146
ir
and (Cir9/fii Court, E. D.
v.
others. and others. 1, , "I
VON' UUBSY r 'and othersv. GXllVIN
L FltAUD,-JOINT JUDlfMENT-S,u:O'UET l'REFEfiENCE OF ONE OF THE. PI"UNTIFFS,' A nllmber of creditors made a loan to an insolvent firm to enable it to carry (ill its business, taki'ng as securit.v a!jointjudgme'nt, with an 'understanding titat t'he debtors should give no other judgnlHlll.s.· ,. Two of these creditors secretl,t took ,8 judgment note from tpe firrq for'the amount of t4eir originalclaimBl nQt incl'3ding of the loan.; ppon credItors, of certali1 prOl'lllses made wIth theIr knowledge by the debtors anll a.fter·inducing delsy in therissuing of execution' on the original lung. ,ment, judgment, note, issued execution, and. "wept tlje entire personal of the debtors. ,Held, that this.ws" fraud. JlJ;lon tl1-e other parties to ,the original judgment, and thatin thedlstrtllutllm9ffih'e proceeds of the debtor's property the execumon thusobta.iJied' shouldbeip{l$tponed to the execution upon that judgment" ,. ;, ;,
2.
8,
BANKRUPTCY-PllOCURATION-:-WHA'I.' DOEBNOT AMouNT TO.
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Debtors agreed to give a creditOr notice 'Wliendangcr threatened, f!Idrder that he might obtain the fil'st'execution. Afterwards they ittdulied him, by misrepresentation, to delliy" alfd Pl;ocured ,an ,to. be issued by anothllT.Creditor more than sufficient to ex!la'.lsttheirpJ,'operty. They then gave notice of this exec\ltion 'to the first CI'(!ditol', who thereupon also· issued' executi'on, Held, th"t this notice by ,the debtors' was not a procuration of the second execution.
Exceptions Masfer.,. .' " : ,',! , This was ,a bill in. equity by assignees inbankrtiptcy to set' aside', on the ground.of procuration, two on tOe or's property prior to the filing in "A Wits filed, P.Y in thE!'second execution, to set aside the fust execution olltside of the' bankrupt The case to it mast,ef" (EdWin T. Chase,) whqreporledsu?stantialtX, tne foFowingfacts; . ' firm were lumber III Phlladelphl;l. In June,' H176, they financIaHy embarrassed. . In ardel' to 'c\irry on ,their bu'siness, they !ha:de applio:ition to some :of their: largest, lcred.ftors. for)a::loan l'l:lprel:lllJlting that tl:iey were not able to meet their obligations, but that if they could obtain' a loan they" could bridge over their embarrassments." Honorable 'Charles P.
.o!
147 Waller, of Honesdale, Wayne county, Pennsylvania, a, pers611al of debtors, and Mrs'. Benton, w;ife of, Bel,lto,Il;' the two whom 'they'W'ere indebted in the amounts.eWhen Benton.& Bro. applied to these t'YO creditors to coixtdbute with' the bthers the latter ag'reed so to do; but, as the Bf:lllton's !.l1ready owed Chadesp. Wallerabout $11,000, and ·Mrs. Benton about $10,000, the latter demanded some security for indebtedness" W;hic,h the agreed to give. As a resultof the creditors for a. loan,. a written agreementwas drawn up on June 21,>1876, between the firm ofA. Benton & Bro. and seven of their creditors, viz.: A. W"Von Utassy,John A. J. Sheets, Otto Lachenmeyer, Chandler 'P. Wainwright, William A. Levering, and Mis. E ··J. Benton, all of Philadelphia, and.. the said Charles, P. Waller, of This agreement' proviae<Ifor a. j6iIi,t ioan Of $11,000 by of credthe firm of:!.. 'Ben,ton fsecured by a b()lld for 322,000; cOnditioned for the repayment of the loan ,iii one:year, to be executed by A. Benton.& Bro. to ,A.