Court Opinion

ID: 7197224
Source: CourtListenerOpinion
Date Created: 2022-07-24 17:03:54.657096+00
Date Added: 2024-06-11T16:16:23.349416
License: Public Domain

*894On Application for, a Rehearing.
Watkins, J.
The object of this suit is to subject an asset in the hands of the syndic of the insolvents to reimbursement of certain attorneys’ fees and other expenses which A. Shwartz & Sons incurred in a litigation with one of their creditors.
H. Kern & Son made sale of a stock of goods in globo to A. Shwartz & Sons for the cash price of forty-seven thousand dollars, and contemporaneously therewith H. B. Claflin & Co. sued out an attachment against H. Kern & Son for a large sum, in the United States Circuit Court, seized the stock of goods and issued garnishment process against A. Shwartz & Sons.
On account of these proceedings, A. Shwartz & Sons stopped the payment of the check which they had given to H. Kern & Son for the price of the goods, and at the same time they filed an intervention in the attachment suit claiming the ownership of the property.
"During the pendency of the foregoing proceedings H. Kern & Son made a cession of their property under the insolvency laws of Louisiana, and included the proceeds of goods sold as one of their assets, and, as the result of the cession, the Federal tribunal held that the attachment was dissolved, thus freeing the fund from the garnishment and leaving the property in the possession of A. Shwartz & Sons.
The sale was thus consummated, and the price passed into the control of the syndic for the benefit of the creditors, and A. Shwartz & Sous proceeded by rule against the syndic for the fees and expenses which they had incurred in -that litigation, resting their claims, mainly, upon a recital in the schedule of the insolvents, to the effect that said fund was in the possession and under the control of a certain trustee who had been selected by representatives of Kern & Son and Shwartz & Sons to await the result of the litigatioa, iu pursuance of an agreement previously entered into between them for the purpose of protecting the sale.
In other words, that W. S. Benedict held the said fund as trustee for the purpose of protecting A. Shwartz & Sons in the expenses and expenditures they had incurred in their efforts to protect the stock of goods they had bought of H. Kern & Son, from the attachment of H. B. Olaflin & Co.; and that this agreement was a supplement to and an incident of the sale.
*895This claim is resisted by the syndic and one of the creditors of H. Kern & Son, who are appellants.
In support of their contention, A. Shwartz & Sons claim that they conducted an expansive litigation with H. B. Olaflin & Co., and prosecuted a writ of error from an adverse judgment of the Circuit Court to the United States Court of Appeals, and therein procured the dissolution of the writ of attachment at great cost and expense.
On the other hand, the contention of the syndic is, that it was the cession of H. Kern & Son which struck down the attachment, and released the fund; and that A. Shwartz & Sons could, at any time, have exonerated themselves from all liability by surrendering the fund, or causing it to be deposited in the judicial depository of the court.
Our opinion holds that the services of the attorneys of A. Shwartz & Sons and the expenses they incurred having inured to the benefit of H. Kern & Son is not a good basis for an action.
But the action taken by A. Shwartz & Sons evidently prevented H. B. Olaflin & Co. getting the fund in possession and depriving the syndic of it. The attachment was sustained in the Circuit Court; and nothing but the timely writ of error which was taken by A. Shwartz & Sons prevented its becoming a finality.
The agreement is stated to have been that the trustee was selected for the purpose of keeping the fund “ in order to protect A. Shwartz & Sons against any lawsuit and to hold them harmless, and to indemnify them for any expenses they might have to undergo ” * * * to the end, that the fund should be preserved for the benefit of the “ general mass of the creditors of H. Kern & Son.”
Our opinion, finding this proposition supported by the evidence, affirmed the judgment.
The application for a rehearing rests upon the following grounds, to-wit:
1. That the expenses incurred by A. Shwartz & Sons were the result of an understanding between them and Kern & Son, “to divert the proceeds ” from the creditors of H. Kern & Son.
2. That the court erred in holding that the syndic and the creditors of H. Kern & Son were concluded and estopped by the schedule.
8. That if the statement made by W. S. Benedict, with regard to the agreement, is to be accepted, same must be taken in its entirety, and a part of it is that H. Kern & Son were to go into insolvency; *896and had that part of the agreement been carried out, the attachment would have been immediately dissolved.
4. That the court erred in holding that there was any trust or agreement whatever, for the purpose of reimbursing the expenses or the attorneys’ fees of A. Shwartz & Sons.
5. That A. Shwartz & Sons could have, at any time, relieved themselves from liability by making a surrender of the fund.
There are several additional grounds of objection stated, but they are substantially embraced in the foregoing.
None of the grounds urged are at all serious. In our view a sufficient foundation for the agreement is the protection of the fund for the benefit of the syndic and the creditors of H. Kern & Son.
The cession of H. Kern & Son was made, but it was unavailing in so far as the insolvents were concerned. The attachment was levied immediately after the terms of the sale had been agreed upon, and before the check of A. Shwartz & Sons was presented at bank for payment. It was, of course, prior to the agreement. Consequently that part of the agreement, subsequently made in reference to the cession of H. Kern & Son, was of no possible efficacy; and the subsequent cession as made did not procure the release of the property. Hence the necessity .of intervention and writ of error obtained by A. Shwartz & Sons, through which alone the release of the attachment was obtained.
The point made, as well as the agreement of counsel for the syndic and the creditor goes upon the theory that the cession of H. Kern & Son would of itself have solved the whole difficulty.
Counsel says that if Kern had surrendered immediately, there would have been no need of an agreement. And they ask: “In such case, how could it have ever been contemplated that there would be any litigation in the Federal court? ”
This argument misplaces the situation altogether. The litigation began before the sale was consummated and Kern’s cession, subsequently made, was unavailing without the aid of Shwartz & Sons. Without the agreement and Shwartz & Sons’assistance neither the syndic or the creditors would have realized anything out of the fund.
Rehearing refused.
Miller, J., adheres to his dissent, and Blanchard, J.;, takes no part in this opinion, not having been a member of the court at the original hearing of the cause.