U.S. Supreme Court
Nudd v. Burrows, 91 U.S. 426 (1875)
Nudd v. Burrows
91 U.S. 426
1. Where, in a suit by an assignee in bankruptcy to recover moneys paid a creditor within four months prior to the filing of the petition in bankruptcy, the evidence tended to prove that the payment was the result of a conspiracy between the bankrupt and the creditor to give the latter a fraudulent preference within the meaning of the Bankrupt Act, held that the declarations chanrobles.com-red
of the bankrupt at and prior to the time of such payment, although made in the absence and without the knowledge of the creditor, were, when offered by the assignee, admissible in evidence.
2. The assignee claimed that a partnership formerly existing between the bankrupt and other parties had been dissolved prior to a certain transaction, and that consequently that transaction was had with the bankrupt individually, and not with the firm. The defendants, insisting to the contrary, offered the declarations of such other parties touching the points in controversy. Held that such declarations were not evidence.
3. The defendants having claimed that they appropriated the money and proceeds of the property in question in the exercise of a factor's lien to satisfy a prior indebtedness alleged to be due them by the bankrupt, held that the attempt to set up such a lien when the creditor knew that the debtor was on the eve of bankruptcy, and thus secure a preference over other creditors, was a fraud upon the Bankrupt Act.
4. The Practice Act of Illinois provides that the court shall instruct the jury only as to the law and that the jury shall, on their retirement, take the written instructions of the court and return them with their verdict. In this case, the court below, while it commented upon the evidence, but without withdrawing from the jury the determination of the facts, refused to allow the jury to take to their room the written instructions given them. Held that the Act of Congress of June 1, 1872, sec. 5, 17 Stat. 197, has no application to the case, and that there was no error in the action of the court below.
This was an action brought by the defendant in error, as the assignee of one Norton Emmons, a bankrupt, against the plaintiffs in error, to recover the net proceeds of about eleven carloads of livestock and dressed hogs shipped by the bankrupt to the plaintiffs in error, and one thousand dollars in money paid by him to them, which proceeds and money they had applied to the payment of his indebtedness to them, in fraud, as contended by the assignee, of the provisions of the act to establish a uniform system of bankruptcy throughout the United States approved March 2, 1867. Judgment was rendered in favor of the assignee.
A bill of exceptions was allowed in the court below, which is in substance as follows:
The plaintiff introduced evidence tending to show that Emmons had for a number of years been engaged in the stock business in Wisconsin, purchasing cattle, sheep, and hogs, and shipping them chiefly, but not always, to the defendants at Chicago for sale upon commission; that about the first day of July, 1870, Emmons associated with him Richard B. Chandler chanrobles.com-red
and James W. Chandler, and that said parties thenceforth, under the firm name of Emmons & Chandler, continued the business, also shipping chiefly to the defendants the stock which they bought; that about the thirteenth day of December, 1870, said firm was indebted to the defendants between $4,000 and $5,000; that Emmons was then insolvent; that it was then arranged between the defendants, said Emmons and said Richard, B. and James W. Chandler, that said firm of Emmons & Chandler should dissolve; that James W. Chandler had previously gone out; that Emmons should continue the business until the first of the following January, and should at the close of the year buy a large amount of stock upon credit, which should be shipped to and sold by the defendants, and the proceeds applied to pay his indebtedness to them; that the firm of Emmons & Chandler did dissolve about the thirteenth day of December; that Emmons did in the first four days of the following January, in his own name and on his own account, ship to the defendants nine carloads of cattle, sheep, and hogs, which were sold by them, and the proceeds held to pay the said indebtedness; that upon the sixth day of January, 1871, Emmons paid to the defendants $1,000 in money; that the net proceeds of said last shipment, so held by them, was $7,553.27; that a large part of the stock which went into the last shipment was paid for by drafts drawn by Emmons on the defendants, which were not accepted or paid by them; that the amount of drafts so drawn and unpaid was about $4,000; that a petition in bankruptcy was filed against Emmons in the District Court of the United States for the Eastern District of Wisconsin, on the eighteenth day of February, A.D. 1871, on which petition he was duly adjudicated a bankrupt; that the defendants, at the time of making the aforesaid arrangement -- to-wit, on or about the thirteenth day of December, 1870 -- had reasonable cause to believe said Emmons was insolvent.
