Case Name: DWIGHT & HARTMAN vs. BEMISS ET AL.
Court: Louisiana Supreme Court
Jurisdiction: Louisiana
Decision Date: 1840-09
Citations: 16 La. 145
Docket Number: 
Parties: DWIGHT & HARTMAN vs. BEMISS ET AL.
Judges: 
Reporter: Louisiana Reports
Volume: 16
Pages: 145–151

Head Matter:
DWIGHT & HARTMAN vs. BEMISS ET AL.
APPEAL FROM THE COURT OF THE FIFTH DISTRICT, FOR THE PARISH OF ST. MARY, THE JUDGE OF THE SIXTH PRESIDING.
Persons who are not creditors of an insolvent debtor, may purchase and receive transfers of his property after he is in insolvent circumstances, and it cannot be complained of by his creditors, when they appear to be purchasers for a valuable consideration, and in good faith.
But, if an insolvent debtor use the proceeds of sales of his property, in such a manner as to give a preference to one creditor over another, the law will interfere and correct it.
Where a creditor receives a note from his debtor, to collect and pay himself, he is bound to use due and proper diligence to collect it, or he will be charged-with the amount.
This is a revocatory action. The plaintiffs, who were creditors of John B. Bemiss, an insolvent debtor, instituted this their revocatory action against him and others, to whom he made sales or transfers of his property, on the eve of insolvency, in fraud of them as bom fide creditors. They allege, that being in insolvent circumstances, and indebted to them, in the sum of six hundred and forty dollars, he sold and trans-; ferred to one Judson Harman, a carriage worth four hundred and seventy dollars, with a view of giving him an-unjust preference as a creditor; and also that he sold and conveyed toDonelson Caífrey, John E. Carson, Milton and Thomas Johnson, a slave named Henry ; and that these conveyances, were made for the purpose of defrauding them, and giving unjust preferences to others. They pray that these sales be annulled, and the property restored ; that they have judgment against Bemiss for the amount of their demand, and that this property be sold to satisfy the same.
The defendants, Milton Johnson and Caífrey, failed to answer. Harman pleaded the general issue; and Carson and Thomas Johnson, denied all fraud, and averred they were not creditors of Bemiss, but purchased the slave Henry, in good faith, and in the ordinary course of business.
Bemiss, the principal debtor, admitted the execution of the note sued on, and averred it was given on a settlement, for a’balance due the plaintiifs. He denied all fraud, and explained the several transfers of his property complained of.
On the evidence adduced, there was a verdict against Bemiss for the amount of his note ; and against Harman for four hundred and seventy dollars, the price or value of the carriage ; and also against Carson and Thomas Johnson, for eight hundred dollars, the price or value of the slave ; also annulling all the sales, and transfers. There was judgment, on this verdict, against Bemiss, Harman, Carson and Thomas Johnson, and also against Milton Johnson, not included in the verdict, and discharging Caífrey. Three of the defendants appealed.
The facts on which this case turns, are more fully explained in the opinion of the court.
Splane, for the plaintiifs,
contended that the judgment should be affirmed, being fully supported by the evidence. The law gives the complaining creditor the right to attack and have annulled, all sales and transfers of property made by the insolvent to one set of creditors or persons, in preferénce of other and bona fide creditors. '
T. II. and TV. B. Lewis, for the appellants,
insisted that /it- was only sales and transfers of the insolvent debtor’s pro-1 perty, made by him to creditors, in preference of other creditors, that can be attacked in this mode of proceeding. The defendants, Johnson and Carson, not being creditors of Be-miss, the sale to them, of the slave in question, is good. It is not giving a preference to one creditor over others, but is a ’> bona fide sale, and in the ordinary course of business, q 6. Louisiana Reports, 538.
2. Johnson and Carson gave a good and valuable consideration, in cash, for the slave, which was paid to Caffrey. They, not being creditors, had the right to purchase, and the insolvent had a right to sell his property foi/cash, as long as he was in possession. What he may.have done with the money is another matter. It cannot affect the appellants.
3. Creditors must show that they have been injured by the transactions of their debtor, before they can set them aside in the revocatory action. Louisiana Code, 1973.
4. The defendant is entitled to a credit for the amount of Allen’s note, because the plaintiffs received it to collect and account for the proceeds. They have neglected, or failed to collect it, through their own fault or mismanagement, and must be charged with its amount.
5. In contracts by insolvent debtors, it must be shown that those who claim the benefit of such contracts knew of his insolvency otherwise they are not liable. There is no evidence that the appellants knew of the insolvency of Bemiss. 4 Louisiana Reports, 256. Louisiana Code, 1980, 1979.
6. If contracts with insolvent persons be onerous, they cannot be set aside, unless the person who contracts with the insolvent acted in bad faith, even though there may have been a design to defraud, on the part of the debtor, except when the property has been sold for one fifth less than its value. Idem., 1974-5-6.

Opinion:
Garland, J.,
delivered the opinion of the court.
