The daily dispatch. [volume] (Richmond [Va.]) 1850-1884, 1875-04-06
RIGHTS OF CREDITORS.
IMPORTANT CASE DECIDED BY
JUDGE HUGHES. 49,,

IMPORTANT CASE Decided BY
.a- JUDGE HUGHES. IL,
D. C. MAYO ADJUDeED A BANKRuPT. ;
To the case of the petition Of G. D.
W. Clinton and Others us. D. G. Mayo,
charging acts of bankruptcy, and pray
| ing that the defendant may be adju-
dicated bankrupt, further evidence was
taken by Judge Hughes yesterday ON the
question whether sufficient number Of Gre
ditors had joined in the petition to warrant
the adjudication. The, law require, one
fourth IN number and oue.third ia amount.
The examination of witnesses consumed
the greater part of the day. The whole
! amount of debts was about $4,000. OF
these about &c, 800 we're represented By
creditots who had signed the petition. This
| would not be equal to one-third in amount
| Of the whole Indebtedness, if the claim OF
| Mcdowell & Co., who accepted a confession
Of Judgment for 1924, ,Ts3. and who proved
| their claim to be now about Sl7, $50, were
| computed. The question, whether this
claim should be computed or not, was ably
argued by Messrs. Neeson and Chandler for
| the petitioning creditors, and by Messrs.
| John S. Wise and Christian for the preferred
creditors. The following was the opinion
and
| ...... DECISION OF THE JUDGE:
The single question now left in this case
| is, whether the debt of S24,763, for which
the confession of judgment given on the 23d
day Of January, 1875, for the purpose of
preferring NJ. E. Mcdowell & Co., is proya.
| BILE in whole, or for moiety. and to be com-
puted as to the whole or only as to balf in
| this preliminary proceediag Before the
| amended bankrupt act Of the 22d of June,
1874, if the claim of a creditor
| were ., doubted by the judge or
| itor had accepted a preference, it was post
poned, and could not be proved until after
| an assignee was appointed. There was then
no provision in the bankrupt Law requiring
| that any specific number of creditors should
join in a petition in involuntary bankrupt
cy; and no computation was necessa-
| ~ of the number OF creditors, which could
| be affected by postponing the proof of the
claim. .. ......... -, .... s-... ..-.r
| BEFORE THE AMENDMENT
of June %, 1874, requiring specific number
| Of petitioning.credto to join in such Pc
| ton authorsing or requiring the court to pass
| upon the question, whether preference had
been given in fraud of the provisions OF the
| bankrupt act, in adjudic,ting upon the peti-
! tion in involuntary bankruptcy; because it
| was then unnecessary to give it that power.
| But when the amendment Of June 90, 1874,
| was passed, an additional clause was add
| ed to the 39th section, immediately
| following the clauses requiring specific
number Of creditors TO join in the petition !;
which clause was in fact msde necessary by
that amendment. That clause empowers
the court, in ascertainipg whether oue-fourth
in plumber and one-lhird in amount of
creditors had joined in the petition, to de.
eide whether the preferred creditor had had
reasonable cause to believe that the debtor
was insolrent; and knew that fraud upon
the bankrupt act was intended"
! say it was necessary to add this clause to
the 39th section, and to give this power to
the court, at least for the purposes Of adju.
dicaton. / do not pretend that the decision
of this court on this question, in this pre-.
! limnary stage of the proceeding, i, final and
conclusive as against the parties to the pre-
ference; but its decision is necessary, and is
| fiual so far as the preference effects the ju-
riSdiction of the court to adjud'cate upon
the petition. II the court did not have this
power, all that it would be necessary for any
creditor and colluding insolYent to do 10
defeat the proceeding in bankruptcy would
| be to arrange confession Of judgment for
sum so large as to exceed by double the ag-
gregate claims of bona tde creditors. The
VALIDITY OF THE CONFESSION OF JUDGMENT
now under consideration being the only
| question in this case, what are the fac s
| in regard to il? The debtor defendant
Mayo is made witness and put upon the
stand by NJ. Z. Mcdowell & Co. He proves
that NJ. f. Mcdowell, the senior partner,
'was whole week, till Friday, January
%, 1874 examining Mayo's affairs, and that
| it appeared upon the examination of bis ac-
counts that his assets were less than his lia-
| biltie>." He proves that this appeared at
the examination in his factory, when Mayo'S
liability 10 Mcdowell & co. was aScertaincd
on that Friday, January %, 1875, TO be less
than $4,000. He proves that on the next
dav, Mcdowell & Co. took confession Of
| Judgment from him for S24763. He proves,
also, that on the day Of conlesSing The Judg-
ment for this larger amount he asked NC.
Dowell & Co.'s counsel, in the presence OF
NJ. L. Mcdowell, whether this confession
of Judgment would be an act of bankruptcy,
and that this counsel (who did not seem TO
know of the previous examination OF his
affairs by Mcdowell, which bad disclosed TO
him Mayo's insolvency, advised him to con-
suit his own, counsel; but stated that the
amount for which the judgment was to DE
confessed was too large to allow OF the re-
naming creditors taking steps Ia bank'
ruptcy.
| DO these facts, proved by the witness
whom Mcdowell & Co. themselves put up
on the stand, show that that 6rm " had rea-
sonabe cause to believe that the debtor was
iIsolyent, and knew that fraud on the Dan X.
rupt act was intended"? Certainly they had
reasonable cause 10 believe ......
MAYo's INSOLVENCY; '..'t-#
for they knew that he was insolvent by long
familiarity with and recent weeks examl-
nation of his affairs.
Did they also know that Mayo Intended
fraud upon the bankrupt act! A fraud up
on that act is au effort to defeat its objects.
The leading Object of tnat act Is to secure
pro rata distribution among creditors, OF
the estate of the bankrupt. This confession
of Judgment could not but defeat that OBJ
| iect; and could not but have been intended
TO defeat that object by Mayo; and NJ. 4.
Mcdowell could not but have known that
that was Mayo's intention. 1t, then, 1t be
maxim of law that no man Shall be allowed
TO take advantage of his own wrong; and II
| it be true that fraud upon statute can-
| not be allowed to defeat the purposes OF The
statute, am at liberty to treat this calm OF
| Mcdowell & Co. as proyable debt ior the
| purpose OF defeating the Jurlsdlctloa OIL lDls
court in this proceedings
1t is not necessary Tor me in determining