May 23, 1988

In the Matter of a Mail Dispute Between:

DAVID RAKES

CONNIE RAKES

and

JAMES MERRIMAN

P. S. Docket No. MD-15

APPEARANCE FOR DAVID AND CONNIE RAKES:

Eric S. Mashburn, Esq.

P. O. box 1277

Winter Garden, FL  32787-1277

APPEARANCE FOR JAMES MERRIMAN:

James Merriman, pro se

P. O. box 831

Goldenrod, FL  32733-0331

INITIAL DECISION

            This mail dispute proceeding was docketed under Domestic Mail Manual §153.72, which requires Regional Counsel to forward certain unresolved mail disputes to this Department for decision.  Both disputants filed written submittals under 39 C.F.R. §965.5 and James A. Merriman filed a brief comment on the Rakes’ submittal under §965.6.  The Rakes submittal is deemed submitted on behalf of both David and Connie Rakes; accordingly, the Motion for Default against Connie Rakes is denied.  The Rakes have also requested that the instant decision be deferred pending the outcome of a state court proceeding which they are attempting to bring.  However, Merriman opposes deferral and requests a decision.  In view of this opposition and the failure to obtain service upon Merriman in the state court proceeding, the request for deferral is denied.  The following findings of fact and conclusions of law are based upon the submittals, comments and exhibits attached thereto:

FINDINGS OF FACT

            1.  Prior to November of 1987, David Rakes (“Rakes”) owned and operated a business known as Rakes Floor Store at 739 S. Dillard Street, Winter Garden, Florida 32787.  He had been in business at that location since August of 1984 and at other locations in the area since October of 1979.

            2.  In November of 1987 Rakes was contacted by disputant James A. Merriman, who stated that he desired to purchase the business.  Marriman stated tht he would pay Rakes for the store by paying unpaid sales taxes of $8,973.64, unpaid income taxes of $3,465.00, and that he would also pay Rakes a fee of $500 per week.

            3.  Merriman informed Rakes that he wanted to put the business in a trust.  Accordingly, the “Bahama Trust” was created on November 27, 1987.  In the trust instrument, David and Connie Rakes transferred to James A. Merriman and Larry Bangert, as trustees, the following property:

            “Al assets associated with or relating to that certain business establishment known and commonly referred to as RAKES FLOOR COVERING located at Winter Garden, Florida, including but not limited to the existing trade name, including all leasehold improvements, inventory, fixtures, utility deposits, any and all other security deposits, good will (which has no value), and any and all other items normally considered and commonly referred to as assets. . . .”

            4.  With the exception of a 1/2% interest retained by each of the Rakes, the beneficiaries of the trust were relatives of the trustees.

            5.  Under the agreement, the trustees had exclusive power to manage the trust property and conduct the trust business.  the trustees were not personally liable for any loss resulting from an act or omission of another all persons dealing with the trustees were to look only to the trust property for the payment of their claims.

            6.  Although the trust agreement does not specifically mention the fact that Merriman individually agreed to pay certain tax liabilities plus $500 per week, as set forth in ¶ 2 above, this fact is not disputed by Merriman and is deemed admitted by him.  The agreement also specifies that the Trust will pay $892.50 in rent on November 27, 1987.

            7.  After the agreement was executed, Merriman took possession of the store and operated the business.  at least one account was changed over to Merriman’s name as trustee; others were left in Rakes’ name.  Pursuant to the agreement, Merriman made the following payments to Rakes:  $892.50 for December rent, $650 on December 7, 1987, $500 on January 4, 1988, and $500 on January 10, 1988.

            8.  By letter dated January 19, 1988, Merriman’s attorney notified David and Connie Rakes that they were terminated from any further responsibilities with the store because they had violated the Bahama Trust agreement by working in conflict with the business.

            9.  Rakes now claims that all of the property in question should be returned to him.  Merriman has refused to comply with this demand.  Merriman retained possession of the business until at least April of 1988, when he appears to have abandoned it.

            10.  The Postmaster at Winter Garden, Florida, is currently holding the mail.  David Rakes claims that mail addressed to Rakes Floor Store or Rakes Floor Covering at 739 South Dillard St., winter Garden, FL  32787, should be delivered to him as the owner.  Merriman claims that the mail should be delivered to him as trustee of the Bahama Trust.

            11.  The agreement of sale which was executed by the parties on November 27, 1987 is an enforceable contract.  All assets in the business were transferred to the trust, including the trade name and good will.  The right to receive the mail addressed to Rakes Floor Store was implicitly transferred in this agreement.  The fact that Merriman failed to pay the tax liabilities does not detract from the fact that ownership of the assets was transferred under an enforceable contract.

CONCLUSIONS OF LAW

            1.  When a business has been sold, and thereafter the purchaser and seller each claims a right to delivery of mail addressed to the company, it is well established that the Postal Service will examine the contract between the parties to determine whether the parties intended to transfer the right to receive such mail.  See, e. g., 3 Op. Solic. P.O. Dep’t No. 1055, p. 49 (1893).  In the instant case the right to receive the mail in question was implicitly transferred, along with all other assets, good will, and the trade name, to disputant Merriman as trustee of the Bahama Trust.

            2.  David and Connie Rakes contend that the agreement was void due to lack of consideration and fraud in the inducement.  This contention is rejected.  First, the Postal Service has previously declined to determine the “legality” of sales contracts in mail dispute proceedings.  Id. at 50.  Second, assuming arguendo that it would be appropriate to decide this issue under the revised procedures, the evidence has been analyzed and it is concluded that consideration was given by Merriman when he made a series of cash payment to David Rakes and when he promised to pay off the tax liabilities.  Also, the Rakes have failed to demonstrate that they were fraudulently induced to enter into the contract.  Although Merriman failed to fulfill his promise to pay off the tax liabilities, the contract is still enforceable.

            3.  Accordingly, all mail addressed to Rakes Floor Store or Rakes Floor Covering at 739 s. Dillard St., Winter Garden, FL  32787 should be delivered in accordance with the instructions of James A. Merriman, as trustee of the Bahama Trust, which owns the business.

                                                                                    Randolph D. Mason

                                                                                    Administrative Law Judge