Summary
In Kamlapat, the case was not decided on the terms of a contract but rather on the fact that the asset was transferred to a party that was not an insider and the debtor "obtain[ed] fair value for the goods."
Summary of this case from Jenco LC v. SJI LLCOpinion
41605.
ARGUED NOVEMBER 2, 1965.
DECIDED NOVEMBER 19, 1965. REHEARING DENIED NOVEMBER 30, 1965.
Action on contract. Savannah City Court. Before Judge Oliver.
Brannen, Clark Hester, Perry Brannen, W. Ward Newton, for appellant.
Adams, Adams Brennan, Edward T. Brennan, for appellee.
The evidence demanded a verdict in favor of the claimant and the court erred in denying its motion for judgment notwithstanding the verdict.
ARGUED NOVEMBER 2, 1965 — DECIDED NOVEMBER 19, 1965 — REHEARING DENIED NOVEMBER 30, 1965.
Purvis-Wade Carpet Mills, Inc. entered into a contract with Sitaram Mahabirprasad, of Calcutta, India, for the purchase of monthly shipments of stated amounts of jute to be used as backing in the manufacture of carpets. After a quantity of the jute was received by the mill a dispute arose as to its quality. Purvis-Wade declined to take further shipments, and 392 rolls accumulated in the warehouse at the docks. There were negotiations between Purvis-Wade and Sitaram's New York agent, culminating in a written agreement, signed by Purvis-Wade and by the agent on behalf of Sitaram, as follows:
"October 10, 1963. "Re: Contract Numbers B-3858, etc. and B-3870, etc. "This is to confirm the agreement arrived at between Purvis-Wade Carpet Mills, Dalton, Georgia, and Sitaram Mahabirprasad, Calcutta, India, concerning the balance of a total of twelve hundred (1,200) rolls of jute carpet backing 152" 9 ounce, still to be delivered under the terms of the above numbered contracts. It is agreed that the price under both contracts be reduced to one dollar ($1.00) per yard and Sitaram Mahabirprasad is to ship a total of one hundred (100) rolls per month beginning in October, 1963, and ending in September, 1964, that they will draw on Purvis-Wade Carpet Mills for each shipment at ninety (90) days sight d/p at the rate of one dollar ($1.00) per yard and that Purvis-Wade Carpet Mills will accept such drafts when presented and assume any storage and other handling expenses that would arise in connection with the goods after acceptance of the draft."It is specifically understood and agreed that in this connection that quality and shortage claims for previous shipments of Sitaram Mahabirprasad to Purvis-Wade Carpet Mills that have been the subject of conversation and correspondence between the two parties in the recent weeks will be presented formally with due speed and that same must be satisfactorily settled within six (6) months of the date of this agreement and that failing to do so, the then remaining balance of the shipments may be rejected by Purvis-Wade Carpet Mills.
Alfred Kramer Co. Inc., for Sitaram Mahabirprasad By (signed) _____________ Purvis-Wade Carpet Mills By (signed ______________ "P. S. Three hundred ninety-two (392) rolls of carpet backing had already been shipped by Sitaram Mahabirprasad against the original July and August portions of the contracts referred to above: This agreement has been arrived at with a clear understanding that those three hundred ninety-two (392) rolls will be disposed of by Sitaram Mahabirprasad in any way the latter may see fit without any recourse on account of price difference or otherwise against Purvis-Wade Carpet Mills."On the same date Alfred Kramer Co., Inc., by cablegram, notified Sitaram of the terms reached with Purvis-Wade, and on the following day, October 11, 1963, Sitaram proceeded to sell the 392 rolls of jute lying in the facilities of Savannah Ports Authority to Juggilal Kamlapat. The sale was confirmed by an exchange of letters between the seller and the buyer, the seller requesting that payment for the jute be expedited and the buyer asserting that it would be made by its New York agents to the bankers as soon as possible.
The jute was invoiced out October 15, 1963, to Hugh A. Chaplin, Inc. as agents for Juggilal and the invoices were sent with delivery order against a trust receipt through the Citizens Southern National Bank. Juggilal wrote their agent, Hugh A. Chaplin Co. Inc., October 14, 1963, informing them of the purchase of the jute, that Sitaram would send delivery orders against a trust receipt, asking that the goods be delivered to Fred E. Grossman Co., Inc. of New York, with whom Juggilal had a contract for the delivery of jute and that the proceeds be used in remitting to the bankers for the purchase price.
