted upon. But the most ordinary activity on the latter’s part, involving little more than mere inspection of the-stock and the most casual inquiry, would have shown the falsity of Rollins’ statement. We think that the situation required this additional caution on McConahy’s part, and that failure to observe it prejudices the claim of defense that'it had no reason to suspect the unquestioned insolvency of its customer. However this may be, there can be no question but that the defendant had almost actual notice, through McConahy, of the insolvency at the time the money was paid on Rollins’ account by Cóm-rie. Then McConahy learned two things: First, that the stock would-not invoice half of Humphreys’ account; and,, second, that the bank. [57] was also a large creditor. These circumstances were enough to put the most obtuse business man upon active inquiry, if they do not amount to actual notice. The most superficial review of Rollins’ circumstances then would have shown that the little shoe stock, and the book accounts, being all the rest of her visible assets, would not have anywhere near approximated in salable value the $1,400 additional necessary to pay defendant and the bank, and the discovery of the latter claim was a loud call upon defendant to investigate for other debts. Our conclusion is that the special master was right, and his report and recommendation will be made the order of the court; the exceptions thereto being disallowed.