Gaskill v. Benton

8 F. 746, 14 Phila. 487, 1881 U.S. App. LEXIS 2414

• Court: United States Circuit Court
• Decided: July 1, 1881
• Status: Published

Opinion

Butler, D. J.

The master’s statement of facts, and the report generally, are satisfactory, down to the point where the cross-bill of Von Utassy v. Galvin is reached and considered. We are unable, however, to adopt his conclusions respecting this bill. The plaintiffs claim that their execution against A. Benton & Brother should have precedence over that of Mrs. Benton and Judge Waller, on the ground that the note and warrant in favor of Benton and Waller, as also the execution issued in pursuance of it, was a fraud on the plaintiffs’ rights. We think this claim is well founded. The object of the syndicate agreement, — signed by the parties to this bill, — was to furnish A. Benton & Brother means to prosecute their business, for the mutual benefit of the creditors uniting in the agreement. The firm was unable to meet its obligations, and they were the principal creditors. Its trade was dull and its property unavailable. A sale at the time would have resulted in great sacrifice. The money proposed to be furnished by these creditors, it was hoped and believed, would' enable the debtors to prosecute their business successfully, or at least to retain their property until more prosperous times. As security for the money to be furnished, the creditors were to have a judgment, payable in 10 days after default by the debtors to meet their paper. While" the plaintiffs entered into the arrangement and advanced their money wi'th no other consideration or prospect of advantage, than that already stated, the representatives of Mrs. Benton and Judge Waller secretly obtained.a note and warrant of attorney for $20,000, by means of which they could sweep away not only the property owned by the debtors' at the date of the agreement, and thus defeat its purpose, but also such additional property as might be acquired by the money obtained from the plaintiffs. That this was a plain .violation of the understanding of the parties, — subversive of the only object contemplated by the agreement, — does not seem to admit of doubt. Certainly not one of the plaintiffs would have advanced a dollar had he been informed of the secret advantage obtained by Mrs. Benton and Judge Waller. As matters stood at the outset the creditors were on an equality. The firm being insolvent, any proceeding to secure prei'erence would have placed its property in bankruptcy, whore all would have shared equally. It cannot be supposed that the plaintiffs would not only risk this advantage, by tying their hands, but also would transfer to the debtors a considerable amount of their own property to be swept away by Mrs. Benton and Judge Waller, at pleasure. That it was fully and distinctly understood that the debtors were to be kept clear of all other judgments than that given to the syndicate creditors appears as plainly from the conduct of the parties at the time the agreement was entered into, and subsequently, as it does from the motives of the parties and the object of the transaction, just referred to. The master finds that—

“ Promises were made by the debtor immediately before and about the time of the execution of the agreement, to certain of tho parties thereto, that no other judgment should be given; and that notice should be given if judgments were likely to be obtained; and that the judgment about to be given to the syndicate should be a lien on the personal property as well as upon the real estate.”

It is unimportant that Mrs. Benton and Judge Waller were not present (as the master finds) when these promises wore obtained. They were procured for the joint benefit of all the syndicate creditors, — who were acting together for their mutual protection, — each one to a certain extent representing his fellows in the transaction. These promises are here referred to, however, as one of the surrounding circumstances, simply, in the light of which the written agreement is to be read. Again, when Charles Benton was asked to sign the note and warrant in favor of Mrs. Benton and Judge Waller, ho at first declined, on the ground that it would be wrong to do so; and only consented subsequently, at the instance of his brother, who agreed that it might be done, “provided Mrs. Benton [his wife] was included.” When the syndicate creditors discovered that other judgments, to a small amount, existed against the debtors, they immediately complained of it as a violation of the agreement; and no one connected with the transaction suggested that this was not a just cause of complaint. The representatives of Mrs. Benton and of Judge Waller were present when the complaint was made, and plainly acknowledged its justice. The plaintiffs were not then aware of the note and warrant given for $20,000. Regarding themselves as unjustly dealt with, however, because of the existence of the small judgments, and of the debtors’ failure to furnish a statement, as promised, respecting the real estate, they bad resolved to issue execution. They were induced, however, by the debtors, and the representatives of Mrs. Benton and Judge Waller, to withhold for 48 hours, under a promise that the small judgments would be paid, and a statement furnished, in the mean time. Instead of making any serious effort to redeem this promise, (and it is quite manifest that none was intended to be made,) the debtors and the representatives of Mrs. Benton and Judge Waller immediately had judgment entered on the $20,000 note, and an execution issued, covering more than twice the value of all the property the debtors owned. Here, again, was an attempt to secure advantage by means of bad faith and imposition. The subject need not be pursued. Sufficient has been said to justify the conclusion that the Benton-Waller execution must be postponed. It seems proper to say in this connection, that Judge Waller, who resides at a distance, had very little personal connection with the transaction involved, and probably no personal knowledge of the particular features which have given rise to this controversy. The general scope of his attorney’s authority covered all matters involved, and he must bear the consequences. The authority of the attorney has not been questioned by him; and no one else can question it.

We do not see anything in the evidence to justify a belief that the execution on the syndicate judgment was procured by the debtors, in violation of the bankrupt law. It is true that an agreement was entered into when the judgment was confessed, that these creditors should have a preference over all others, of execution against the personalty of the debtors; and be notified by the debtors when danger threatened from other sources. As we have seen, however, the debtors not only failed to perform this agreement, but sought to defeat these creditors by a preference of the Benton-Waller judgment, whose amount exceeds twice the value of all their property. The subsequent notice was unimportant. The debtors then supposed the plaintiffs could get nothing. It was notice that an execution would do no good, and was as well calculated to induce them to desist, as to proceed. They could get nothing except by defeating the object of the debtors. It would be a perversion of language to say that this execution was procured to give the plaintiffs a preference. The master’s finding as respects the rights of the syndicate creditors, between themselves, is adopted. .

McKennan, C. J., concurred.