· .w. VonUtassy and Jo)mA. or: Sheets, as trustees · also that it for should be until a statement at the 4,. Benton Bro. should aPl>ear that such r",al: es.tate was sufficient should be furnished, security fOl' the loan. '; ''tWs agreement was executed by all the parties excepting William A. Levering, who declined to join. On June 28, 1876, a supplemental up, in which the name of WiIlisL. Bryapt, a partagreement was ner of. Chandler P. WaiIiwright; was substituted for William A. Levering, and it was also thereby provided, the juqgment b,opd should be made payable instead Of, prOVided in the agreement,) but that in 10 execution should not issue withIn' one year unless default should be made in t;he payment of the notes of A. &iB1-'o, (Which, to a large amount; were then outstanding In the' hands of the syndicate and other creditors) for 10 days after maturity. ".' :' p'rovi:!jion was;'also Ipade for the pro rata among the syndicate of partIal the bond. In 'all otherrespects the terms Of the original agreement reulained unchanged. This' supplemental agreemen,t,was duly by all and o,n day a jUdgment bond, executed by the individlial members of the tirmQ!.,A.l3enton & Bro., in, accordance wjth theagreemellt; was of. record, an(i became a Hen on their real estate. The name of CharlesP. 'ValIer was signed to the agreement by J. M. Moyer,Esq., as bis attorney in fact, under the follOWing cirof A. Benton cumstances: J. M. Moyer was the, attornllY, and general &, Bro., and was also a personal friend of Charles P. Waller. From his residence in Honesdale the latter sent to Mr. Moyer a letter of attorney to join in the syndicate upon his behalf, "UPOll, sil,tisfactory security, statement," etc., ofattorney referred to a letter of instructions beal'ing even date. which tile agreements. ,T\vo days after the Upon this authority Mr. of the A. Bentqn & Bm. dl:ew up a paper the of the .IlHtfle a,greement except real estate. C. P. WalTer, byrepresenting that they were in pres'sing need of t11e money; that the statement of
748 their re;11 E'state WOl1ld Jake to prcp:tl'e, hut that they,woul(lfur· as soon coropiet6d. This paper ,wall also signed by J,' M. Moyer as attbrnev in fact for Waller, but, it appears, without the actual knowledge of"the latter, and without any direct authority froJl;l Subsequently, at various times, A. Bro. received, on account of the syndicate loan, frarn C; P. Waller $2,000; from A.W. Von tTtassy $2,000; from John A.,J, Sheets $2,000; and from Otto Lachellllleyer $1,000., WhetlIer they received the remaining $4,000 from P. Waillwright, W; L. Bryant, and Mrs: E ..J. Benton, was a matterof dispute, the complainants alleging that no money was rec(>ived from these parties. The ,master that they received $2,000 fro[p Mrs. Benton, b'ut nothing fro01 Wainwright and Bryant. " ',' , ,At different times, after the of the syndicate Benton & Bro. told they w8j11 Hot all<)\v 4 ouo to ))1'ess them, and if ltn)' so, .tkey would notify the s;yndicate." .,Neither J:udg(Walltjr; J.1I:[ ¥Qyw/nor wlis l)l'fiserit on any oltMse,occasions. ", , , : " ' . '; , ,. " :On the fifteenth of July with Ilrevious A B,entpn' &i iIifavol' of sai4'C. ,l?,WalIer and .. J:. dllY al,ter from' time Hi was,. a,llpwEt<1,to ;in pbS'Session of saId, Jr ¥.'M?>;er, :vho qy, P. Wal+er,to the note until further the latter, at that he "didn't wallt to :would ,w,ith' of the ,might orp'lacing it in' , ' other hands. at the time." It was any ' , , that at least the sum of · " . , '" : I '} $20;000 was due by: Bellton &:Bro. to these v,l;lrties wh¢n this ,il;()t,e was ." ,.' : "'. . . . ' ' . ; . , . ,·. ,' gIven. At times, after the Emtering'Qfthe syndicate jUdgm'ent, the trustees therein named demanded from A. 'Renton & Bro. 'thelltatement' of the real estate for by tbe syndicate agreement, butA.'Bentoil& avoided brneglected to furnish statement. On 41 1876, ho\vever, they gave to the syi;1dicate trustees, in part,payment of the loan, an otller' on their attorney, J. M.. Moyer, Esq., for a mop;gage Of $1,,500, which had .left in his hands 'by them for collect\on. ,The trustees presented the order to Mr. Moyer, wh'o said it was all right; ,that he' was negotiating fqr a sale' of the mortgage; that he expected, to get the proceeds ina few days, and would hand the amount over to them. 