Court Opinion

ID: 5193745
Source: CourtListenerOpinion
Date Created: 2022-01-06 15:40:10.31996+00
Date Added: 2024-06-11T08:27:00.039855
License: Public Domain

Laughlin, J.:
The appellant contends that the findings of the learned trial court to the effect that the bill of sale was intended as an absolute transfer of the plaintiff’s interest in the- business, are against the weight of evidence, and that competent material evidence upon that issue was erroneously excluded. The substance of the testimony and evidence which we deem material is stated in the statement of facts. There is also evidence tending to impeach the credibility of the respective parties and of other witnesses, and there are many other items of evidence shedding more or less light on the litigated questions, which cannot be stated within the reasonable bounds of an opinion; but it has all been .given due weight. The credibility of the appellant is so shaken by his own. cross-examination that we would place but little reliance upon his testimony standing alone. The probabilities of the case, however, support the contention that this instrument was given to secure the firm’s indebtedness to respondent, and that it was executed in the form of a bill of sale in order that he would have absolute control of conducting the business in case of the firm’s financial embarrassment or of liquidating the business, unhampered by any interference on the "part of appellant.
The appellant does not seek relief from, the bill of sale on the ground of fraud or mistake. He merely claims the right to show, under a doctrine well established and looked upon with favor by the courts (Horn v. Keteltas, 46 N. Y. 605 ; Mooney v. Byrne, 163 id. 86 ; Barry v. Colville, 129 id. 302), that though absolute in form it was intended as security. No burden of showing fraud or mistake rested upon him. Of course, in so far as the instrument is in' conflict with his present claim, he has the burden of adducing evi*42den ce ■ satisfactorily explaining how it came to be drawn as an absolute, instead of a conditional, transfer. Although appellant now claims not to have known at the time he signed the instrument that it was an absolute bill of sale, yet this is no bar to his obtaining relief, the same as if he conceded that it was understood that he was to execute an absolute bill of sale, and that he so intended, but that the agreement was that it was to be held only as security. Surely, if he could obtain relief on this theory .by admitting that he knew the bill of sale was absolute, his rights can be no less merely because he claims he never agreed to give an absolute bill of. sale, but only to transfer his interest as security for respondent’s claim against the' firm. The absoluteness of the bill of sale and its recitals are not altogether irreconcilable with appellant’s claim that it was intended as security. The recital that the firm was dissolved - is the most difficult.to harmonize with this theory.
The respondent claims that the appellant’s interest, was of no value, and that the bill of sale was executed upon that under-, standing,. Appellant claims it was of great value; and if so, he-being in charge of the business and thoroughly familiar with the assets and liabilities,, he knew the fact and would not likely make a gift of the only property he had tb his brother-in-law, who was well to do financially, • If the firm had been dissolved and there was to be an accounting, he suggests that there would be no necessity for a bill' of sale as security. On the other hand, if appellant’s interest was of no value and respondent intended, as he represented, to close out the business, there would be no necessity for his taking a bill of sale, and the only office it would serve would be to obviate an accounting or dissolution proceedings. ■ This is scarcely an adequate explanation, when it is remembered that he intended to allow the business to be closed out by appellant, who fixed the selling prices,. as it was doubtless contemplated that he should. The relations of the parties continued friendly, and it is not probable that in these circumstances there would have been any difficulty over an accounting. The respondent did not. assume or agree to pay the debts of the firm. There were no negotiations for a purchase and sale. There was no inventory of stock, or examination of books, to ascertain the firm’s financial condition. It is quite- significant also that, according to the testimony of the respondent, there was no express *43agreement with respect to appellant’s continued connection with the firm. If the bill of sale was intended to be absolute, it is not likely that respondent would unnecessarily exact an agreement that his son should take charge of the business. If appellant retained no interest in the business, and it had not been understood that he was to continue in the charge and management thereof as before, except with reference to signing, checks, it is highly improbable that lie would have been given this general charge, which became as exclusive as ever after the first six weeks. Hor is it probable that the business would have been continued in the firm name, which would have been a violation of law. (Penal Code, § 363.) The fact that respondent’s confidence was restored soon after taking the bill of sale and placing his son in charge of the finances tends to support appellant’s claim that the son was sent here until the condition of the business could be ascertained, and that the bill of sale was given as security. Concededly, the respondent was dissatisfied with appellant’s .management; and appellant says he