# Means v. Dowd

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United States Supreme Court
128 U.S. 273
Means v. Dowd
This is an appeal from a decree of the circuit court of the United States for the Western district of North Carolina, dismissing a bill brought by Paul B. Means, assignee in bankruptcy of Charles G. Montgomery and Charles D. Dowd, partners, composing the firm of Montgomery & Dowd, against Clement Dowd, A. B. Davidson, Charles G. Montgomery, and Charles D. Dowd. On and prior to the 24th day of April, 1876, the firm of Montgomery & Dowd carried on a mercantile business in the town of Concord, N. C. About that time they became embarrassed, and on that date made a conveyance in writing of all their goods and personal property to A. B. Davidson and Clement Dowd, of Charlotte, in the same state, which instrument is variously called a 'deed of trust,' an 'assignment,' or a 'mortgage.' Although the grantors asserted that they did not consider themselves as being insolvent at the time, it is very evident now, in the light of subsequent circumstances, that they were entirely so. They had a very considerable stock of goods, which does not seem to have been inventoried in reference to this transfer, and a large amount relatively to their business was outstanding debts due them growing out of that business. The stock of goods was old, and needed replenishing. The notes and accounts due them were in many cases worthless, and never have been paid. They were also indebted in a large amount (quite as much, probably, as they were worth) to certain banks in Charlotte upon promissory notes, indorsed by A. B. Davidson and Clement Dowd, sometimes jointly, and in other cases separately. Davidson was the father-in-law of Charles G. Montgomery, and the vice-president of the Merchants' & Farmers' National Bank, one of the creditors secured by this conveyance. Clement Dowd, the other grantee, was a brother of Charles D. Dowd, one of the grantors, and also president of the Commercial National Bank, a preferred creditor. W. J. Montgomery was a brother of Charles G. Montgomery, and he and Davidson and Clement Dowd appear as indorsers upon some of the notes set forth in the instrument referred to. This conveyance, although made in April, was not placed on record until the 12th day of July, 1876, thereafter, and the grantors, Montgomery & Dowd, remained in possession and had absolute control of the property until shortly after that period. The instrument itself is filed as 'Exhibit A,' and reads as follows:
'EXHIBIT A.
'This indenture, made this 24th day of April, 1876, by Chas. G. Montgomery and Chas. D. Dowd, partners, trading under the firm and style of Montgomery & Dowd of Concord, N. C., parties of the first part, and A. B. Davidson and C. Dowd, of Charlotte, in the state aforesaid, parties of the second part, witnesseth that, whereas, the parties of the first part are indebted as follows: By a certain promissory note, of even date with these presents, given to the Commercial National Bank of Charlotte, N. C., for three thousand dollars, and indorsed by the said A. B. Davidson and C. Dowd; also by a certain other note to the said bank for one thousand dollars, dated the ___ day of _____, 1876, due at sixty days, and indorsed by W. J. Montgomery; also by another note of five hundred dollars to the said bank, of even date herewith, indorsed by C. Dowd, and due at sixty days; also by another note to said bank of thirty-four hundred dollars, secured by customers' notes in the hands of Montgomery & Everitt, att'ys, bearing date the ___ day of _____, and due at sixty days; also by two other notes, of one thousand dolllars each, to the First National Bank of Charlotte, indorsed by A. B. Davidson, dated, respectively, on the 25th March and 5th April, 1876, and running to maturity at sixty days; also by a note to the Merchants' & Farmers' National Bank of Charlotte for one thousand dollars, dated the ___ day of _____, 1876, at sixty days, and indorsed by A. B. Davidson; also by another note to the last-named bank for five hundred dollars, indorsed by W. H. Lilly; also by another note to said M. F. National Bank for one thousand dollars, indorsed by J. R. Neisler, and by another note to said bank for five hundred dollars, indorsed by R. S. Harris; also by a note to Martin Boyer, Jr., _____ dollars, and note to D. P. Boger for _____; also by a note to J. A. Lilly for four hundred dollars: Now, in order to provide for the payment of the said debts, and to indemnify and save harmless the said indorsers, the parties of the first part do hereby bargain, sell, convey, and transfer unto the said A. B. Davidson and C. Dowd the following property, to-wit: The entire stock of goods, wares, and merchandise of every kind and description now in the possession of the parties of the first part, and in and about their store in Concord, together with all the fixtures and personal property used in connection with the said store and business; also such goods, wares, and merchandise as the parties of the first part may purchase to renew or replenish the said stock; also all the notes, accounts, mortgages, judgments, and other evidences of debt due and belonging to