The Helena independent. [volume] (Helena, Mont.) 1875-1943, 1891-05-23
The ASSIGNMENT IS VOID.
Eastern Merchants Win Their Case
Against R. H. Kleinschmidt and
Boesmann Brothers.
The Transfer, Was in Law, FRAUD
Of Most Objectionable
Character"
,vr,.~ Fermentation Had No Breath of Life
save what 1T Derived From
KI~einschmidt."

Judges Hunt and Buck, Of the distric
court. rendered a very important opinio
Yesterday in the case of Henry Teitig an
others, eastern merchants, wko brought at
tachment proceedings against the defen
dants. aggregating about 5000. In
opinion is given in full as follows: I'm thi'
case it appears from the facts disclosed by
the evidence that the three BOSNIAN
brothers. residents of Helena. foreigners
not very familiar with our language ant
unfamiliar with our laws. with the assls-
lance Of the defendant, R.H. kleinschmldt
4 man of means and business knowledge
organized a corporation for the purpose o
selling and dealing in liquor:
In this state. The three brothers afore-
said at the time were wholly without means
and without such assistance could
not have obtained credit or carried on the
business aforesaid, and Kleinschmidt had
full knowledge Of this. The corporation
vas organized and the said II. II. Klein
schmidt sold it a bill of goods, taking the
individual notes of the three brothers IL
payment of said goods. With the bill OF
goods so obtained the corporation Com
menced business operations, and shortly
thereafter Kleinschmidt surrendered said
individual notes and took a note, or notes,
from the corporation in lien, n for the
aggregate amount thereof. The only shares
Of stock ever issued in this corporation were
iaeued to the three brothers aforesaid, for
which they paid no consideration whatever.
II tins appears hat SO far as the corpora
tion was concerned it never in reality, save
for a few days. had any corporate property.
The facts further disclose that at or about
the time of the organization of the corpora
ton Kleinschmidt was to be its supporter,
and a written agreement was entered into
betweea said kleinschmidt and the trus-
tees of the corporation that if the said cor
porstion ever became involved said Klein
schmidt should be Immediately secured. II
appears in the transaction of the business
OF this corporation that said Ii. II. Klein
achmidt had full control of its officers and
its affairs. and that all it's acts. or substan-
tally all, we're done and performed at his
i%nstigation or suggestion, or by his express
direction. He fixed the salaries of en-
ployss, had frequent access to its books. di-
rected the assuming of certain %pecuniary
oblipatiops,-indeed, he was the very fpan-
cisl and commercial existence of the corpo-
ration itself. The company thereafter
bought goods from eastern merchants: and
the said Kleinschmidt endorsed its notes
from time to time as cash was incidentally
required for the conduct of its business.
Finally. the business was not paying, and
being largely in debt to eastern merchants,
but with 4 large stock of goods on hand,
said R. Il. Klsinschmidt directed its trus-
tees to make an assignment to him of all
its assets, giving him and a corporation in
which he was interested preferences which
would consume all these assets. Certain of
said eastern creditors of the corporation
who, if this assignment were allowed to
stand, would be wholly without any remedy
for it's Indebtedness to them, now seek
to set this assignment aside. We are
of the opinion that the acts
of said Kleinschmidt in connection with
the management of this corporation, and
the part he took in its organization, have
placed him in the same attitude as if he
had been q s~tockholder and director in the
corporation itself. To him, and him alone,
ii due the fact that men wholly without
means, psrfecting a corporate organization
of q character never contemplated by oul
statutes, we're enabled to obtain credit
from and deal with these eastern mer-
chants in the same manner as the solvent
xHerchsntS of our state. WHAT the pur-
pose of Kleinschmidt was in the premise!
Az AZ aVOOl06b ~ olotuo0 v Oil CkAlStS
standpoint, but from a legal standpoint i
was q fraud in law of a most objectionabl,
character. To allow such a course of bust
ness to prevail would be, in effect, to coun
tenance conspiracies to purchase good
from eastern merchants with the secret in
tention of never paying for the same. |
would result in discrediting the tinancia
credit Of the state abroad, and woul
strike q blow at all the struggling mer
rhaDtn aud GnaIArH IN Montana For
such transactions were tolerated none Blu
the wealthiest merchants could obtai
credit in the eastern states. From the yer
inception of this corporation it had n
property upon which to base capital stocl
1t had no credit, no standing, no stability
except that lent to it by the defendan
kleinschmidt. The written agreement b.
tween Kleinschmidt and the Bosnian
Brothers that they wsre to give him tn
preference at the first occurrence OF finan
cial difficulties, in connection with his at
solute control Of the affairs of the corpt
ration, placed said Kleinschmidt in
peculiar and decided position of al
vantage as against subsequent credit
ors. kleinschmidt, M he alone {
the hazard of crediting it; and he ha
ne right to give it q credit which might il
jure innocent persons. His control of j
affairs and the officers, their subsection
and reliance upon him, to all lntents ar
purposes made the corporation of Doe
mann Brothers d Co., a mere puppet in h
hands. 1t may be fairly inferred from IL
evidence that the goods Kleinschmidt 30
to the corporation were sold at a lar
profit. If the corporation was ~successf
kleinschmidt was in a position to make G
cessive profits; if it failed he was to 10
nothing. AS between Kleinschmidt al
the corporation such an arrangement "
neither immoral nor illegal, but as to pc
sons deluded by such a course of dea!i.
into giving credit to E corporation which
reality had no existence, apart from klei
schmidt, the conclusions are necessari
very different. These eastern creditors, 1
plaintiffs in the suit, had q right to belle
and assume as Il fact in dealing with it, I'll
the corporation of Boesmann Brothers
Go. had an existence and stability Of
own; the honor of the state as voiced in
laws was a sufficient guaranty of this, a
it was not incumbent upon them to anti
pate that the corporation was an intangll
technically, a shadow, owing its eXistcI
to a man who, while responsible for it a
its course of dealing, nevertheless ende,
ored to carefully abstain from any dir
personal risk to himself. The CORPORATE
had no breath of life, save what it derry
from kleinschmiCt.
Had it existed and ever had a credit
its own before he gave it credit, or had
lone what he did in an endeavor to e
assistance to something in actual ~existen
then our conclusions might have been d
ferent.
st is held By good authority that
sgreemeLt honestly entered into betwee
debtor and his creditor, whereby tho deb
aprees to prefer in an assignment the p
ticular creditor, is not necessarily frau,
lent and will not by itself be sut1icien,
;nvalidate an assignment as to a third or
itor who was ignorant of such an arran
ment; but all tho facts and circumstance,