A trust receipt was executed to the Citizens Southern National Bank October 28, 1963, for warehouse receipts representing the 392 rolls of carpet backing and mailed by Hugh A. Chaplin Co. to the bank in Savannah under cover letter October 30, 1963.
Chaplin paid the accrued storage and other charges against the jute, the amount to be deducted from the purchase price, and thereafter paid the monthly charges and insurance on behalf of its principal, Juggilal.
Clearance for remittance was authorized through the Bank of Baroda, Ltd., Calcutta, India, in order to comply with the regulations of the Exchange Control Authorities of India.
For some reason Fred A. Grossman Company did not immediately take all of the 392 rolls and on February 13, 1964, Purvis-Wade, failing to reach a satisfactory settlement with Sitaram on their claim of inferior quality on prior shipments, sued out and had levied an attachment on 256 rolls remaining in the warehouse of Savannah Ports Authority, later obtaining in that proceeding a default judgment.
When Purvis-Wade applied for and obtained a short order for sale of the jute, Juggilal filed a claim in the statutory form asserting that it was not the property of the defendant in fi. fa., but the property of claimant.
By deposition Ramesawr Agarwala, manager of Juggilal, testified that for 23 years he had been in charge of their export department, was familiar with export regulations of the Indian government and that he had negotiated the purchase of the jute from Sitaram. He identified the documents and letters evidencing the purchase and sale, the invoices and the letter addressed to their New York agent with instructions to take over the title documents under trust receipt and proceed to sell the jute for Juggilal's account. He asserted that the export regulations of India require that the settlement be handled through the banks in order that U.S. currency flow into India for the goods; except for portions of the jute sold off prior to the levy Juggilal still owns and has title under the trust receipt arrangement to that which was located in the warehouse; buyer and seller are separate entities or organizations, having no interlocking business connection or relationships, and that if able to sell the jute at a profit Juggilal would have the gain, but if sold at a loss Juggilal would suffer it. In all events Juggilal was bound to pay the contract price less credit for the accumulated warehouse charges paid by Juggilal's New York agent for Sitaram's account, whether the goods were ever sold or not. "C F" means cost and freight to Savannah, and this resulted in the sale price being for some $1.02 and for the remainder $1.06 per yard.
Juggilal is a partnership composed of Sir Padampat Singhania, Kailshpat Singhania, Lakshmipat Singhania and Jhabarmal Saraf, the first three of whom reside at Cawnpore, India, some 800 miles from Calcutta, while the last named resides in Calcutta. In his deposition Hugh Chaplin testified that he was well acquainted with Juggilal, having been in India himself where he worked for a bridge company before entering his present business. It is the third largest industrial firm in India and is about 200 years old as an organization.
Mahabirprasad Saraf testified by interrogatory, taken before the U.S. Consul, that he and his brother Sitaram Saraf, constituting the partnership of Sitaram Mahabirprasad, did, as indicated by the sale documents, letters, etc., sell 392 rolls of carpet backing located in Savannah to Juggilal Kamlapat and that the purchase price had been paid subject to the Indian Foreign Exchange Regulations, though he did not remember the mode of payment. His firm owned no interest in and owed no money to the firm of Juggilal Kamlapat.
James B. Lyon, Chief Clerk of the Savannah Ports Authority, identified the warehouse receipts issued for the 392 rolls of jute, being the same receipts held by Hugh A. Chaplin Co. Inc. under trust receipt to the Citizens Southern National Bank.
Richard A. Connor, Deputy Sheriff of the City Court of Savannah, testified to having levied upon 256 rolls of the jute in the warehouse of Savannah Ports Authority on February 13, 1964.