the parties of the first part, from whomsoever and howsoever the same may be due. To have and to hold the said property, and the said choses in action and evidences of debt, to the said A. B. Davidson and C. Dowd, their executors and assigns, in special trust, as follows: The said parties of the first part are to remain in the possession of the said property and choses in action, and continue to sell the goods for cash only, and to collect, under the direction and control of the parties of the second part, the proceeds to be deposited weekly in the Commercial National Bank of Charlotte, N. C., and applied, under the direction of the parties of the second part, to replenish the stock by such small bills as may be agreed upon, and to the payment of the debts of the said firm, as follows: First, after deducting and retaining the commissions and other expenses of this trust, to the payment of the note of three thousand dollars to the Commercial National Bank of Charlotte, of even date herewith, indorsed by the said A. B. Davidson and C. Dowd, the same being given for money this day borrowed for the exclusive use and benefit of the said firm, and also to the payment of any renewal or substitution of the said note, and of any other note or notes that may hereafter be given by said firm, and indorsed by the said parties of the second part, or either of them, not being renewals of the notes indorsed by them, or either of them, mentioned and provided for in the next class; secondly, to the payment of all the debts hereinafter mentioned, except the debt of three thousand dollars, and other possible indebtedness hereafter to be incurred, as provided for in the first class above named; thirdly, to the payments of all the other indebtedness of the said firm, howsoever and to whomsoever the same may be due; any surplus to be paid over to the parties of the first part, or their legal representatives or assigns. And it is further the understanding and agreement that if any of the said debts, or any renewal or substitution of them, or any of them, shall not be paid when the same shall become due, or if, for any other cause, the parties of the second part may so elect, then and in that case it shall be lawful for the parties of the second part, and they are hereby expressly authorized, to take possession of the said goods and merchandise, and all the property and choses in action conveyed herein, and dispose of the same at public or private sale, as they may deem best, applying the proceeds as hereinbefore directed.
'In witness whereof the parties of the first part do hereto set their hands and seals the day and year aforesaid.
[S'g'd] 'CHAS. G. MONTGOMERY. [Seal.]
[S'g'd] 'CHAS. D. DOWD. [Seal.]
'Witness: W. P. SIMPSON.
'Probated July 11, 1876. Registered same day.'
It appears that at the term of the Concord superior court held in July, 1876, a suit was pending against the bankrupts in favor of Calvin Chestnut, one of the unsecured creditors, which had been in the hands of an attorney for collection since some time during the preceding April. Several of the New York creditors also commenced proceedings, during the autumn of that year, against the insolvent firm, and obtained judgments at the October term of the United States circuit court against Charles G. Montgomery and the firm of Montgomery & Dowd. After executions issued thereon had been returned nulla bona, these creditors filed a bill to set aside the deed executed by the firm as fraudulent and void. In December, 1876, proceedings were instituted by which the firm of Montgomery & Dowd were adjudicated bankrupts, and the appellant, Means, was duly appointed their assignee in bankruptcy. Very soon afterwards he commenced the present suit in the circuit court to set aside the conveyance above recited, as being fraudulent and void under the statute of 13 Eliz. and the United States bankrupt act. After the filing of this bill, the complainants in the first one, the New York creditors above referred to, proved their debts in bankruptcy, and asserted their lien upon the assets created by the bill in equity filed in December, 1876, and the first suit has been considered in abeyance ever since, and treated as merged in the proceeding instituted by the assignee in bankruptcy. To the bill brought by the assignee, both of the grantors and the grantees in the deed of assignment were made defendants, and each of them filed answers. There is the usual denial of any fraudulent purpose in the transaction, and allegations that the praties were doing the best they could, under the circumstances, to secure a proper distribution of their property among their creditors. After considerable testimony was taken, in which all the parties to the deed were sworn, the circuit court dismissed the bill, and it is from that decree that the assignee has taken the present appeal.
H. M. Herman, for appellant.
W. W. Flemming and Willis B. Dowd, for appellees.
[Argument of Counsel from pages 278-280 intentionally omitted]
MILLER, J.

## Notes

This work is in the public domain in the United States because it is a work of the United States federal government (see 17 U.S.C. 105).
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