The New York herald. [volume] (New York [N.Y.]) 1840-1920, 1851-11-15
Superior Court.

Before Judges Duer Mason and Campbell.
The FORTH AMERICAN FIRE INSURANCE COMPANY
VS.. JAMES LoRIMER GRAHAM, SAMUEL JONES,
AND OTHERS.
The bill was fled in the late Court of Chancery,
in the year 1916, and it charges that, in December
1911, the compainants obtained decree in chance
ry for deficiency on q sale of mortgaged premises
in the city of New York, against the defendants
Samuel Jones and James Lorimer Graham, who
were the original debtors. The decree was docket
ed and transcri OF fled in tho counties Of Mont.
gomery, New York, and IA snroe, but no execu ton
was ever issued. The bill charges that, at the
time of the contracting of the original debt, and
for long time subsequent, the debtors were the
owners of large amount of real estate in all
those counties, aud that the same was conveyed
away frauduently, prior to tho docketing of the
complainants decree, and they insist that such de-
cree was, AMI is, Lien upon such real est ate
The bill also charges that subsequently, to said
decree the defendant, James l. Graham, had pre-
sented his petition to the District Court of the
United States, to be declared bankrupt, pursuant
to the act Of Congress, passed August ~, 1871,
and that such proceedings we're had thereupon in
said court, that in the month of June, l3t3 be was
discharged from his debts, and that certificate OF
such discharge was issued by said court. The
bill of com plant sought to set aside this dis
charge in bankruptcy, and alleged that the petit
tiorer, Mr.. Graham, did not Get out an accurate
inventory Of his property; that he traudulenty
omitted large and valuable pieces of real estate, in
New York, Montgomery, Monroe, and elsewhere in
this State and in the United States; that he omit
ted large and valuable amounts of personal pro-
perty goods, ehattes and cbeses in action that he
fraudulently suppressed particulars Of Importance
in relation to his property, and to the extent of mis-
interest therein, with the design to re- acquire the
since his discharge he had come into possession and
resumed the control of his real and personal estate
or some large and valuable part thereof. The
prayer Of the bill is, among other things, that
Jones and Graham be decreed to pay the debt Of
the ccmplainants, or that the conveyance made by
them be set aside; that the discharge of Crab lm
be set aside, and deemed fraudulent and void as
against compliments, and all other creditors who
may come in and contribute to the expenses of the
suit. And that hindrances and mpediments being
removed, complainants may issue execution and
levy upon, and by that means, or under decree of
this court, be allowed to sell all or so much
of the real or personal estate of Jones and
Graham as may be necessary to pay their
debt. The defendants put in their answers to the
bill upon oath, denying all tn, charges of fraud
made by the bill. Issue was taken upon the an.
swers, and the cause first came on to be tried in the
month of October, 1919. After several days had
been occupied in the investigation, the court came
to the conclusion that the cause was defective, so
far as it attempted to set aside the discharge in
granted to Mr. Graham, because the
official assignee had not been made party, and
sufperde the trial to enable the complainants to
bring him before the court as party to the suit;
they were also allowed to notice, specifying
additional alleged grounds for impe aching Mr..
Graham's discharge, which the complanants did,
alleging fraudulent preferences well as fraudu-
lent omissions and concealments of property by
Mr.. Graham. The trial was resumed in January,
ls5l, and about one month was occupied in taking
testimony the: Elm, ard counsel were heard by the
court upon the pleading Is and proofs in the month
of March last. The judgment was pronounced by
the court on the sth Of November instant, and an
elaborate opinion was delivered by Mr.. Justice
Campbell. After considering the scope and OBJ
jecs Of the bill, and the jurisdiction of the late
Court Of Chancery, the court decided, that exc
cution must frst be issued before a bill could be-
fle IN SGT asde inc hran oh
n al estate. The court then considered the ques-
tiOn upon the allegations N ade by the complaiI-
ants in their bill, AMI in their notice served after
the trial commenced, to impeach the discharge
opinion pronounced, proceeds as fellows As to
him il prays hat his discharge in bankruptcy may
be set aside, and that the debt of the complanants
may be reinstated against him and satisfied and paid
out OF any property now owned by him. The
grounds upon which the conplainants rely to avoid
this discharge are, that subsequent to the passage
OF the act, and after II went into operation he gave
preferences to some of his creditors; and that he
did so in contem plation Of awaiting him self of the
benefit Of its provisions; and also, that he fraudu
lently and wilfully concealed property. Upon the
he airing We were called upon to determine whether
bill could be filed to set aside bankrupt's dis.