Juggilal admitted that Jhabarmal Saraf, one of its partners, lived at 76 Cotton Street, Calcutta, India, and is the father of Sitaram Saraf and Mahabirprasad Saraf who are the partners in Sitaram Mahabirprasad, and that their residence address also is 76 Cotton Street, Calcutta. However, the building at that address is a very large multi-unit one, and each of these men rents and occupies his own apartment separately from the other, each paying his own rentals. Until 1948 Juggilal maintained an office in the building, but in that year moved to 7 Council House Street, where it remained until it recently moved to 11 Rabindra Sarani. Sitaram maintains an office in the building at 76 Cotton Street, but the firms do not have or use the same offices, telephones or telephone numbers. They are separate firms at different locations.
At the close of the evidence claimant's motion for a directed verdict was overruled. The jury returned a verdict finding the property subject to the levy, thus finding against the claimant. To the overruling of a motion for judgment n.o.v. and an amended motion for new trial claimant excepts.
Plaintiff in execution, Purvis-Wade Carpet Mills, urges that the verdict finding the property subject to the levy was proper because the sale of the jute was a transaction between two firms in which a partner in the purchasing firm was the father of the partners in the selling firm and that badges of fraud appear which authorized the jury to conclude that there had in fact been no sale, or, if so, the sale was made for the purpose of hindering, delaying and defrauding this creditor.
The evidence of the sale, both oral and documentary, is overwhelming. The one fact relied upon as an indication that there may not have been a sale and that the purchasing firm may have been acting merely as an agent for the seller to dispose of the jute, was the testimony of Mahabirprasad Saraf, a partner in the selling firm, that the purchase price had been paid but that he did not remember the mode of payment. It is insisted that since the amount was in excess of $100,000, if payment had been made he would have remembered the mode. But it was testified also that settlement must, under the foreign exchange regulations, be handled through the banks. Consequently, though the Bank of Baroda, Ltd. may have received and credited to the seller the purchase price as it was remitted, it would be most unusual if the seller should have any knowledge at all of the mode of settlement. Further, it appears that the buyer was bound, in any event, to pay the purchase price — no matter what happened to the jute. That testimony is entirely inconsequential. The mode of settlement was immaterial.
Relative to the other contention, that the sale was made to hinder, delay and defraud Purvis-Wade, we have only to refer to the contract between it and Sitaram dated October 10 in which it was recited that the agreement was arrived at "with a clear understanding that those three hundred ninety-two (392) rolls [of carpet backing in the warehouse of Savannah Ports Authority] will be disposed of by Sitaram Mahabirprasad in any way the latter may see fit without any recourse on account of price difference or otherwise against Purvis-Wade Carpet Mills." (Emphasis supplied).
Thus, at a time when Purvis-Wade knew that it had a claim against Sitaram, it specifically agreed, in effect, that Sitaram might proceed to dispose of the jute in the warehouse at the Savannah docks for cash, on credit, or on any terms, and to anybody. Sitaram was given a completely free hand in disposing of the jute, and in return Sitaram relieved Purvis-Wade of any claim that might result on account of the difference in the price which might be obtained on sale of the jute and the price that Purvis-Wade had agreed to pay for it. This contract alone should be, and we think is, enough to dispose of the contention that the sale was made to hinder, delay or defraud Purvis-Wade.
But, pretermitting the contract, claimant was entitled to the verdict. There was no effort at any time to hide or remove the jute. It remained in the Savannah warehouse without let or hindrance more than four months after the sale until levied upon February 13, 1964. If there were a conspiracy between Sitaram and Juggilal to defraud Purvis-Wade by putting the jute beyond its reach, reason urges that this would have been accomplished by getting it out of the warehouse and out of Georgia long before the levy was made. There is a total absence of evidence that the sale adversely affected the financial ability of Sitaram to meet its obligations, including the claim of Purvis-Wade. The sale was not to a fly-by-night firm having no financial responsibility; it was to the third largest industrial firm in India, whose history extends back some 200 years. It was not made at a price below market or value, but at 78 cents, CF, per yard, which amounted in some instances to $1.02 and others to $1.06 per yard, total. It is worthy of note that in the contract of October 10 Sitaram had agreed upon a price to Purvis-Wade of $1.00 per yard for future deliveries, with 90 days for payment. "As between the grantor and the grantee, in the absence of fraud, any sum paid or contracted to be paid is a sufficient consideration to make the conveyance valid." Martin v. White, 115 Ga. 866, 868 ( 42 S.E. 279).
