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Irving Trust Co. v. Townsend

May 29, 1933

IRVING TRUST CO.
v.
TOWNSEND ET AL.



Appeal from the District Court of the United States for the Southern District of New York.

Author: Chase

Before L. HAND, SWAN, and CHASE, Circuit Judges.

CHASE, Circuit Judge.

The plaintiff as trustee in bankruptcy of W.W. Townsend & Co., Inc., sued the defendants to recover $5,000 claimed to have been transferred in fraud of creditors, or, at least, under circumstances which amounted to a voidable preference.

The bankrupt corporation was, in 1929, doing business in New York City in selling securities. William W. Townsend, one of the defendants, was its president and owned 30 per cent. of its stock. The defendant Whist, whose business was in Paris, France, interested the Townsend Corporation in a scheme to promote a new company and sell its stock to the American public. The idea was to form a holding company which would acquire the controlling stock interest in several insurance companies in Europe, including the Malaren Insurance Company in Sweden. Options were to be obtained by the Townsend Corporation on sufficient stock in these foreign companies, and these options were to be turned over to the new company which was to be organized under the name of Domestic and Foreign Insurancestocks Corporation. The money to take up the options was to be obtained from the sale of the stock of the new corporation. Whist already had some such options and the bankrupt sent its president to Europe to investigate the proposition. He had no express authority to contract to buy stock, but only to secure options for its purchase and to have some options extended.

Among other things, an extension of an option on the stock of the Malaren Insurance Company was desired. Townsend and Whist went to Oslo, Norway, to confer with a man named Hirsch in regard to that matter. Hirsch had authority to extend the option, but was not willing to do so. He was willing to extend the time within which payment for the stock should be made provided Townsend personally would agree to buy it. Hirsch was unwilling to accept the obligation of the Townsend Corporation as the purchaser. Up to this point, Townsend was acting wholly as the representative of the Townsend Corporation and within the scope of his authority so to act. Rather than lose the opportunity to acquire the Malaren stock, Townsend acceded to the demands of Hirsch, and the following agreement was signed by those two men:

"Oslo, Aug. 24, 1929.

"Gunnar Hirsch, Esq., Forsakringsaktiebolaget Malaren, Stockholm.

"Dear Sir: I hereby beg to confirm the agreement concluded by Mr. Alf Whist and by telegrams exchanged between my firm in New York and Aktiebolaget Svenska Handelsbanken in Stockholm to the effect that I have purchased from you not less than 51% or not more than 75% of the Forsakring-saktiebolaget Malaren's 3,000 shares at a rate of 120%, i.e. 600: -- Swedish kronor a share plus 6% interest thereon from 1st of August 1929 until payment is made. As purchaser I shall be entitled to select in my place another person or a certain company. This will in all probability be the Domestic & Foreign Insurancestocks Corporation of New York. Payment of the number of shares that has now been deposited by you in Aktiebolaget Svenska Handelsbanken in Stockholm comprising 71.96%, corresponding to 2.159 shares i.e. Swedish kronor 1,295.000: -- plus 6% interest as above, shall be made at Aktie-bolaget Sevenska Handelsbanken in Stockholm, Drottninggatan 5, not later than November 15, 1929. I am under obligation until November 15, 1929 to take over further 3.04% of the Forsakringsaktiebolaget Malaren's shares corresponding to 91 shares i.e. Swedish kronor 54.6000: -- plus 6% interest as above, which amount is to be paid Aktie-bolaget Sevenska Handelsbanken in Stockholm either cash or by deposit under escrow agreement for successive delivery. Respondibility for stamp-duty shall be taken over by you.

"According to a previous agreement payment should have been made by me prior to 25th August 1929. Tist letter thus involves an amendment in regard to the date of payment in the earlier agreement, which later date is accepted by you.

"Yours truly,

"W. W. Townsend.

"The contents of the above are herewith accepted in every respect by the ...


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