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HARDT V. HEIDWEYER, 152 U. S. 547 (1894)

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U.S. Supreme Court

Hardt v. Heidweyer, 152 U.S. 547 (1894)

Hardt v. Heidweyer

No. 268

Submitted March 13, 1894

Decided April 2, 1894

152 U.S. 547


Whether a debtor in Illinois in failing circumstances has or has not the right by transfers of property to prefer certain creditors in the disposition of his assets, it is clear that he has not the right to transfer to such creditors property largely in excess of their claims to the injury of other general creditors.

A bill in that state by other creditors of the debtor filed several years after chanroblesvirtualawlibrary

Page 152 U. S. 548

such transfers were made, which attacks them and prays to have them decreed to be invalid and to have the assigned property distributed pro rata among the general creditors and which alleges that the plaintiffs were ignorant of the matters complained of, but now have knowledge acquired within a month prior to the filing of the bill, but which does not show how knowledge of the wrongs complained of was obtained, nor why they had not had earlier the same means of ascertaining the facts, may be dismissed, on demurrer, for laches on the part of the complainants.

On April 23, 1889, the appellants, as plaintiffs, citizens of the State of New York, filed their bill in the Circuit Court of the United States for the Northern District of Illinois, making as defendants the following persons, citizens of the State of Illinois: Sigismund Heidweyer, Norbert Stieglitz, the National Bank of Illinois, Siegmund Florsheim, Philip Florsheim, and Simon Florsheim. On January 15, 1890, they filed an amendment to their bill. To the bill, with its amendment, the defendants demurred on the several grounds of a want of equity in the bill, the laches of plaintiffs, a lack of jurisdiction, and a defect of parties. On May 5, 1890, this demurrer was sustained, and the bill dismissed. From the decree of dismissal the plaintiffs have appealed to this Court.

The facts, as stated in this bill and its amendment, are as follows: the plaintiffs were judgment creditors of the defendants Heidweyer & Stieglitz, a firm doing business in Chicago from July, 1875, to October 15, 1884. As early as January 1, 1884, the latter were hopelessly insolvent, their liabilities exceeding even their nominal assets, as they well knew. By the assistance of friends, however, they were enabled to keep up the appearance of doing business until October. Early in September they ascertained and determined definitely that they must fail, make a general disposition of their property among their creditors, and go out of business. At that time their indebtedness amounted to about $240,000, their assets to about $150,000, of which $125,000 was the value of their merchandise and $25,000 that of their bills receivable and open accounts. Among other creditors were the following parties, to whom Heidweyer & Stieglitz claimed were due at the time the sums set opposite to their names: chanroblesvirtualawlibrary

Page 152 U. S. 549

National Bank of Illinois . . . . . . . . $12,000.00

Siegmund Florsheim. . . . . . . . . . . . 2,628.00

Julius Heimann. . . . . . . . . . . . . . 5,000.00

Julius Heimann, administrator . . . . . . 5,000.00

Florsheim Bros. . . . . . . . . . . . . . 5,000.00

Philip Florsheim. . . . . . . . . . . . . 9,000.00

Simon Florsheim . . . . . . . . . . . . . 5,000.00

Herman Hahlo. . . . . . . . . . . . . . . 2,500.00

Hahlo, Stieglitz & Co. . . . . . . . . . 2,086.56

In fact, the true amount due to such parties was much less than the sums so named. In addition to this, the defendant Siegmund Florsheim was liable, as they pretended, as endorser on their commercial paper for the sum of $22,925.

It was their duty, so the bill avers, in view of their financial condition, under the policy of the assignment law of Illinois, to make in due form a general assignment to some person of all their property for the benefit of their creditors, and without any preferences; but instead of doing this, they consulted with counsel as to the best means to prefer the creditors above named. On September 16th, by the advice of such counsel, they executed certain judgment notes, payable on demand to the parties, and for amounts as follows:

National Bank of Illinois . . . . . . . . $12,000.00

Siegmund Florsheim. . . . . . . . . . . . 41,553.50

Florsheim Bros. . . . . . . . . . . . . . 5,000.00

Philip Florsheim. . . . . . . . . . . . . 9,000.00

On the note in favor of Siegmund Florsheim, $16,000 was subsequently credited as paid. On October 13th they executed further judgment notes, payable on demand, as follows:

Julius Heimann, two notes, each . . . . . $ 5,000.00

Simon Florsheim . . . . . . . . . . . . . 5,000.00

H. Hahlo & Co. . . . . . . . . . . . . . 2,500.00

Hahlo, Stieglitz & Co. . . . . . . . . . 2,086.56.

On October 15th the counsel above referred to, acting for both chanroblesvirtualawlibrary

Page 152 U. S. 550

the creditors and the debtors, caused judgments to be entered upon said notes in the superior court of Cook county, Ill., in favor of the creditors for the amounts of principal and interest and attorneys' fees, the attorneys' fees amounting in all the cases to the sum of $3,564.04. Immediately after the entry of such judgments, executions were issued thereon to the Sheriff of Cook County, who levied upon the stock of merchandise of said firm of Heidweyer & Stieglitz, being all the tangible property of which they were possessed, and of the value of $125,000. Of this merchandise, about $8,500 was replevied from the sheriff before the sale, and the remainder sold at great sacrifice, producing only $65,537.38, which sum was applied upon the executions, leaving a small balance due upon most of them. The only property of value which the said Heidweyer & Stieglitz, on October 15th, possessed, other than the stock of merchandise, were certain bills receivable, of the value of about $18,000, and certain accounts receivable, of the value of about $6,000. It is charged:

"That as a part of the same scheme of preference said Heidweyer & Stieglitz assigned and delivered said bills and accounts receivable to the defendant Simon Florsheim, in trust to collect the same for the benefit of said judgment creditors as to the amounts remaining unpaid on their aforesaid judgments, and for the benefit of himself as to a claim of thirteen hundred dollars, due to him by said Norbert Stieglitz individually, the surplus, if any, to be returned to said Heidweyer & Stieglitz, so that, out of said accounts and bills receivable so assigned, and out of said replevied goods subsequently surrendered or paid for, said defendants' judgment creditors, as aforesaid, have received the amounts of their judgments and interest and said attorneys' fees in full. Said defendant Simon Florsheim has received payment in full of his claim against the defendant Norbert Stieglitz, as aforesaid, and the entire scheme originally devised by and between said Heidweyer & Stieglitz and said judgment creditors has been successfully accomplished, and all the property of said defendants Heidweyer