Binns v. Thompson

ALSCHULER, Circuit Judge (after stating the facts as above). It is the law of Illinois that where a vendor, parting with possessing of personal property, reserves in himself the title, he may assert his title as against creditors of the vendee, except such as, while the property is in the vendee’s possession, have levied an attachment or execution thereon. And if, prior to any such levy, the vendor acquires possession of the chattels, his title will prevail as against any attachment or execution. Union Trust Co. v. Trumbull, 137 Ill. 146, 27 N. E. 24; Staver Carriage Co. v. Richardson, 203 Ill. App. 620, and cases there cited In re Rodgers, 125 Fed. 169, 60 C. C. A. 567. 7. For five or six weeks next preceding bankruptcy proceedings (which alone here could give the creditors the standing of a levied attachment or execution), Binns was in the actual exclusive possession of the property, and he must prevail in his claim therefor unless the record discloses reasons wherefor he should fail. From the petition and the record and briefs and arguments, we understand appellees’ contention to be (1) that the property had passed to the corporation, and that the agreement of August 24 was fraudulent and void because entered into by Thomas alone, and that Binns therefore had no right under the agreement to possess himself of the property; (2) that Bihns knew and intended that the property should pass to the corporation, and be by it used as the basis for credit, and that therefore he may not as against the creditors assert his ownership of the property. If we accept the contention that by means of Thomas’ proposition and acceptance as written in the corporate minute book, Thomas’ interest in the property passed to the corporation,* what was then in fact conveyed? Clearly only such interest as Thomas had under the May 4 contract, and this was but a right to acquire Binns’ title upon compliance with the contract terms. Thomas, the president, and the. [396] practical owner of the corporation, and its directing spirit, did not convey to it a better title than he himself had. But whatever of equity in the property the corporation acquired, it would be Thomas’ duty to protect as best he could. By the contract Binns was empowered after May 21 to end the Thomas interest, if by that time the terms he agreed to were not fulfilled. If, therefore, there was an equity to be protected, naturally Thomas entered into negotiations with Binns to such end. It is evident Thomas had no funds of his own, and he was making desperate efforts, not only to raise money to pay off Binns, but also to induce Binns to grant further time for doing so. The undertaking to bring the property to Chicago was in the interest of the corporate enterprise, and Thomas’ efforts to that end would be clearly within his scope of duty in his management of the corporation. We find no record or hint of any repudiation by the corporation of any of his long series of transactions in that regard. If there can be said to have been a corporate plan and purpose, it was to establish this clock business in the Chicago plant. Thomas’ action in bringing the property to Chicago, notwithstanding this was in violation of the agreement with Binns, was in furtherance of the corporate purpose, if there can be said to have been any such; and Binns’- ultimate consent that the property be brought to Chicago was a corporate benefit of which the corporation, if concerned at all, promptly and fully availed itsfelf. It is the claim that the property when brought to Chicago became the property of the corporation, and was by it being used for its own benefit. But without Thomas’ negotiations with Binns, the property would have remained at Rockton. The, corporation cannot take the benefits of Thomas’ negotiations to secure for it possession of the property without at the same time -assuming the burden of whatever Thomas agreed to as the condition for such consent by Binns. It is very apparent from the record that Binns never did consent nor would have consented that the property be brought to Chicago, unless he retained title, and was protected in it until the stipulated conditions had been performed. The fraud alleged in the bankruptcy petition consists primarily in Thomas executing in his own name the agreement of August 24. But there is nothing in this agreement which differs radically from that of May 4, the main feature being a definite extension for time of performance. But let it be assumed that because that agreement purports to have been made by him, and to his signature is not appended the word “president,” it is not an agreement of the corporation. Nevertheless it embodies the terms and conditions upon which'Binns consented to the change in possession, the dominant feature of which, as in the May 4 contract, is that the title remain in Binns until the purchase price is paid or secured. Indeed, one cannot read the record without concluding that at no time during all these transactions did Binns consent to part with his title on any other terms. It follows that, if the corporation would have the benefit of the possession and use of this - property, it can háve it only upon the terms upon which Binns consented to part with the possession. Under the circumstances here shown fine distinction cannot be drawn between acts of Thomas and those of the corporation, for in the broad [397] sense Thomas was practically the corporation. He held substantially all the stock that was issued, and this was paid for by going through the form of having the minutes show his transfer to the corporation of his equity in the Binns property. Every act of any consequence was transacted by Thomas. He bought and sold, hired and discharged, and the corporate records show no corporate acts concerning such things. The corporation never had any books, accounts, funds, or any banking connections. To all intents and purposes it was a paper organization merely. In this view the omission from the contract of August 24 of the corporate name, or from Thomas’ signature of his official title, is not significant, and cannot impair Binns’ title to the property as in the contract reserved unto him. We are not impressed with the contention that Binns’ conduct in relation to this property gives to the creditors any larger rights as against his title than Thomas or the corporation possessed. To be sure he was desirous of selling the property, and he may even have supposed that Thomas would raise some funds to pay him for it, by selling stock in the corporation. This was not inconsistent with Binns’ retention of title to the property. The fact that he had at least a claim for the purchase price was well recognized by the principal creditors, and we do not think the record discloses any substantial evidence to warrant the conclusion that he did anything to lead others to believe he had parted with his title. On the contrary, it seems that he asserted his right whenever it was assailed or called in question. One witness, who was produced when the cause was re-referred, testified that Binns told him in substance Thomas was his partner or agent or promoter for disposing of the plant, and that under certain circumstances the plant was his, and under others it was to belong to Thomas or the corporation. This testimony is so at variance with most of the evidence that, apart from Binns’ own contradiction, the conduct of all the parties refutes it. The general belief of the largest creditors a few days before Binns finally took possession of the property, is deducible from a letter to Binns, September 30, from the principal creditor, Crane, who said therein: “Mr. Thomas agreed to sell out to me, but later he refused to do so, and as his payment of $0,000 to you is due to-day, and, if not met, will forfeit his contract, I am writing to you about this matter, since I have advanced all of the money which has been expended by Mr. Thomas, and unless something is done I may lose this money. Furthermore, your property is being cared for at a certain expense, and will continue to be so eared for unless you order differently, and hence certain sums will have to be paid by you, which might not have to be paid if Mr. Thomas was responsible.” The Crane deal was not consummated. And under date of September 27 creditor Carter wrote Binns, saying, “In looking over the contract with Mr. Thomas, I find that payment of $6,000 must be made by September 30th,” and suggests a purchaser for the property who would make a new contract with Binns; that unless he (Binns) had made other arrangements he is sure he could make a satisfactory contract with this man. These gentlemen, in their testimony, seek to avoid the force of the letters by saying that at that time they did not know of the fraud which they assumed existed in Thomas, and not the cor [398] poration, entering into the contract of August 24. If, however, Binns in any way deceived or defrauded any creditor, action against him therefor would be in no way affected by the bankruptcy. When Binns on October 3 repossessed himself of the property there had accrued no liens thereon, such as the Illinois authorities hold sufficient to divest him of his title, and his undisputed possession thereafter until the seizure by the marshal under the bankruptcy proceedings begun December-4 clearly entitled him to restitution of the property in accordance with his petition therefor. The order denying Binns’ petition for restitution is reversed, with direction to the District Court to grant the petition. The foregoing disposition of the petition for restitution of the property leaves Binns without any interest in the outcome of the bankruptcy proceeding, and his appeal from the order of the District Court adjudicating the Thomas Electric Corporation a bankrupt is therefore dismissed. The costs of the two appeals shall be borne, one-third by the appellant, and two-thirds by appellees.