Court Opinion

ID: 8801618
Source: CourtListenerOpinion
Date Created: 2022-11-26 14:34:27.939377+00
Date Added: 2024-06-11T17:03:55.593386
License: Public Domain

HOUGH, Circuit Judge
(dissenting). The first question in this and every other litigation is not whether plaintiff can recover in any form of action, but whether recovery can be had in the particular suit brought.
This action at law is not on a debt; it bears no relation to the statute of Elizabeth or any similar enactment. It is not to set aside any transfer of property, nor to enforce an equitable or other lien; it is an ordinary suit against principal and surety on a bond, and presents no issue other than the inquiry whether the condition of that instrument has been broken.
The terms of the bond are set forth in the opinion of the court; whether they mean that the Baker Company of Ohio agreed to pay or secure Hunter’s claim in full, or only s.uch dividend thereon as he *901might establish in bankruptcy, is not d matter susceptible of much argument, for the signification must be extracted from'few and ill-chosen words. I regard it as self-evident that the bond can only be construed into a promise to pay in full by disregarding most of the words used.
Yet the generous obligation spelled out by the court below affects not only the Baker Company of Ohio as principal, but a.surety whose liability is strictissimi juris; and, in this action on the bond, there can be no recovery beyond the measure of the surety’s responsibility.
The basis of judgment below and affirmance here is a substitution of the bond for certain assets in and to which plaintiff had certain rights at the time of bond given. This, of course, presupposes an intent so to substitute, yet the record is barren of evidence of any intent on the part of the surety other than to sign a certain form of words; and in those words no such substitution or intent to substitute can be discovered.
Nor did the plaintiff by his own pleading present any such contention. The complaint only alleges that among the creditors of the Baker Company of New York ("the bankrupt) the plaintiff stands alone with a “first and preferred claim” against the assets of that company, and so is entitled to be paid in full in the bankruptcy proceeding; not having received such payment, this suit is brought.
Thus the test of plaintiff’s right to recover on the bond is pleaded as identical with or dependent upon his right to recover in full in bankruptcy. This pleading is in complete harmony with what I regard as the obvious meaning of the. condition of the bond.
It follows that plaintiff was bound by his complaint, as well as by the terms of the instrument in suit, to make out a case which would have entitled him to a judgment against -the trustee in bankruptcy of the Baker Company of New York. It has never been asserted in this record that such a demand was established, and if the fact is not admitted, it is obvious.
It advances nothing to dwell on the order made by the bankruptcy court, permitting the sale of assets. That order was no more than a formal registration of creditors’ consents, filed in writing with said order, and Hunter’s consent is in the exact language of the bond in suit. The wording of consent and bond is not good; it may not express the intent either of Hunter or the Baker Company of Ohio; but that is immaterial in an action where the propriety of the judgment must be gauged by the surety’s rights and by nothing else.
Nor is it material to assert that the transfer of assets from the Rice Company to the Baker Company of New York was not good as against Hunter. Nobody has ever asserted such validity; indeed so far from denying -liability, the Baker Company of New York openly assumed all the.Rice Company’s obligation, including that to Hunter if he succeeded in establishing it. Therefore no one sought to make Hunter worse off after transfer than before; but why his position should be bettered thereby has never been explained.
Assuming, however, the equitable lien now said to exist in favor *902of Hunter and to be a reason for entering judgment against the surety-on this bond, the lien must be on some particular property, and it was incumbent on plaintiff to show the property and its worth if it had been parted with. The only proof as to the worth of what Rice Company had and Baker Company of New York got is a trial balance sheet, showing solvency in the Rice Company- (unexplained and duly objected to) of a date prior to an agreement signed by the plaintiff Hunter (as president of a creditor concern), to the effect that the Rice Company was insolvent. This seems unusually insufficient.
Nor is there any evidence that what, a year later, the Baker Company turned into bankruptcy to” be there sold consisted of Rice Company’s assets either in whole or in part. In short, nothing is shown to which the asserted lien can attach, or ever did attach.
This hiatus in the evidence has been supplied (so to speak) by confusing an action to\ enforce a lien with one to obtain an accounting from a transferee in fraud of creditors. This case was really tried below on the theory of fraud, and seems to be affirmed in approbation thereof. No such case was pleaded, and if it had been, and had been proved, it has not been pointed out why the American Bonding Company is affected thereby.
For these reasons I dissent from the' reasoning and conclusion of the court.