J. B. Kepner Co. v. Hutton 226 N.Y. 674

The J. B. Kepner Company, Appellant, v. William E. Hutton et al., Copartners under the Firm Name of W. E. Hutton & Co., Respondents.

Kepner Co. v. Hutton, 179 App. Div. 130, affirmed.

(Argued April 29, 1919;

decided May 20, 1919.)

Appeal from a judgment of the Appellate Division of the Supreme Court in the first judicial department, entered August 23, 1917, affirming a judgment in favor of defendants entered upon a dismissal of the complaint by the court at a Trial Term without a jury. The action was brought by the appellant corporation, to recover money paid to the defendants on checks signed in the name of the corporation by its president, J. B. Kepner, and its treasurer and delivered to the defendants by the president in payment of his individual indebtedness. It appeared that prior to April 10, 1912, said J. B. Kepner carried on business individually as a cotton converter and as sales agent for certain cotton mills. In 1912 he caused the plaintiff corporation to be organized with a capital of $5,000 divided into fifty shares, of which forty-nine were issued to Kepner’s wife and one to Kepner himself. To this corporation was transferred the good will of the *675business formerly carried on by Kepner individually and said corporation continued to carry on the same business under Kepner’s management. During the whole period covered by the transactions complained of in the complaint Kepner and his wife owned all the capital stock, and they, together with the bookkeeper, a man named Donohue, who held nominally one qualifying share, were the sole directors. During all that period Kepner alone managed and controlled the corporation, his wife and Donohue not interfering in any way. Prior to the incorporation of the plaintiff and when Kepner, as an individual, was doing the same business (turned over to the company as aforesaid), he had personal bank accounts, but after the incorporation of the plaintiff company the said Kepner had no individual bank account, and no attempt was made by the corporation, or by Kepner, to distinguish between the personal funds of Kepner and the funds of the corporation; and all checks received by him, personally, or made out to the order of the corporation, were indorsed by him and deposited in the bank account standing in the corporation’s name. From the time the said company was incorporated, the plaintiff company made a practice of paying J. B. Kepner’s individual debts and obligations by checks drawn from the corporation’s bank account.

John E. Brady and Francis C. Schwab for appellant.

Sumner B. Stiles and William F. S. Hart for respondents.