'The trustees asked him to advise them when he obtained the money, and he promised to do so. Subsequently the trustees made repeated calls upon him for the money, but were put off by him from time to time, and neither the mortgage nor its proceeds were ever handed ' over to the trustees. , On Thursday, January 25, 1877, at the request of the syndicate trustees, Charles Benton and J. M. Moyer met them at the office of their counsel, A.M. Burton, Esq. Neither Judge Waller nor Mrs. Benton was present. At this meeting the trustees demanded the statement of the real estate, and the surrender of the $1,500 mortgage; or its Mr. Moyer promised that the statement should be furnished in afe\v'days, and, with regard to the mortgage, stated that, as C. P. Waller was interested in the proceeds, he did
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not wish to hand it over without authority from the latter, and to write to him. " The trustees also inquired as to'some jUdgments that had tllen recently entered against A. Benton' & Bro., and were informed. that' there only remained one of small amount, for which the money' would be forthcoming. There was some talk with reference to an execution on the syndicate judgment unless the matters were satisfactorily arranged.' The meeting adjourned, according to the testimony of some of the creditors present, with standing'that nothing should be don.e for 48 hours, and, according to, the testimony of otl:).ers, with the understapding thatJ;l:othing was to' be dime ., until the statement was furnished. which was to be on th!l following !;Lon. daY·9r Tuesday." On the same day, afterthe meeting had adjournEid, dhatles Benton went tobis brother ,Albert's house, and there met his brother;and hil! brother's wife. Mrs. Elizabeth J. Benton.,- After some conversation between went immediately to the .office of J. M. Moyer,illiP-l}j1l6d. them, a him. Mr. Moyer p,lacedthe jUdgm'ljnt.nRN of $20,000, in favor of C. P. Waller and Mrs. E, ,J. Benton, inthe hands of another attorney itl ;the same building,' (if; Spragne, Esq.,) issue the execution, which,was accordingly on tlhiHiatile'tliij- it pl1\Ced the banqa of the sheriff., In the evening of;the slt0l6day{!!Iila iafter t!;le execution ha4 . lIeen cltUed upGn Mrs. EnJ. Bentgn, his dUecting !ijwJp issue the executlOn. . ' .{ .' '. . {. .' : ". . '. ;I', The next morning (Friday, Jammty Y. Moyer to'(l P; Waller to instmet B. F. Fisher. Ellq:. ;td !issue: 'execution likainstBetitH! immediately. On the same day C;P. Waller to, issue execution.against the Bentons. r}dl1'i Fisher, finding the itlready issued-,.entered his fQr C.,P.Waner, an,d; n,otified ,the :SheJ)Ul that he represented him in the exe!3ution. , Qnthe J;\e:x;t lO\ilock Charles Benton saw Chandler P. of sll4\licate creditors, .and volunteered the information that execution had: been isSued on the $20,000 judgment: Mr. Wainwtight, on' the same afternoon, m this· information to one of the syndicate trustees, and earlyoIi Monday ,morning,January 29th, cOJ;llmunicated it to the other. ' The trUstees on that day instructed their couns,el to issue ,execution, which was done. On Wednesday, Jaimary 31st, the general creditors filed a petition in bankruptcy, Bro. were adjUdicated on the. twentyunder which A. Benton seventh of March, 187-7, upon the ground that they had procured the execution oll'tbe $20,000 jUdgment in favor of C. P. Waller and Mrs. Benton to beissued. . . The prgperty levied on was sold under an order entered in the present equity proceedings, and the proceeds deposited in the registry of the court. The master reported that under the above. facts he was of opinion that both executions had Qeen procured, but ,that even if the syndicate execution had not been procured' the plaintiffs therein ha.d not established any equitable ground to entitle them to
,BEPORTER.
