Court Opinion

ID: 8640001
Source: CourtListenerOpinion
Date Created: 2022-11-24 19:51:39.385046+00
Date Added: 2024-06-11T16:56:04.170122
License: Public Domain

BLATCHFORD, District Judge.
The evidence shows that on the 26th of May, 1873, when Daniel Adee was appointed receiver, and took for the benefit of Muxlow the property of Hulst, Hulst, to the knowledge of Niles, who was the attorney for Muxlow in the proceedings, owed, besides the Muxlow judgment for §1,025.63, the following judgments: The Jackson & Chace judgment of January 16th, 1853, for $202.56, owned by Daniel M. Adee, the two Jackson & Chace judgments of April 22d, 1873, for §118.27 and $243.02 respectively, and the Staeey judgment of May 20th, 1873, for $2,014.88. Niles also then knew of the debts sued for in the suit brought by Holden, Hopkins & Stokes for §734.S3 and in the suit brought by Flynn for $1,000, both of which suits Niles was defending as attorney for Hulst. Hulst also then owed the judgment recovered by Daniel M. Adee May 21st, 1873, for $605.13. Hulst was, therefore, at the time Daniel Adee was appointed receiver and took the property in question, insolvent, within the meaning of the bankruptcy act. He had failed to pay judgments obtained by default against him. He had no defence and made none to the suits in which such judgments were recovered. Niles knew of this insolvency of Hulst. His knowledge must be imputed to Muxlow. Muxlow is affected by what Niles knew.
The remaining questions are whether Hulst, in suffering Muxlow to obtain his judgment and to have the receiver appointed. and in suffering the receiver to take the property in question for Muxlow’s benefit, substantially procured all this to be done, and did so with an intent to prefer Muxlow over other creditors, and whether Muxlow had reasonable cause to believe that Hulst had such intent, and that a fraud on the bankruptcy act. was being committed by what was being done.
The defendants cite and rely upon the decision in Wilson v. City Bank, 17 Wall. [84 U. S.] 473, as controlling in the present case. They contend that there was no collusion between Hulst and Muxlow, in reference to the obtaining of the judgment by Muxlow and the appointment of the receiver. and the taking of the property by him; that Hulst was entirely passive; that he could make no defence to the proceedings of Muxlow. tvhich were founded on a just *1176debt, and made no defence to them; and that there is nothing shown m evidence to displace the lien acquired by Muxlow.
The main point upon which the case of Wilson v. City Bank [supra], was decided was, that the facts of that case did not show any positive or affirmative act of the debtors from which an intent to give a preference to their creditor could be Inferred; that the facts merely showed legal proceedings against them, through the whole of which they remained perfectly passive; that they afforded their creditor no facilities to obtain a lien on their property by judgment and execution, and interposed no hindrance; that no positive evidence existed of a wish or a desire on their part to give their creditor a preference; and that, having other creditors with debts due and suable, they neither hindered nor facilitated any one of all their creditors. But the court, in that case, did not hold, nor has it been held in any case, that where there was evidence of affirmative acts done by the debtor which not only directly tended to secure the preference to the particular creditor, but actually re-suited in securing it, the intent on the part of the debtor to secure such preference could not be inferred. On the contrary, the language of the court, in that case, is to the effect that where a debtor does a positive act, the consequences of which he knows beforehand,’ he must be held to intend those consequences; and that when a debtor contributes, by acts of a positive and affirmative character, to the success of the acts of his creditor, it may be inferred that he has an active desire or wish to prefer such creditor to other creditors, when the acts of his creditor are such as to secure such preference,
Applying these principles to the facts of this case, we find that in March, 1873, Hulst was sued by Holden, Hopkins & Stokes, for a just debt, for $734.83 for merchandise sold, to which there was no just defence; and that this suit was defended in such a manner that Muxlow, who brought his suit late in April, 1873, was enabled thereby to obtain a judgment more than a month before Holden, Hopkins & Stokes could obtain their judgment. The act of Hulst in putting in a defence in the suit of Holden, Hopkins & Stokes was an affirmative act. It had the effect, when the defence was continued after Muxlow’s suit was brought, and until time enough had eiapsed to enable Muxlow to perfect his judgment and his proceedings for a receiver, to secure to Muxlow a preference over Holden. Hopkins & Stokes. Such preference is now asserted in favor of Muxlow, as against the plaintiff, who represents Holden, Hopkins & Stokes as well as other creditors. The intent of Hulst to prefer Muxlow over Holden, Hopkins & Stokes, from and after the time Muxlow brought his suit, must be inferred from the act of Hulst in continuing after-that time to defend the suit brought by Holden. Hopkins & Stokes, when it is shown, by the fact that the latter subsequently recovered a judgment, that such defence was groundless. The propriety of this inference is not qualified by any evidence which goes to show that such defence was consistent with any other intent. Hulst interposed a hindrance to Holden, Hopkins & Stokes, by defending their suit; and by continuing to do so after Muxlow brought his suit and until after the receiver was appointed, he facilitated, by an affirmative and positive act, the proceedings of Muxlow. He must be held to have known that his continuance of the defence of the one suit would enable the plaintiff in the other to secure a preference by proceedings which it was lawful to take. He substantially' procured to be done by Muxlow what Muxlow did, because his continuing to defend the other suit enabled Muxlow to secure over the plaintiffs in the other suit the preference which othenvise could not have been secured. It would have been equally open to Holden. Hopkins & Stokes to take the same steps which Muxlow did.
That Muxlow had reasonable cause to believe that Hulst had the intent to prefer him, and that a fraud on the bankruptcy act was being committed, is entirely clear. Muxlow is chargeable with all the knowledge which his attorneys had. They were the same persons who as attorneys for Hulst were defending the suit brought by Holden, Hopkins & Stokes. They were acting for Hulst, after they brought Muxlow’s suit, in defending the suit brought by Holden, Hopkins & Stokes, and in thus enabling Muxlow to first obtain his judgment and institute the subsequent proceedings, and they were at the same time acting for Muxlow in using the facilities which, on behalf of Hulst, they were thus placing at their own disposal for the benefit of Muxlow. Mayer v. Hermann [Case No. 9,344],
I have considered this case solely as one of a preference void under the bankruptcy act. That is the only subject matter of the bill. There is a large body of evidence, which, it is urged in argument, makes out a case of actual fraud on the part of Hulst, fraud in fact, fraud as against his creditors, an intent to cheat them, and conspiracy with various persons to that end. I express no opinion as to these questions. It is sufficient to say that the allegations of the bill are not directed to anything of the kind.
There must be a decree for the plaintiff according to the prayer of the bill, with a reference to a master to take the necessary account.