Citation Numbers: 31 F. 189
Judges: Hammond
Filed Date: 7/6/1887
Status: Precedential
Modified Date: 9/9/2022
A most careful reading and reconsideration of the , proof has confirmed the impression left at the hearing that this attachment was unauthorized. Giving the widest scope to all that is claimed for the language of Mr. Justice Strong in Butler v. Watkins, 13 Wall. 456, as to the latitude to be given in the admission of evidence to prove fraud, and conceding the utmost to the suggestion that often it cannot be proved by direct testimony, but only by circumstances, and yet fraud cannot be established by inconsequential circumstances and facts that are entirely .consistent with honest intentions, albeit they be facts that show an unwise judgment and imprudent business conduct. Take any merchant, and especially the country merchants of this section, and subject their business conduct to hypercritical scrutiny, and circumstances will be developed showing that, in the struggle for existence that goes on among them, they violate somewhat the highest standards of business prudence. They often do not keep books that should be kept, nor proper accounts. They buy too largely; engage in doubtful speculation; enterprises that risk too far their judgment as to the future of crops and other business contingencies; and do not always, if ever, give their creditors, or proposed creditors, the most exact statements of t-heir condition, being satisfied with generally truthful exhibits that are as full as any one expecting to deal with them has a right to expect. These statements are not intended to be exact. If so, every merchant would have to produce a balance sheet, and a complete and detailed showing of his affairs, as the preliminary to asking a credit of the wholesale dealer. Few merchants would be willing to do this, and it is not asked. Therefore discrepancies between the statements that are made and the exact showing by the books are quite probable in almost any case; as here, the statement of the defendant to Eiseman, which has been so severely scrutinized, taken in the light of his explanations is of that character. Want of precision in it is not, in my judgment,. of consequence, as a circumstance showing any fraudulent intent; particularly when taken in connection with the specific transfer alleged to be fraudulent, to be
And here I wish to say that the attachment laws of Tennessee were not designed to enable merchants who crowd their sales upon reluctant or imprudent retailers to impound the goods they have so parted with, as soon as they become alarmed for the success of their debtor in his enterprise of selling them. The attachment laws are made to protect them against fraud,'—specific fraud, hut not imprudent business management, or that kind of imaginary fraud that they attach to insubstantial mercantile speculation which the wholesale merchant decries when it is developed in his customer, although indulged in by himself in the very transaction.
Briefly, the proof here show's that the defendant, a young man who had been a dry goods clerk, launched out for himself by buying at an insolvent assignment a stock of goods, at very low figures. To those he added other goods, and, after the year was done, he had been very successful. He did not owe a dollar, and had more and better goods than he had started with, though he had some of the old stock left. Ho had paid his purchases promptly, and taken the benefit of the discounts allowed for cash. He was dazed with the success, and thought he could enlarge his business. So were the drummers who lived round about him, and were his friends, every one of them. They’drummed him to death; even extorting promises that he should buy only from them, respectively, they thought it was such a good thing. It is difficult to say which was most to blame,—the defendant or the drummers; hut certainly those orders and promises should not he now taken to mean that the defendant had then cunningly contrived a scheme to get the goods, and pocket the money for their sales, as is now alleged, in the desperation of the desire to save this attachment; for they are wholly consistent with an honest purpose to conduct the business as successfully as before. Why should this successful young merchant conceive that scheme, at that time, rather than the more honest one of enlarging his business into a greater success? It is simply preposterous to suppose that ho did. He did not owe anything, had paid for his stock on hand, and was not in the least embarrassed. The circumstances all tend to support his contention that he thought he could enlarge his business, buy on time, and have the money ready to meet his bills four months thence. He seems to have been himself somewhat alarmed at his orders, and coun
I am inclined to think he might have worked out if his creditors had let him alone, and trusted him; for the comparison with his neighboring merchants, made in the proof, indicates that. They were bound to trust him unless he had fraudulently conveyed his property, or was about to do so when they attached. This alleged fraud of overbuying was no ground of attachment. It may have alarmed his creditors, but their alarm was not to be assuaged by seizing the goods without a statutory ground of attachment, and we can only look to these circumstances as evidence tending to convince us that some specific transfer, sworn to by the creditors, was a fraudulent one,—that is, one depriving the creditors of some just right thejr had, with an intent to hinder and delay or defraud them,— and these words may be taken as synonymous. Winf. Words & Phrases, 181; Bump, Fraud. Conv. (2d Ed.) 582.
The mere dissatisfaction of creditors with his business or his methods, however well founded it may have been, is no ground of attachment, and this is a mistake creditors alarmed about their customer often make. They must be able to show some specific act which is done under circumstances showing an intention to cheat them by that act. Other acts and circumstances may be shown in evidence, undoubtedly, and the attachment laws should be so liberally construed and administered by the courts that no amount of cunning shall be allowed to make fraud available by narrow and confined interpretation of conduct and its attendant circumstances; but, nevertheless, when a court can see that the conduct and circumstances are consistent with honest purposes, appearing in the case, the creditors should not be allowed to distort those circumstances to make them fit any real or imaginary injury to themselves which they may be pleased to denominate a “fraud.” This is clearly the law in Tennessee. Jackson v. Burke, 4 Heisk. 610; McHaney v. Cawthorne, Id. 508.