priority, and the :fi!tst exeoution being more than sufficient to exhaust the entire fund, an4 qeing VQid as against .the assignees in bankruptcY on procuration, the assignees in bankruptcy shou,14 Exceptions to this report were filed by botp. the and execution creditors. . B. F. Fisher and Wayne MacVeagh, for C. P. Waller and Mrs. Behton.. , M. Burton, for.tr,ustees of syndicate judgment. . E'rank P. Pricha.rd:and G. O. Purves, for assignees in bankruptcy. ..,'IkTL.ER; D. J. TheJ;l1aster's statement of facts, and the report generl!lil1y, are satisfactory, down to the point where the cross-bill of Von Utas8'!J v. Galvin is reaiched and considered. We areunable, howe-vsr,to adopt his conclusions respecting this bill. The plaintiffs that their .ag!f,inst A. Benton & should have overJ4 at Benton and Judge Waller, on the ground and favor of Benton:and Waller, as also the of was a fraud on the plaintiffs' rights.: ·:We think this:claimis well founded. The object ofth.e sinby the parties to this bill,-was to A...BE)nton & t() :prose(ju.tetheir. the mubenefit of the in the agreeme1\t. The firm was to meetdts obligations, a.nd they were the principal creditors. ltis,·trade was dulLand its property unavailable. A sale at the time would'na've resulitid'ingreat·sacrifice. The money proposed to be furIIished :by these eteditors;H waslloped and believed, would enable ·the 4ebtois'tdprosecute their business successfully, or at least to their prosper.ous times. As security for ihe money to .be, furnished,the creditors were to ,haves. judgment.. payable in 10 days after. default by the debtors to meet their paper. While the plaintiffseliteredint9 the arrangement andl!tdvanced their money with no consiaera,tion or prospect, of advantag-e, than that already stated', the of Mrs. Benton and Judge obtl\>ined Ai note and warrant of attorney for: $20,000, by means of which they could sweep away not only the property owned by the debtors at the date of the agreement, and thus defeat its purpose,but alfm'Buch additional property as riJ.ight be acquired .themoney b'btained from That tliis was a plain viQlationof theundersta;nding,of the parties,-subverBive of the only object cbntempl'ated by, the agreement,-does not Beem to admit of doubt. Certainlyi!Ilot one of the plaintiffs would have advanced It dollar bad he been· iIiformed of the secret ad vantage' obtained by Mrs.
he
G'ABKl'LL . t). ,BENTON,
Denton and Judge Waller·. As matters stood at itors were on atJiequality. .The:(Hm beinR insolvent, auyp:roceedj.ng to secure preference would have 'placed itsi,property·inbankruptcYI. where all would have shared equally. It cannot be the plaintiffs would not onlYTiskthia advantage, by tying theu: but also would transfer to the debtors a considerable amount of thel1l own property to be swept by Mrs, Benton· and JUdge-:Waller,at pleasure. That it was fully and distinctly understood. thaUhe debt!" orswere to be kept clear of all other judgments thantha.t gi.:ven syndicate creditors appears as plainly 'from the conduct. Qftbe at· the time the agreement ,was entered into, and subsequ6Iltly, does from the motives of the parties and theobjectQf thetraIllmci tion, just referred to. The Dlaster·findsthatj ;j
.. Promises were made by the debtor immediately befOre and 'about thetirti'fl of the execution of the agreerntint, to certain of the patties thereto, that no other judgment should be given; and tlhatnotice should begiyenifjudgment6 were likely to be obtainedjand. that a}::lout synUicate should be a lien on tile perspnal property as upo,u,r4e estate." . . ,
It is unimporta.nt that}frs.Benton and Judge Waller were present (as the.m,aster finds) when these', promises wera.i obtained. They were procuted for·the joint benefit of all the were acting together for their mutual protectiou,..;...eaQh one to a certain:e:dent representing his fellows in th,e These promises are here referred to, however,as. one of ing light of ·which,lthe;wxitt.en agrear ment is to be read. Again, w,hen Charles Bentonwa.saskedtojs\gp. the note and warrant in favor, of Mrs.·Benton and Judge at first declined, on the ground that it would be wrong to odo ao; only consented subsequently, at the instance of that it might be done, "provided Mrs. Benton [his wife] was' included." When the syndicate creditors discovered that other judgments; t() a small amount, existed against the debtors, they immediately complained ofit as a violation of the agreem.ent; and n.o one connected with the transaction suggested that this was not a just cause ofoomplaint. The representatives -of Mrs. Benton and·o.£: Judge I Waller' were present when the complaint was'made, and plainly its tice. The plaintiffs were not then aware of the note and, warr-a.nt given for $20,000. Regarding however, because of the existence of the small judgments, and of the debtors' failure to furnish a statement, as promised, respecting the
752
YEDERAL REPORTER.
