Shainwald v. Lewis

6 F. 753, 6 Sawy. 556, 1880 U.S. Dist. LEXIS 263
CourtDistrict Court, D. California
DecidedNovember 11, 1880
StatusPublished
Cited by3 cases

This text of 6 F. 753 (Shainwald v. Lewis) is published on Counsel Stack Legal Research, covering District Court, D. California primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Shainwald v. Lewis, 6 F. 753, 6 Sawy. 556, 1880 U.S. Dist. LEXIS 263 (californiad 1880).

Opinion

HoufmaN, D. J.

The complainant seeks by his bill in equity to have a certain judgment, execution, sheriff’s sale, and other proceedings in a suit at law in the nineteenth district court of this state, entitled “Harris Lewis v. Louis H. Shoenfeld, Isaac Newman, and Simon Cohen,” declared to be a fraud upon the creditors of the firm of Schoenfeld, Cohen & Co., and upon the complainant, as their assignee in bankruptcy, upon Simon Cohen, and upon said firm; also, that it be declared and decreed that certain promissory notes upon which the suit was brought, to-wit, a note for $17,000, a note for $8,000, and a note for $5,000, were fraudulent and void as against said firm for want of consideration; also, that it bo declared and decreed that certain transfers of money, bills of lading, promissory notes, and other property, to the respondent, by said Schoenfeld and Newman, were fraudulent and void as against the creditors of said firm, upon the complainant as their assignee, and upon Simon Cohen, one of the members thereof; also', that it be declared and decreed [754]*754that the respondent is a trustee for the benefit of the complainant of all the moneys, bills of lading, accounts, merchandise, chattels, and other property obtained by said Lewis through or by means of said action, attachment, judgment, execution, or sheriff’s sale, or transferred or delivered to or received by him from said Schoenfeld, from said Newman, or from any other person, and also for such further and other relief, etc.; also, for an injunction and writ of ne exeat.

The facts and circumstances which constituted the fraud are particularly and fully set forth in the bill. Its allegations are sustained beyond all doubt or denial by the proofs. It is, perhaps, not easy to imagine a grosser case of conspiracy by merchants of fair repute to cheat and defraud their creditors, or one where the proofs could be more convincing and indisputable. The testimony is very voluminous. But the evidence to establish the fraud is that of seven witnesses only, viz.,.Lewis, Newman, Hyams, Schoenfeld, Naphtaly, Sharp, and Bremer, nearly all of whom were active participants in the fraud, either at its inception or during its progress or at its consummation.

I shall not attempt to give a detailed account of the various transactions by which the respondent, at the instance and by the aid of Newman and Schoenfeld, two of the three members of the firm, succeeded in getting possession of the entire assets of the partnership, to the exclusion of all its eastern and foreign creditors, and of nearly all its creditors in this state. It will be sufficient to state the nature and effect of the fraudulent conspiracy, and in a general way the means by which those objects were attained. The firm of Schoen-feld, Cohen & Co. was composed of three partners — Louis S. Schoenfeld, Isaac Newman, and Simon Cohen. Its capital was $30,000, contributed ($15,000 each) by Schoenfeld and Newman. Cohen was to contribute for a certain period his skill and experience in the business, and thereafter to furnish $15,000 to the capital, or pay interest on such portion thereof as he should fail to furnish. Each partner was to be at liberty to draw $250 per month for personal expenses. In January, 1877, it was determined between Schoenfeld and New[755]*755man that the former should proceed to the eastern states and Europe to procure, if possible, a large stock of goods on credit. Aware that their credit would depend upon {heir financial standing here, and knowing that, if the true condition of their affairs was disclosed, Mr. Schoenfeld’s expedition would prove abortive, they presented to one of the banks of this city a false statement of their profits and business affairs, sustained by false entries in their books as to their profits, and the amount of money loaned to the firm by Newman. Having thus firmly established their credit, Schoenfeld proceeded to the eastern states and to Europe, and succeeded in purchasing goods to the amount of more than $30,000, cost price. Whether, at the time the false credit was obtained, and Mr. Schoenfeld started for Europo to make his purchases, it was the intention of Newman and Schoenfeld to cheat the foreign creditors out of the whole price of any goods the firm might succeed in obtaining by false pretences as to their financial condition, or whether that project was formed after Mr. Schoenfeld’s return, does not clearly appear. It is certain, however, that the preliminary steps for the perpetration of the fraud were taken immediately on his arrival. Mr. Schoen-feld returned to this city early in June, 1877. On the succeeding day he met Newman by appointment at their store, where the affairs of the firm were discussed. A subsequent meeting vras soon after held, at which Mr. William Bremer, Mr. Hyams, and Mr. Lewis were also present.

For the full understanding of the agreement éntered into at this meeting some explanation is necessary. The $15,-000 contributed to the capital of the firm by Schoenfeld had beetr obtained by him by a loan of $8,000 from an old friend and former employer, Mr. H. Bremer, for which be had given his individual notes. He had paid in, in cash, $2,000. The remainder, $5,000, he had borrowed, on his individual note, from Newman, who claimed that the money belonged to a Mrs. Alexander, by whom it had been placed witli him for investment. Newman had paid in cash the whole of the $15,000 to he contributed by him to the capital. He had also lent the firm on the firm’s' notes $18,000. These notes [756]*756were then held by the London & San Francisco Bank, having been hypothecated by Newman to secure a private loan of $6,000. The money had been originally obtained, as Newman asserted, and as appears to be the fact, from the respondent, and there is evidence tending to show that Newman had, without the knowledge of his partners, executed a note in the firm name to Lewis for $17,000 of the amount. On this point the testimony is conflicting. It is not material; for the note, if executed, was a fraud upon his other partners, and the respondent well knew that the firm note to Newman for the loan was outstanding. It had, in fact, been transferred by Newman to Lewis, and had been by the latter lent to Newman to enable him to deposit it as collateral security for his loan from the bank. At the first meeting nothing definite was effected. At the next meeting Mr. Newman explained the embarrassed condition of the firm. He stated that he owed $20,000, viz: the $18,000 already mentioned, and $2,000 which Lewis had loaned to the firm, and for which he held their genuine note; that Lewis was his only friend in the world, etc., and he insisted that he should be protected. Mr. Schoenfeld replied that if Lewis was to' be protected, his confidential creditor should also be secured. This was assented to, and it was agreed that a firm note for $8,000 should be executed to Bremer, “so that the $8,000 should stand, valid against the firm instead of against an individual member, in case any action should be taken.” This was accordingly done on the succeeding day. The note was delivered to Mr. William Bremer, agent for H. Bremer, who was to hold it for presentation as a firm debt in case any suit was brought against the firm. Mr. Bremer did not then, nor at any time up to the trial of this cause, surrender the individual notes of Schoenfeld originally given by the latter to his brother.

A few days subsequently Mr. Schoenfeld received a peremptory notice from the Anglo-California Bank to make good the firm’s indebtedness. This notice he communicated to Mr. Newman.

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Related

Shainwadd v. Davids
69 F. 701 (N.D. California, 1895)
Shainwald v. Davids
69 F. 687 (N.D. California, 1895)
Shainwald v. Lewis
69 F. 487 (N.D. California, 1895)

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Bluebook (online)
6 F. 753, 6 Sawy. 556, 1880 U.S. Dist. LEXIS 263, Counsel Stack Legal Research, https://law.counselstack.com/opinion/shainwald-v-lewis-californiad-1880.