The news & observer. [volume] (Raleigh, N.C.) 1894-current, 1905-04-21
SULLEY'S CASE MAY
NOW Be REOPENED
Three Sensational Points
Are Sprung.
is SULLY SOLVENT?
If 1t is Proved That Cotton Exchange
Transactions Are Gambling, Yes.
Shall He Pay Creditors Un-
der Fridays or Saturdays
Prices?
DIV the Associated Press.l

New York, April 20.-MacGrane
Coke, referee in bankruptcy in the
Daniel j. Sully case, today sent to
Judge Holt, of the United States Dis
trict Court an opinion which, If ap-
proved by the court, will reopen the
Sully case entirely and bring up for
adjudication several important and al
most sensational points. The opin-
ion is given upon the application of
two sets of petitions, o1ze from Ed
win Hawley and Frank H. Ray, who
have been sued by Sully's trustee in
bankruptcy for certain sums alleged
to have been lost through participa-
ton with Sully in alleged cotton pools
and the others from creditors who are
not members of the Cotton Exchange.
Three questions were brought up:
First whether $1,000,000 paid on
Saturday, March 18, 1904, was pre-
ference and if illegal; second, wheth-
er the Fridays prices or Saturdays
prices should determine the amount
the Sully estate owes, and third,
whether transactions on the Cotton
Exchange are gambling transactions.
The opinion of the referee is that the
case should be re-opened. If Judge
Holt decides in his favor this will
reopen the whole question, and If
the claims are decided it will make an
immense difference in the amounts
due.
If it is proved that Cotton Exchange
transactions are gambling transactions
Sully is solvent and will not owe a
cent.
Referee Coke in his report said:
Il think that the petitioners have a
direct pecuniary interest in showing
if they can, that, upon a proper de-
termination on the law and the facts,
there would be sufficient assets in the
estate to preclude any right to recov-
cry against them, and that this is the
only proceeding in which such q de-
termination had and that they must,
therefore, be held to parties in in
terest within the meaning of the
bankruptcy act.
Large sums of money, it is alleged,
were paid by the bankrupts by way
of margins within four months, and
within a very few days of the bank
ruptcy, and it is not unreasonable
that creditors who have not received
such sums should desire to examine
to the facts with a view to ascertain
ing whether such payments have not
been such as are known as preferen-
tial payments under the bankruptcy
act. 1t does not seem to me inequita-
bic to permit a judicial investigation
into this matter"
The referee then quoted the rule
of the New York Exchange which
provides thta when a member an
nounces his inability to meet his OBJ
legations his contracts shall be settled
at the average quotations for like con-
tracts on that day; unless the notice
OF the failure is given within an hour
of the time of the closing of the ex-
change, in which case the average quo
tation for contracts in the subsequent
day shall eb the basis of settlement.
The referee says the trustee in bank
ruptcy and opposing creditors aver
that the Sully notice Of suspension was
given after 2 D. m. while the petition
ers, on the other hand claim the
notice was sent to the superintendent
of the exchange by D. m.
Referee Coke adds:
1.-THE petitioners ask to be permit
ted to attack the legality of the rule.
and also to show that even under the
rule, the average price at which these
cotton contracts should be settled
should really be it's average price of
Friday. The average price of Saturday
was very much lower than the aver
age price of Friday. The bankrupts
had on hand large amount OF cotton
iSdlllSl the COUlEdClS. L, InereIOfe,
they were to liquidate these contracts
at the higher price for the cotton of
March Is it would follow that there
would be much less money owing by
them, if anything. than would be ow-
ng by them if the settlements were
made on the average price of Satur-
lay, March 10. 1t is manifest that
under this rule a tremendous power IS
given to the superintendent of the ex-
change. 1t seems to me that such
'ule, fraught with such complete con-
to so many people if it is to
De maintained at all, should be MAIN
aimed upon a strict compliance with
is terms; and that petitioners here
nave an equitable right to be heard
% show if they can, that it has not
been complied with and that by such
noncompliance their property rights
nave been detrimentally affected.
Counsel for the trustee argued that
he only statements in the petition
which touch upon the illegality of the
exchange claims and the question of
wagering are made on information and
belief therefore should not be consid-
red. For the reasons stated. / am
orced to the conclusion that the petit
toner's here are entitled to the relief
hey ask"