real estate, they had resolved to issue execution. They were induced, however, by the debtors, and the representatives of Mrs. Benton and Judge Waller, to withhold for 48 hours, under a promise, that the small judgments would be paid, and a statement furnished, in thl;! mean titile. Instead of making any serious effort to redeem this promise, (and it is quite manifest that none was' intended to be made,) the debtors and the representatives of Mrs. Benton and Judge Wal1!'l;!; immediately had judgment entered on the'$20,OOO note, and an execution iS8'lled, covering more than twice the value of all the property the .debtorsowned. Here, again, was, an attempt to seCijre advaJ;l." tage by meuns of bad faith and. imposition. The subject need:ll.4'>t bepursued. .Sufficienthas been said to justify thecQIlcl1,lsion tha,t the Benton-Waller executiionmustbep08tpone.d. It seems propel.' ta"say in this connection, Waller, who resides. at, a, distance,ha.d very little personal.,pOtlllectwn with the transaction involved,: and probably no personal knowledge ·oftha particuladea.. tutes which have given rise to this controversy'_ ,The general scope of his attorney's autboritycovered all matters involved, and he must bear the consequences. The authority of the attorney has not been questioned by him; and no oneelse:canquestion it. We do not see anything in the evidence to justify a belief that the execution Oil the syndicate judgment was procured by the debtors, in violation of the bankrupt law. It is true that an agreement was entered into when the judgment was confessed, that these creditors should ha;e a pref<erence over aU others, of execution against the personalty of the debtors; and' be notified by the debtors when danger threatened from other sources. As we have seen, however, the debtors not only failed to perform this agreement, but sought to defeat these creditors by a prefereMeof the Benton-Waller judgment, whose amount exceeds twice the valueof all their property. The subsequent notice was unimportant. The debtors then supposed the plaintiffs It was notice that an execution would do no good, could get and was as well calculated to induce them to desist, as to proceed. They could get nothing except by defeating the object of the debtors. It would be a per'Version of language, to say that this execution was procured to gi'Ve the plaintiffs a preference. The master's finding as respects the rights of the syndicate creditors, between themselves, is adopted. McKENNAN, C. J., concurred.
IN RE ALLIN.
'/53
In re 1. RECEIVERS-AcCOUNTING.
ALLIN,
Bankrupt.
(District Oourt, D. Vermont. September 6, 1881.) A receiver of lands, on a part of which he holds a mortgage with condition broken, must account for rent issuing out of such part as 'Was not covered by his mortgage, where he rents them for a term which did not exprre until after payhis appointment, and before his appointment receives the rent, which able in advance, for the full term.
In Bankruptcy. WHEELER, D. J; This cause has been submitted upon the report of the' register, to whom was referred the matter of the account of Renry L. Tilton, receiver. !Upon this part of the case the receiver's account only is to be settled. 'What he has received on 'acoount of the property of which he was made receiver, and what he is entitled to' retain in his own right, are to be ascertained, and the differeneeis to be paid into conrt,to go to whomsoever it may be decreed to belong. He was made receiver of lands, part of which was covered by a mortgage with condition broken, held by him, and part not. He .had claimed the whole by an invalid subsequent mortgage, and ,rentlld them at $300 fora year, which had not expired, but the had become due and been paid when he was appointed receiver. He rented them the next year at $250, and has collected two-thirds of that rent. One-third of these sums was due to what his mortgage did not cover, and the other two-thirds to what it did cover. The bankrupt had a homestead right in the part which the mortgage covered, and with his wife conveyed it to the receiver. These premises have been sold free of the homestead right, but subject to the mortgage, and $500, representing that right, have been paid into court. He has leased these premises since that sale and received rent. He claims that he is not chargeable at all as receiver for the rent received before he was made receiver, for the year during which he was appointed receiver; that rent was received for the whole year, and not for a part expiring at or before the rent was paid. It issued out of the land and was the product of the whole year, and appears to have been paid so much in advance as security, and not becll.use it had fully accrued.' When so paid it was in Tilton's hands in trust until accrued. Had the lessee been evicted by title paramount to Tilton's, . doubtless the rent so advanced could have been recovered back. Tilton was appointed receiver while his right to that rent in his hands v.8.no.1 0-48