Court Opinion

ID: 5241573
Source: CourtListenerOpinion
Date Created: 2022-01-06 17:27:21.382911+00
Date Added: 2024-06-11T08:27:48.813359
License: Public Domain

Kellogg, P. J. (dissenting) :
Wingate owned the entire stock of the Republican Art Printery, Inc., a corporation. He sold to Labaree “all that certain printing and publishing business, now conducted by me on Main Street, Chatham, Hew York, and known as the Republican Art Printery, Incorporated, including the good will thereof, lease, if any, stock in trade, machines, fixtures, and appurtenances, job and advertising books, outstanding subscription accounts, and each and everything used by me therein,” for $10,500, receiving $6,500 in cash; for the remaining $4,000 Labaree was to execute a chattel mortgage “for said amount upon all the business hereinabove sold,” etc. The contract also provided that Wingate was “ to pay all accounts due from said Republican Art Printery up to the date of said sale.” This was more than a sale of the capital stock of the corporation; it was a sale of the printing and publishing business as conducted. The fact that Wingate was to pay all accounts against the business indicated clearly that it was the sale of the business and not merely of the capital stock. The corporation, after Labaree took control of the business, executed the notes in question and a chattel mortgage to Win-gate for the $4,000, the mortgage reciting that the printery is indebted to him in that amount, “being for sufficient good and valuable consideration.” The judgment appealed from sets aside the notes and the mortgage given to secure them, upon the ground that they represent the individual debt of Labaree and not the debt of the corporation, and are, therefore, void as to the corporation, although apparently Labaree owned all the stock at the time the notes were paid, one share standing in the name of a relative who was financing the enterprise for him. In various forms upon the trial the defend*733ant sought to show that the notes and mortgage represented an indebtedness which the corporation owed to Wingate at the time the contract was made. The trial justice excluded this evidence, apparently upon the ground that it contradicted the terms of the written agreement and was immaterial. The defendant excepted. Clearly, if the corporation owed Wingate the $4,000 and Labaree purchased the printing and publishing business, that would, when consummated, extinguish the indebtedness from the corporation to Wingate, so far as Labaree was concerned, but would leave an obligation from the corporation to Labaree for paying Wingate. If by the sale Labaree caused the corporation to issue to Wingate notes and a mortgage for an amount which the corporation owed Wingate, it has suffered no injury at their hands. It has simply changed its account liability to Wingate to notes and a mortgage liability, showing clearly that the notes and mortgage were given for a full and fair consideration. It did not contradict the instrument to show that the notes and mortgage executed by the corporation were in fact for the very indebtedness which the corporation was then owing to Wingate on account. The ruling apparently overlooks the fact that Labaree was buying the business and not merely the stock of the corporation, and also overlooks the fact that by the agreement itself the debt which the corporation owed to Wingate would cease to exist upon the consummation of the transaction, except so far as it was represented by the mortgage and notes. Perhaps the agreement, strictly construed, contemplated a sale of all the assets and business to Labaree, and that Labaree as an individual was to execute the mortgage, thus stripping the corporation of its practical existence. There is nothing in the written agreement or in the transaction tending to show that it was the intention of either party to relieve the printery business or corporation of the debt it owed to Wingate. In fact the terms of the instrument implied that the business was to remain indebted to Wingate in the sum of $4,000. There is no reason why Labaree should individually pay the debt which the corporation owed to Wingate, and we see no good reason why the notes and mortgage, the evidence of the corporation debt, to Wingate, should be canceled and the purchaser lose their value *734and the corporation be relieved of the debt in direct violation of the obvious intent of all the parties. I, therefore, favor a reversal of the judgment and a judgment dismissing the complaint, with costs.
Judgment and order affirmed, with costs.