was willing to transfer his interest to respondent as security. Whether it was the intention of respondent to take the bill as security pending the dissolution, or, as claimed by appellant, until such time as the firm’s indebtedness to him should be discharged, it is not surprising that his attorney, who was admonished to draw up a paper, with a view to enabling respondent to have full possession and control in case of any “ trouble,” as respondent puts it, should prepare an absolute bill of sale and insert a clause reciting the dissolution of the firm. That would certainly accomplish what he was directed to obtain, and there might be a difference of opinion as to whether anything short of it would. Hor was it strange that • appellant, who, owing to friendship and confidence, refrained from consulting his own attorneys, should sign the instrument in that form. The obstacles to be overcome in reconciling the appellant’s theory of the case with the bill of sale which he executed, are insignificant in comparison with the difficulties encountered in endeavoring to reconcile the respondent’s conduct with the bill of sale as an absolute transfer. The continuance of the firm business for nearly a year and a half with appellant in absolute charge, except that he did not draw checks for six weeks, the rendition of accounts by the firm to respondent, and by him to it, and the many representations *44made by him during this period in letters and verbally to customers and others, and his other numerous acts briefly recited in this opinion, cannot be readily accounted for consistently with respondent’s absolute individual Ownership of the business during that period, and if that were the fact, • it is inconceivable that; he should have written the letters to appellant herein quoted, requesting as a favor from an employee in charge of his own business funds that belonged to himself.
Upon the trial, the appellant, for the purpose of corroborating his statement that the bill of sale was merely intended to secure respondent on account of the firm’s indebtedness to him, on his main case offered evidence tending to show, not only that the firm was solvent, but that the assets exceeded the liabilities in a considerable amount, so that he had a substantial interest in the business. This evidence was objected to and excluded on the ground that the court would not go into an accounting in determining the main issues, and appellant excepted. Subsequently appellant was permitted to show from his personal knowledge and examination of the stock what he thought was the value of the assets^ the amount of the firm’s indebtedness to the respondent and to- others, separately and in gross. His evidence tended to -show that there was a surplus of assets over indebtedness cf $107,947.17. The respondent was permitted to controvert this by the testimony of an expert accountant, who- testified to the condition of the firm affairs as, shown by its books, from which he assumed that the liabilities exceeded the assets by $7,844.48. It appeared that there were transactions that were not entered in these books at all, and in some instances only the sales of certain commodities were entered, there being no entry- of the purchase or of the amount on hand. The expert testified that his calculations were made exclusively from' the books, and lie-deducted ten per cent of the stock shown to be on hand by the books, “ for lost, stolen and different things, as a matter of custom,” and computed the price from the average of all the purchases entered on the books for the entire period - of the copartnership down to the execution of the bill of sale. The appellant claims that there was other stock on hand in large quantities, not shown by the books, and that the price assumed by the expert was not the current market price at the time of the execution of the *45bill of sale. He had prepared an estimate from personal examination on November 10 and 11,1889, which the court excluded under respondent’s objection and appellant’s exception. On objection interposed by the respondent, the court precluded appellant from testifying as to the market price upon which the value of the stock on hand should be figured, upon the ground that the testimony of the witness should have been exhausted when he was first upon the stand. From the subsequent admission, during appellant’s case, of the general evidence relating to matters concerning which the court had excluded special evidence, it may be that the court intended to change its ruling and permit appellant to establish the solvency of the firm; but the record contains no other evidence of a change of intention on the part of the court in that regard. Perhaps the appellant should have again offered specific evidence of the assets and liabilities. We think, however, that it was important evidence and would have materially aided in solving this important question of fact. Whatever the condition of. the firm was with reference to solvency or insolvency, the appellant undoubtedly possessed accurate knowledge on the subject. If the firm was insolvent, then, of course, it is not improbable that he would be willing to execute a bill of sale of his interest; but if the firm were solvent, so that he had a substantial interest in the business, nothing is shown as an inducement for his executing the bill of sale.
It follows that the judgment should be reversed and a new trial granted, with costs to appellant to abide the event.
O’Brien and Hatch, JJ., concurred; Patterson and McLaughlin, JJ., concurred in result.
Judgment reversed, new trial ordered, costs to appellant to abide event.