The contention that in testifying Mr. Argawala concealed that one of the partners in Juggilal, the purchasing firm of which he was manager of the export division, was the father of Sitaram Saraf and Mahabirprasad Saraf, partners in the selling firm, is without merit. As to this, the questions and answers were:
"Q. Is there any connection between Juggilal Kamlapat and Sitaram? A. No connection. Q. There is no identity of ownership? A. No connection whatever. You mean business connection? Q. Well, are the principals in either company, are they interlocking directorates or any such thing as that? A. No. Q. I mean, are any officers or stockholders in one officers and stockholders in the other? A. No."
Clearly, the witness was being interrogated solely as to any interlocking financial interests, and he was testifying as to that. Counsel explained the import of his questions after he was asked by the witness whether this was what he sought to know. If counsel had asked about family relationships, or had indicated that he sought that information by his questions when asked whether he meant business connections, there is no reason to suppose the witness would not have answered truthfully as to any information sought. He gave the information which he understood counsel to be seeking. "The law presumes that witnesses who testify are credible and worthy of belief, unless impeached or otherwise discredited." Coates v. State, 192 Ga. 130 (2) ( 15 S.E.2d 240). When the witness asked "You mean business connection?" the inquiry should have put counsel on notice that some other connection might exist, and if he wished information as to that he could and should have asked about it. But he did not. "Notice sufficient to excite attention and put a party on inquiry shall be notice of everything to which it is afterwards found such inquiry might have led. Ignorance of a fact, due to negligence, shall be equivalent to knowledge." Code § 37-116.
That there were only 256 rolls of the jute in the warehouse when the levy was made is not a badge of fraud. Again, under the contract of October 10, Sitaram had a free hand to dispose of it in any manner, as one lot or in parcels. But the evidence discloses that the whole of the lot was sold to Juggilal. Most surely Juggilal had an equal right and free hand to dispose of it.
The contention of plaintiff in fi. fa. is grounded upon the law as found in Code § 28-201 (1): "Every assignment or transfer by a debtor, insolvent at the time, of real or personal property . . . either in trust or for the benefit of, or in behalf of creditors . . ." is void. There is a total absence of evidence that Sitaram was insolvent at the time, or that the transfer rendered them insolvent.
"Every conveyance of real or personal estate, by writing or otherwise, . . . had or made with intention to delay or defraud creditors, and such intention known to the party taking" is void. Code § 28-201 (2). See also Code § 96-204. Not only is there no evidence of any intent on the part of Sitaram to hinder or delay creditors, including Purvis-Wade, but there is also a total absence of any evidence showing or tending to show that the purchaser, Juggilal, had knowledge of such an intention. In Baker v. Goddard, 205 Ga. 477, 482 ( 53 S.E.2d 754), the court asserted: "When this Code section is applied to conveyances for a valuable consideration, it is necessary that the intention should have been known to the party taking, even though the transaction be between husband and wife." There was no evidence indicating that Juggilal knew of or had any information as to the existence of the claim of Purvis-Wade against Sitaram.
"Every voluntary deed or conveyance, not for a valuable consideration, made by a debtor insolvent at the time" is void. Code § 28-201 (3). Any contention that the transaction here was voluntary must fall in the light of the uncontradicted proof of the contract of sale by which the seller was obligated to pay the purchase price — in all events, and uncontradicted evidence that payment was accordingly made. And again, there was no evidence of insolvency on the part of the seller — either before, at the time of, after or as a result of the sale. The sale was not a "bulk sale" within the meaning of Code § 28-203, et seq. (now supplanted by Ch. 109A-6), and it raised no duty on the purchaser to call on the seller for information as to his debts. Long Cigar c. Co. v. Harvey, 33 Ga. App. 236 (1) ( 125 S.E. 870).
The sale was not negotiated by or through the father, but through the manager of the foreign exports division of Juggilal, who was accountable to all of the partners for his actions. The record is devoid of evidence showing that the father, or, for that matter, any of the partners in Juggilal ever had knowledge or information relative to the transaction until after this litigation developed, save that which may be imputed by law to partners concerning acts of their agents.