charge, and upon the authority Of the case of AL
colt VS.. Avery, Bar. CHI r., Si7, We decided that
such BILL for the purpose Of reaching subs quenty
acquired property, might be filed. Our examine
tions and reflections since the hearing, have led us
slider whether an action at La should not have been
com me need STILL as under the change of proceed
ings in this State, the question Is not of pract
cal Importance, and as we shall proceed to dcter-
mine the matter upon the construction Of the seve-
raj provisions Of the bankrupt act, we have con-
clud,d to consider the bill rightly filed according
to our previous ruling, and therefore forbear dis
cussion Of the question. There Is q manifest
distinction between acts which are fraud upon
the bankrupt act, and acts which are in themselves
that Is, cases Of actual fraud Thus IL
seems always to have been held In Eng land that pre-
ltrences given by the DEBTOR, in contemplation of
bankruptcy, were fraud upon the bankrupt act, and
the assgnees could sue for and back the
paid to preferred creditors. The preferences are
void, 1t Is said, because they tend TO defeat the
equality of the bankrupt laws. Rust and others,
Assignees, 10, vs. Cooper. Cover 62s Devon
J Justice 1.-The motive, perhaps, was not culpable,
but the transaction was contrary to the general
policy Of the Law" Hassels, SC, Assignee, VS..
simpson Douglass 50. (Note) Poland and
others, Astigress, VS. Glynn. Dos and Ry., BIO.
Wilson, assigree, VS.. Balfour. 2 Camp, Dig. I
There are many other cases, to the sam effect,
rur nirg through the English reports. The pre-
feierces are declared to be fraud upon the bank.
rupt acts, ard tho assignees in bankruptcy may sue
FOR, aud recover back ficm the p.eis rred creditor
he smtup's paid or assigted to him. Such pre-.
fr,nces, also. ccI stitute acts u bankruptcy but
co rot, in England, rievs Mt TIE discharge of tho
fpikrupt. The act Of United States, Of lSll,
uTs the oct, when made In contemplation OF bank
iuptty, ard sAthorzes The assignee to sue for AMI
recover the amounts; end 1t also declares that
"tte person making such Unlawful preferences
ard payments, shall receive no discharge I'M
der the provisions Of this act" Though the
bankrupt, in the language Of Bayley Justice
Poland vs.. Glen, pay ''the money upon mo-
tives honorable, certainly, to him as individual
but which cannot be recognized a defence at
law yet the payment is unlawful Ii would be no
defence to a suit by the assignee, and no answer to
an objection interposed to prevent the bankrupts
discharge at the time of the proceedings IN bank
ruptoy IL is not case Of actual fraud; but it is
q fraud upon the act. Preferences are unlawful
But though they may be unlawful, and though, IL
the question bad been raised in the courts of the
United states when the bankrupt applied for his
discharge, his application wo aid bave been denied;
.ti is the fact, If admitted, that the bankrupt in
Of bankruptcy, made unlawful pre-
ierepces ground for afterwards, before another /
tribunal, impesching his discharged IL was said by
Lord Eldor, in Expsrte Mawson, D Vesey, GIL, IN /
D case where, by the statute. the charge of gamb /
ing would prevent the certificate, as also be good \