Richmond Wholesale Meat Co. v. Hughes

625 F.Supp. 584 (1985)

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Nature of the Case

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Facts

Richmond (P) sued Ds for breach of contract, failure to pay an amount due on account stated and conversion of P's property. P was a California corporation in the business of purchasing and selling meat and meat products. P alleges that Weinberg Bros. (D1), an Illinois corporation, was engaged in purchasing and selling various foods including meat and eggs. D1 denies that it purchases or sells meat. In March 1983, Dominick (D2) and Hughes (D3) purchased all the stock in D1. D2 owned 60%, and D3 owned 40%. Both participated actively in corporate offices (D2 VP and Treasurer and CEO and D3 secretary, director, and company attorney. Both D2 and D3 deny they took an active role in the operation of D1 and contend that D1 was run by its president until he had a stroke in 1983. At that point Ds claim that Chiagouris, the controller, took over the management of D1. In 1983, D1 was dissolved by the Secretary of State of Illinois for failing to pay its franchise taxes. It was reinstated in December 6, 1984 and has since filed for protection under Bankruptcy. After D1 was dissolved, Weinberg, D2 and D3 continued to do business as Weinberg Bros. Foods, Inc. P alleges that while D1 was still dissolved that P sold to D1 on a sale or return basis over 450,000 pounds of various brands of meat. Some of these products were repurchased, but despite repeated demands, Ds have refused to pay the amounts due under the invoices. Weinberg Bros. pledged the meat to American National Bank & Trust Co. to secure loans to Weinberg Bros. P alleges this action was contrary to the beneficial ownership that P retained in the products under its sale or return conditions. The bank foreclosed on and sold the meat to pay for Weinberg Bros.' indebtedness. Ds contend that they merely accepted a transfer of products from P. They admit that P was never paid but argue that P never expected payment. Ds claimed that this sham transaction was a method by which they could trade warehouse receipts so that P could have receivables on its books to borrow against. Ds contend that P and D had a long-standing practice of double financing warehouse receipts. D2 and D3 contend they have no liability as they have never had any relationships with P.