It is alleged, for instance, in this bill, and urged in argument, that these goods were sold to be traded at Humboldt, and complaint is made that some of them were carried to Medina, another railroad town in the same county, to be there sold, as if this transaction were a ground of attachment, or, at least, a pregnant circumstance, showing a fraudulent
Again, it is alleged that the defendant was selling the goods below cost. It is said in argument that this is hard to prove: but is this any reason why it shall be assumed? What is the proof? Only that at Medina a lew pairs of shoes and one suit of clothes were sold for sums thought to be below cost. The defendant and his clerks say the goods were not sold below cost, and explain that staple goods were sold closely, and that some others as “leaders,” to start their new trade at Medina, were sold occasionally at figures close to cost, but all in the legitimate way that all merchants use. When defendant’s rivals complained to plaintiffs that ho was selling below cost, they became alarmed, and sent down a drummer. He went to the rivals, and was told so; but these rivals are not 'witnesses here to prove what they told to the plaintiffs in the letter they wrote, and to the drummer when he went to investigate. It is said in argument, by way of excuse for this, that they only knew wind had been told to them, and that was not competent. If it was not compel ent to sustain the charge, it. was not sufficient as a basis for the affidavit of its truth, unless the witnesses who did know and told the facts are here produced. The suspicions of rival merchants were not a fair ground of action for plaintiffs in suing the attachment, even though plaintiffs were threatened with the loss of the custom of those merchants by the letter they wrote giving the false information that defendant was selling for 50 cents on the dollar less than the price they paid to plaintiffs; at least it was false so far as this record shows. This drummer who was sent to investigate went to these rival merchants, who were angry because defendant had opened a store in their town, and was successfully competing with them, and were evidently trying to break him down by reporting him to his creditors as selling below cost, and these conspirators set a trap to catch the defendant. The man sent to buy a suit of clothes which had been bought from the plaintiffs, the price of which was $16, succeeded in having the clerk price it to him at $14.50 “if he would not tell, and say that he paid $16.50;” and this circumstance is distorted into one showing a fraudulent intent to sustain the allegations of this attachment affidavit. So far from the proof showing that the goods were sold below cost, it shows that they were successfully sold; for, the Medina concern, not being attached, continued business successfully, and the clerk swears the goods were all sold properly, with such attractive methods of pushing trade as merchants use by selling a few articles cheaply. One of the reasons why defendant could do this was that he had part of his old insolvent sale stock, which he was working off in this way, to the consternation of Ms rivals. Courts cannot sustain attachments on such proof as that, however convenient they may be to merchants who have become uneasy, and wish to recover the goods they have sold.
We come now to the partnership transaction, which is the only really
It is urged that this partnership “hindered and delayed the creditors,” hut that is delusive. Defendant’s interest .in the partnership was still liable to seizure by execution, and it is a mistake to suppose that he was under any obligation to his creditors not to enter into any partnership or other business transactions without their consent, or one that would deprive them of “a direct levy,” to use the language of counsel. He might make any transfer that was honestly made, for a valuable consideration. Rump, Fraud. Conv. 582 et seq.
The very woist thing that has boon shown against the defendant is that when ho wound up his interest in this Medina store, and got out his sisare oí the partnership, he kept the money, only paying a debt due to his mother, and did not pay his creditors. The highest typo of man would, perhaps, have paid this money to those creditors, at least, who had iiol attached; but a good deal of allowance must be made for the resentments and temptations of human nature. This cruel attachment had destroyed defendant’s means of living, had taken away his goods, and shattered his business hopes and prospects, and under the circumstances it cannot Do said that In's failure to apply the money to his debts indicates that this affidavit for attachment was true at the time it was tiled, and this is the test. Bumberger v. Gerson, 24 Fed. Rep. 257.
Of course, it is apparent that the argument that defendant is insolvent, that the fund in court is the only reliance of plaintiffs to collect their debt, and that it is the product of the sale of the goods they had sold to him, in part, if not wholly, cannot avail the plaintiffs. The defendant
Dismiss the attachment, at plaintiffs’ cost.
Upon the presentation of the decree in this case the plaintiffs’ counsel objected to so much of it as required the fund of $2,200 to be paid over to the defendant, upon the ground that there were other attachment suits pending in the state court, instituted immediately after this case, which was the first; th^t the writs were successively levied upon the stock of goods, which were sold by the receiver, and a joint fund realized in his hands; that the levies were liens on the fund, and this prior lien having failed, by the judgment dismissing the bill in this court, leaves the liens of the other levies in force, and the fund should be returned to the state court. The record showed that at the time this suit was removed from the state court the whole fund was in the hands of the receiver of that court, and he was ordered by the chancellor to pass his accounts, and, after the allowances made to him, he was directed to retain in his hands $2,200 to answer the demands of this case, which had been removed to this court, and to pay over the balance to the clerk and master of that court, which was done accordingly.
The court holds that, under the removal acts, the receiver and the fund came with the case to this court, and stood for all purposes just as if the suit had been originally commenced here, and $2,200 of Jones’ stock had been attached by the process of this court; that, as this case was the first that had been levied, the fund accumulated by that writ had been segregated by the removal, and left in the hands of the receiver of this court, the state court receiver becoming such ipso facto,—by the mere act of removal itself; that the subsequent attachments did not operate as a lien on the fund which the plaintiffs here had previously attached, the case standing in all respects as if originally commenced here, under the very language of the removal acts; and therefore there could be no lien on this fund in this court in favor of subsequent attachments in another court, however it might have been if the removed case had been one of the later levies, instead of the first one made. Rev. St. 639; Act 1875, c. 137, § 3; 18 St. 471; Rev. St. 646; Act 1875, c. 137, § 4; 18 St. 471; Supp. Rev. St. 174, 175; Thach. Pr. Cir. Ct. 295. But since the chancellor, in dealing with the fund, could not definitely determine