"Fraud cannot be presumed at law, but it may be proven, from circumstances." Colquitt v. Thomas, 8 Ga. 258 (3); Code § 37-706. Though a transaction between near relatives is to be scanned closely, yet some proof of its fraudulent nature must appear, and until that proof appears the rule has no application. Hoard v. Maddox, 202 Ga. 274 (1) ( 42 S.E.2d 744); Hicks v. Sharp, 89 Ga. 311 (3) ( 15 S.E. 314). "It is true, as declared in Code § 37-706, that `slight circumstances may be sufficient' to show fraud; but it is also provided therein that `fraud may not be presumed.' Circumstances creating a mere suspicion are not sufficient." Watson v. Brown, 186 Ga. 728, 731 ( 198 S.E. 732). Accord: Boney v. Smallwood, 202 Ga. 411, 416 ( 43 S.E.2d 271); Dollar v. Johnston, 87 Ga. App. 261, 270 ( 73 S.E.2d 336). Given the most favorable construction to plaintiff in fi. fa., the evidence shows no more than a mere suspicion that because a partner in the purchasing firm was father to the partners in the selling firm there may have been something wrong with the sale. "Finding of fact based on mere conjecture can not be upheld." U.S. Fidelity c. Co. v. Brown, 68 Ga. App. 706 (3) ( 23 S.E.2d 443). "[M]ere conjecture does not constitute evidence upon which . . . findings may be based." Globe Indem. Co. v. Brooks, 84 Ga. App. 687, 688 ( 67 S.E.2d 176). "[W]here evidence is not more than a scintilla, if it is dependent entirely upon guess or speculation, it is insufficient to support a verdict." Ladson Motor Co. v. Croft, 212 Ga. 275, 277 ( 92 S.E.2d 103).
"A bona fide transaction on a valuable consideration, and without notice or ground for reasonable suspicion, shall be valid." Code § 28-201 (2). Unquestionably there was a valuable consideration, and as we have noted, there is a total absence of evidence indicating that. Juggilal had either notice or a reasonable ground for suspicion.
We conclude, as did the court in Watson v. Brown, 186 Ga. 728, 731, supra, that "the evidence in this case, construed most strongly against the claimant, does no more than create a suspicion as to the bona fides of the transaction here attacked as fraudulent. The evidence demanded a finding that the property was not subject to the levy. . ."
Moreover, under Code Ann. § 111-427 the goods being in the hands of a warehouseman who had issued a negotiable receipt therefor, which was outstanding at the time of levy, rendered the jute not subject to the levy and claimant was entitled to prevail.
The court erred in overruling claimant's motion for judgment notwithstanding the verdict. Other errors enumerated are not reached.
Judgment reversed with direction that a judgment n.o.v. be entered in favor of the claimant. Nichols, P. J., and Pannell, J., concur.
ON MOTION FOR REHEARING.
The motion for rehearing cannot avail, for title to the jute passed upon the issuance to Juggilal of the warehouse receipts — whether any part of the purchase price was paid or not ( Code §§ 111-418, 111-421, 111-427, 111-443, 111-444, now supplanted by Ch. 109A-7), and from that time the seller had an enforceable claim against the buyer for the purchase price. Code § 96-113 (now supplanted by § 109A-2-709); Oklahoma Vinegar Co. v. Carter, 116 Ga. 140 ( 42 S.E. 378, 59 LRA 122, 94 ASR 112).
Movant wholly ignores the effect of its contract of October 10, by which it agreed that Sitaram might dispose of the jute "in any way the latter may see fit." Application of the good faith test as against Sitaram could require no more than that in making the sale it obtained fair value for the goods, and the evidence meets that requirement, particularly in the light of the Purvis-Wade claim that the jute was of inferior quality. But in this connection it must also be observed that Sitaram, the defendant in fi. fa., was not a party to the claim case. Keith v. Hughey, 138 Ga. 769 (3) ( 76 S.E. 91). The purchaser-claimant, Juggilal, owed no duty to Purvis-Wade, even in purchasing for less than value, unless it should appear that it knowingly purchased from one who, in making the sale, intended to defraud his creditor. Baker v. Goddard, 205 Ga. 477, 482, supra. Any rule of further requirement would paralyze commerce. In attacking the sale as fraudulent the burden was upon the plaintiff in fi. fa. to show both the fraud and scienter. This it utterly failed to do.
Motion for rehearing denied.