As tending to show some of said matters, the plaintiff introduced in evidence a document as follows:
"CHICAGO, Dec. 13, 1870"
"To whom it may concern:"
"This certifies that whereas Mr. R. B. Chandler has been a joint partner with Norton Emmons from the first day of July, 1870, to date, we release him from all further obligations that may be transacted
between us and Norton Emmons, and look to Norton Emmons only for balance of present account and all business that may hereafter be transacted with him."
"The above release of R. B. Chandler is made by the consent of all parties."
"I. P. NUDD & Co."
Also the ledger of the defendants, showing the account of Emmons and of the firm of Emmons & Chandler with the defendants.
The last item upon the account of Emmons & Chandler is as follows:
"1870, Dec. 13. By balance due Nudd, $1,617.43."
Under which is written the following:
"The above balance we transfer to the individual account of Norton Emmons, by request of both parties."
Immediately after and upon the same ledger page is the following, showing all the entries made subsequent to said Dec. 13, 1870:
To certain questions put to the witnesses, calling for the declarations and statements of Emmons at and before the chanrobles.com-red
consignment was made, the defendants objected because said declarations, not being made in the presence of either of the defendants nor brought to the knowledge of either, could not be used to prejudice them, which objections being overruled by the court and the answers admitted, the defendants then and there excepted.
The defendants introduced evidence tending to show that they acted as the factors of said Emmons prior to the time of his partnership with Richard B. and James W. Chandler, and for said firm of Emmons & Chandler after that time and until the closing of the account, Jan. 10, 1871; that during all this time it had been the usual course of business and the regular practice of the defendants to advance money to these parties to buy stock, relying upon the consignments to be made to them to cover such advances; that the defendants continued to make such advances after the thirteenth day of December, 1870, in the same manner as before, receiving consignments, and selling the same to cover their previous advances; that the indebtedness to the defendants at the time of the last shipments of stock was for such advances; that these advances were made by payment of drafts upon the defendants; that such drafts were drawn in the name of Emmons, as well after as before the formation of the copartnership of Emmons & Chandler; that the bank business of the firm of Emmons & Chandler was done at the First National Bank of Madison, Wis., in the name of Emmons alone, as well after as before the formation of said copartnership, and that the drafts upon the defendants usually came through said bank; that their ledger, introduced in evidence, correctly shows the sums advanced by them upon drafts since the 13th December, 1870; that such advances were made in good faith and in the usual and ordinary course of business and relying upon consignments to be made to the defendants to cover such advances; that there was no such arrangement for the payment of the indebtedness to the defendants made about the 13th of December, 1870, or at any other time, between the defendants, or either of them, and said Emmons, Richard B. Chandler, and James W. Chandler, or either of them, as claimed by the plaintiff; that said firm of Emmons & Chandler did not dissolve chanrobles.com-red
upon or about the 13th December, 1870; that said James W. Chandler did not go out before that time, but that certainly James W. Chandler, and probably Richard B. Chandler, continued to be interested in business with said Emmons subsequently to that time, and continued so interested till the time of the closing of the account with defendants, Jan. 10, 1871; that the transfer of the account on the book of the defendants from the name of Emmons & Chandler to that of Norton Emmons was made at the request of said Emmons and the Chandlers; that the reason given to defendants for such request was that all drafts were drawn in the name of Emmons alone; their bank business of Madison, Wis., was done in his name, and they desired their account on the defendants' books to correspond; that defendants had no idea that the firm of Emmons & Chandler was dissolved or that their dealings with said firm were thereby brought to a close, or that, by making such a change, they released either of the Chandlers, but regarded the transfer simply as a change in the manner of keeping their books; that the receipt or release to Richard B. Chandler was not given to him until about the middle of January, 1871, after the account with the defendants was closed; that it was antedated at the request of said Richard B. Chandler; that it was given by the defendants unhesitatingly, and with but little inquiry into the reasons of Chandler for wishing the same antedated, because, at the time it