The plaintiffs sue John B. Bemiss, to recover six hundred and forty dollars, with interest, due.on two promissory notes. They make Judson Harman and Milton Johnson, parties,' alleging that Bemiss was in insolvent circumstances, and that he had transferred to them, or one of them, a carriage of the value of about four hundred and seventy dollars, with a view of giving an unjust preference to them or some others of his (Bemiss') creditors. They also made Donelson Caffrey, John E. Carson and Thomas Johnson, defendants, alleging, that the former as the agent of Bemiss, or at his instance, had conveyed to the two latter a slave named Henry, for the purpose of paying them a pretended debt, when in fact, Bemiss was not in any manner indebted to said Carson and Johnson. There are other allegations in the petition, in relation to other property, which it is not necessary to notice, as all the litigation before us has been in relation to the carriage and the slave Henry. The plaintiffs say, all the conveyances were made for the purpose of defrauding them, and giving unjust preferences to others. Caffrey and Milton Johnson filed no answer, and a judgment by default was rendered against them. Harman's answer is equivalent to a general denial. Thomas Johnson and Carson, in their answers, deny any fraud, they say they were not creditors of Bemiss in any manner, that they purchased the slave in good faith, for a valuable consideration, in the ordinary course of business, and their object was not to aid in giving an improper preference to any creditor. Be-miss, in his answer, says he signed the notes sued on, that they were given for balances due the plaintiffs, by himself, and the firm of Bemiss, Brashear & Co., on a settlement that took place a few days previous to their dates, in the course of which he made various payments to plaintiffs, and also gave them a note drawn by J. H. Allen, on which was due the sum of two hundred and fifty dollars, which they were to collect and place to his (Bemiss') credit. He further says, that the payments, transfers, &c., made to his co-defendants complained of, were not made in fraud of plaintiffs rights, or those of any other person, but were made as similar transfers and assignments were to plaintiffs, for the purpose of discharging the debts he, was owing.
The jury rendered a verdict against Bemiss, for the sum of six hundred and forty dollars, and interest. They discharged Caffrey from all liability, and they further found against Harman, for four hundred and seventy dollars, the price of the carriage, and against Carson and Thomas Johnson, for eight hundred dollars, the value of the slave. They say nothing about Milton Johnson, the other defendant, yet the court renders a judgment against him, and also against Bemiss, Harman and Carson, and Thomas Johnson, for the sums above mentioned, and discharge Caffrey from all liability. From this judgment, Harman, Carson and Thomas Johnson have appealed.
An inspection of the record, together with those in the cases of Walton & Son, against Bemiss, Brashear & Co., and others, and the present plaintiffs against them and others, which have come up with this, show that, at the trial, there was a continuation of the scramble and confusion, which commenced when the insolvency of Bemiss and his partners became known, and which accounts for some of the errors into which the court below has fallen. Harman is condemned to pay the value of the carriage, in two different judgments, signed on the same day, when the court had in one of them, decided that the plaintiffs had no claim upon it, and had dismissed their intervention on that ground.
The evidence in the case, creates a strong impression on our minds, that the plaintiffs do not come into court with unsoiled hands, their notes being dated at a time when they say, themselves, that Bemiss was insolvent, and it appears by their receipt for Allen's note, that they were endeavoring to secure something from the wreck, and obtain that preference for themselves, which they complain of so much in olhers.
As we have in the case of Walton & Son, against Bemiss, Brashear & Co., just decided, reversed the judgment, and permitted the plaintiffs to come in with them, for their share of the claim against Harman, the judgment against him in this case must be reversed, as it is not just he should pay tWICe.
are not creditors debtor ^^may purchase, and re-of his property, solvent0 ch'eumstances, and it plained of by his they^appeiR'b to be purchasers ble considerafaithand ms°0<l
But if an insolvent debtor use the proceeds of sales of his such6atymanner ferencé^o* Poné creditor over will 'interfere
tor receives a note from his debtor to collect hadisound6to use due and proper diligence to collect it, or he with the amount!
The plaintiffs specially state, in their petition, that Carson and Thomas Johnson were not creditors of Bemiss at the time Caffrey made the sale of the negro to them, and they say the same. There is no evidence in the record to show they were creditors, or that they were interposed to give an undue preference to others, who were creditors. And admit^ng for the argument, that they were interposed, we do not see how the plaintiffs could recover without making the favored creditors parties to the suit. As the transaction is Presented to us, the evidence is insufficient to establish bad faith in Carson and Thomas Johnson ; they appear to be purchasers for a valuable consideration, and we cannot agree with the jury as to the correctness of their verdict. The purchase of the slave seems to have been in the ordinary course of business, and ought not, in our opinion, to be annulled upon the evidence now before us. A person in embarrassed, or even in insolvent circumstances, may sell his property to another, for a valuable consideration, but if he use the proceeds in such a manner as to give a preference to one creditor over another, the law will interfere and correct # 7 it, but with that the purchaser has nothing to do, unless he is a party to the fraud, and interposed for the purpose of per-Petra^ng Louisiana Code, articles 1973-74-75-76.
As this case must be remanded, it is necessary, to a correct decision of it, that the effect of the receipt given by plaintiffs to Bemiss, for Allen's note, be decided. We are of opinion. that, if it shall appear, on the trial, that the plaintiffs have . , , used due diligence m endeavoring to collect that note, and c°uld not do so, then they are not to be charged with it; but jf proper diligence has not been used, then they ought to be * 1 . , . jo charged with it. If Allen was notoriously insolvent, a knowledge of that fact will excuse them.
It is, therefore, ordered, adjudged and decreed, that judgment of the District Court be annulled and reversed, the verdict of the jury be set aside, so far as they concern the defendants, Judson Harman, John E. Carson and Thomas Johnson. That a judgment be entered in favor of said Harman ; he having in the suit of M. Walton Son vs. Bemiss, Brashear & Co. et al., been condemned to pay the value of the carriage, to said Walton & Son, and the plaintiffs. It is further ordered and decreed, that as relates to the defendants Carson and Thomas Johnson, this cause be remanded for a new trial, to be proceeded in according to law ; and as to the distribution of the amount to be collected from Harman, it is to be made upon the principles settled in the suit of M. Walton & Son vs. Bemiss, Brashear & Co. et al., in which these plaintiffs are intervenors : It is further ordered, that the plaintiffs pay the costs of this appeal.