Holmes v. Schmitt

NOURSE, J.

Plaintiff sued as trustee in bankruptcy of Fox Brothers Sporting Goods Company (a Corporation), to recover $9,000 alleged to have been received by defend

[690]

ants on behalf of the bankrupt. Plaintiff had judgment for $8,390.85 against both defendants, from which they appeal on a typewritten record.

Two grounds are urged for a reversal of the judgment— that the plaintiff was not authorized by the United States district court to prosecute the action, and that the evidence is insufficient to support the findings and judgment. The defendant Fox was the sole owner and directing head of the corporation, which was engaged in the sporting goods business in Grand Junction, Colorado, on June 4, 1923, when the stock and fixtures of the concern were damaged by fire. Fox obtained from the insurance companies, as compensation for the damages, $4,615, and received, by way of salvage from the damaged goods, $3,775.85. For some time following the fire he conducted a fire sale to dispose of these goods and on December 20, 1923, paid to his mother $3,500 and to his sister $1,200 which, he claimed, had been loaned him for use in the business. On December 24, 1923, he claimed to have received from his co-defendant, who was his nephew, the sum of $9,000 for the purpose of investing it in California. This sum, he testified, was received by him in'cash and carried upon his person until April, 1924, at which time he purchased three cashier’s checks in St. Louis for the sum of $3,000 each, which he carried with him until June, 1924, when he deposited them in a bank in Los Angeles. This deposit was made in the ■ name of Henry M. Schmitt, but the defendant Fox procured from Schmitt a power o£ attorney which authorized him to draw the money from the bank. On February 29, 1924, defendant Fox was adjudicated a bankrupt and at the trial of this action he testified that at the time of this adjudication he had no assets of any kind or no property belonging to the corporation. The judgment in this action represents the sum of the value of the salvaged stock which the defendant Fox disposed of after the fire and the amount paid to him by the insurance companies for the loss. It is the theory of the plaintiff and respondent that these sums were obtained by Fox as assets of the corporation and that the purported repayment of loans to his mother and sister was made to cover up the misappropriation by him of corporate funds and that the purported transaction with his nephew whereby Fox claimed to have received the sum of $9,000 for purposes