was actually given, their account was paid in full; that business was conducted in the same manner subsequently to the 13th December, 1870, as before that time, and the defendants supposed they were doing business with the firm of Emmons & Chandler up to the time the account was closed, and until such time knew of nothing from which they could infer the dissolution of said firm; that there was nothing unusual about the size or quality of the last shipments, and the same were not, nor was any part of them, sold by the defendants under any arrangement with said Emmons and the Chandlers, or either of them, that the proceeds should be used to close up the account with the defendants; that shipments continued to be made after Dec. 13, 1870, and up to the time of the closing of the account, with one or two exceptions, in the name of Emmons chanrobles.com-red
& Chandler, and not in the name and on account of Emmons alone; that Richard B. Chandler was worth $15,000 or $20,000; that James W. Chandler, though of small means, was solvent; that if the copartnership of Emmons & Chandler continued subsequently to the 13th December, 1870, and up to the time of closing the account, said firm was not insolvent; that the defendants did not know at any time prior to the closing of said account that said Emmons was insolvent, and that they had no reasonable cause to believe that he was. A witness for the defendants testified that the partnership between Emmons, Richard B. Chandler, and James W. Chandler, continued until some time in January of 1871. To a question in this connection as to the declarations of Richard B. Chandler after the 13th of December, respecting his being interested in the firm carried on in the name of Norton Emmons, the plaintiff objected; and, the objection being sustained by the court, the defendants duly excepted.
A witness for the defendants having testified that James W. Chandler frequently came to Chicago after Dec. 13, 1870, in charge of the consignments of stock, the defendants asked what if anything was said respecting the sale or prices at which stock should be sold.
To which, and to the admission of any declarations of said Chandler, plaintiff objected. The court sustained the objection, and refused to admit the evidence; and the defendants excepted.
Before the charge to the jury, and in apt time, defendants' counsel requested that the court would in all respects in its charge be governed by and follow the practice of courts of record of the state of Illinois and the laws of the state applying to such matters; but the court refused so to do, and defendants' counsel then and there excepted.
Defendants' counsel then prepared and handed to the court the following instructions in writing, requesting that they be given to the jury, with permission to take them to their room:
"First, if the jury believe, from the evidence, that either R. B. or J. W. Chandler was a partner with Norton Emmons subsequent to the 13th of December, 1870, and remained so until the settlement
of the account with the defendants, and, as such partner or partners, was or were interested in the dealings with the defendants subsequent to that date, they are instructed, that, in such case, the plaintiff cannot maintain this suit."
"Second, if the jury believe from the evidence that the defendants advanced money to Norton Emmons to buy stock to be consigned to them, relying upon those consignments for the repayment of those advances, they are instructed, that in such a case the defendants would have a lien upon such consignments for such advances as soon as the same came to their possession, even if the defendants knew at the time of making such advances that said Emmons was insolvent."
The court gave the first instruction, but added to and commented upon it as follows:
"I have charged you, as requested by the defendants' counsel, that if this debt on the part of the defendants was against Emmons and the Chandlers, or either of them, the plaintiff cannot recover. . . . On the main question, which covers most of the property, I shall not occupy much time. The evidence to establish it rests in writing, under the defendants' own signature. By the defendants' books, it appears that the partnership account of Emmons & Co. was settled, and the balance transferred upon their books to the individual account of Norton Emmons on the 13th of December; that after that it was kept with him alone, and the defendants did not pay any amount to the Chandlers without an order from Emmons, and, in addition to this, they signed a receipt, release, or declaration, as follows:"
"CHICAGO, Dec. 13, 1870"
"To whom it may concern:"
" This certifies that whereas Mr. R. B. Chandler has been a joint partner with Norton Emmons from the first day of July, 1870, to date, we release him from any further obligation that may be transacted between us and Norton Emmons, and look to Norton Emmons only for balance of present account and all business that may hereafter be transacted with him."
