Claridge v. Kulmer

1 F. 399, 1880 U.S. App. LEXIS 2370

• Court: United States Circuit Court
• Decided: March 9, 1880
• Status: Published

Opinion

Butler, J.

An earnest argument was made against the master’s finding that the execution creditors, Gotlieb Kulmer and Thompson & Binns, had reasonable cause to believe Mr. Dempster insolvent when the judgment notes were given. It has not convinced us, however, that the master is wrong.

The law is well settled. Grant v. The Bank, 7 Otto, 80, contains nothing new. The creditor must have such knowledge of facts, to defeat a preference, as are calculated to produce reasonable belief of the debtor’s insolvency. It is not sufficient that he have cause to suspect, simply. As is said in Grant v. The Bank, dicta to the contrary are not wanting. But the rule, as above stated, conforms to the language of the statute, and to every decision in which the question was involved. What facts are necessary to- produce the belief must be determined in each particular case. No rule on the subject has been or can be established. To some minds the facts found, and adverted to by the judge, in Grant v. The Bank, would have been sufficient, and, if they had satisfied the circuit court, it is quite probable the final result in that case would have been otherwise.

In the case before us it would be difficult, we think, for an unbiased mind to read the testimony respecting the information possessed by Messrs. Kulmer, and Thompson & Binns, at the time their notes were given, and avoid the conclusion that each of them, directly, or through their counsel, had knowledge calculated to produce a reasonable belief that Mr. Dempster was unable to meet his business obligations as they matured. And this inability constituted insolvency. What they may have supposed him able to do with time to nurse his affairs is unimportant. To each of them he had recently given checks repeatedly, without having funds to meet them. They knew that his creditors were pressing; that he was frequently sued, and was seriously embarrassed, Mr. Dickinson, attorney for Thompson & Binns, testifying that a “multitude of suits” had been instituted against him, “several during the previous week,” and that he (the witness) was afraid the father would get judgment and sweep everything away. It is not very important that Mr. Dempster was able to arrange these suits. The fact remains that he was not able to meet his obligations as they matured, and that Kulmer and Thompson & Binns knew it. He was staggering on, under the burden of his debts, endeavoring to procure time, and hoping to get through, but he was manifestly insolvent, and must have so appeared to all familiar with the facts referred to. His representations made to creditors, under the circumstances, were entitled to little credit, and receive little. Neither Messrs. Kulmer, nor Thompson & Binns, believed that “he had abundant means to pay all his debts,” if then pushed; otherwise they would not have threatened suit, and pressed for judgments as they did. The exceptions filed by these creditors must therefore be dismissed.

We also agree with the master respecting the claims of the subsequent execution creditors. Without the intervention of the assignee, it is clear, they could get nothing. The benefit of the intervention is for the general creditors. If it were not, the assignee should withdraw; and, if he did not, the court should dismiss his bill. Why should he interfere, at the expense of the state, to confer preference on these subsequent executions ? And why should equity aid him in doing so, if he desired? In the distribution these executions will receive a dividend; to give them more would be most unjust. The levy made subject to the prior executions was of no value. It would not have realized a farthing. In principle the claims of these creditors cannot ,be distinguished from that made in Reed v. McIntyre, 8 Otto, 513.

A decree must be prepared dismissing all the exceptions, and confirming the report.