" The above release of R. B. Chandler is made by the consent of all parties."
"That would seem to settle all controversy upon this question. That matter having been so carefully reduced to writing by the defendants at the time, or soon after, while the matter was fresh in their memory, it would seem most remarkable to allow them now to
swear it away. The book and the release show that they agreed to deal thereafter with Emmons, and released Chandler altogether, and did so on their books. So far as Chandler and Emmons are concerned, it was an individual matter with them; but as the assignee represents Emmons's right, and is entitled to the benefits under his contract, as to him, it would be very remarkable that they could, in view of these entries and the statement or release, be allowed to set up that he was still a party in interest as to that. Written testimony is much stronger than parol. It is like a disputed case in regard to the boundaries of real estate in which a government boundary is discovered. It generally disposes of the dispute, and outweighs, ordinarily, any amount of verbal testimony depending upon the recollection of witnesses, particularly interested parties and witnesses."
"Nudd says he drew the release; but he says he did not draw it until in January, after that date. The time when it was drawn is quite immaterial. It declares the fact that they did business with Emmons alone; and, if that is so, that disposes of the defense on that ground. There is some testimony that the receipt was given to Chandler on the 13th. Emmons says he heard him say that he had a receipt when he returned home."
"If you are satisfied that the receipt was made at the time it bears date, or afterwards, with a view to furnish evidence to release Chandler from the 13th, and as stating the true condition of their affairs, I hardly think that you will be justified in finding that the transaction between the parties was not as stated in the books of the defendants and this release or declaration; and it would be unsafe to reject written evidence of that character upon the evidence of interested parties."
To all of which modifications and comments, and to that portion of the charge, save as requested by them, the defendants then and there excepted.
The court gave the second instruction asked by the defendants, but modified and commented upon it as follows:
"The books of account of defendants read in evidence, together with the testimony, tend to show that the defendants had been advancing the bankrupt money from time to time after the thirteenth day of December, 1870; and that on the thirty-first day of December, 1870, the time of the last item of account, the bankrupt was owing to them the sum of $8,553.87. This money it is claimed was advanced by defendants, who were stockbrokers and general
commissionmen in this city engaged in the business of receiving stock, cattle, and hogs, making advances thereon, and selling for the benefit of shippers. They state that their ordinary mode of doing business was not to pay drafts drawn by their country customers or consignors until after the receipt of stock, but in this case they permitted the bankrupt to draw and obtain the money to use in buying stock. When that stock was received and sold, they credited his account with the proceeds, and such appears to have been the way they dealt with the bankrupt, so that he had overdrawn his shipments on the first day of January in the sum of $8,553.87, above stated. This being the mode of business pursued, as I understand to be stated, I think it would constitute the relation of debtor and creditor between the bankrupt and the defendants; that he, in law and fact, was owing on the first of January to the amount above stated, which was unsecured at that time; that the advances did not create a lien on such stock purchased with the money advanced or loaned for that purpose until the bankrupt had actually shipped them to the defendant."
"As I have charged you, at the request of the defendants' counsel, that the lien of the defendants did not attach until the actual receipt of the stock by the defendants, such being the law, the subsequent receipt of stock and appropriation of the avails to the payment of the debts due them would be void, as a preferential payment, provided the other facts hereinafter mentioned are found to have existed; by which I mean to be understood that if the transactions between the parties were as I have before stated them, they would constitute the relation of debtor and creditor, and bring their debt under the provisions of the Bankrupt Act the same as any other debt."
To all of which defendants' counsel excepted.
The court having charged the jury upon the facts, notwithstanding the request that it would follow and be governed by the laws of the state of Illinois and the practice of her courts of record, defendants' counsel excepted thereto, as well as to its refusal to permit the jury to take to their room the written instructions given by the court, or the account book, freight bills, and other papers introduced in evidence, other than the depositions. chanrobles.com-red