Coffin v. Day

• Decision Date: 18 April 1888
• Citation: 34 F. 687
• Parties: COFFIN et al. v. DAY et al.
• Court: U.S. District Court — Northern District of Illinois

34 F. 687

COFFIN et al. v. DAY et al.

United States District Court, N.D. Illinois.

April 18, 1888

Irwin Flower, Remy & Gregory, for complainants.

Puterbaugh & Son, Hopkins & Hammond, and McCulloch & Son, for defendants.

BLODGETT J.

This case now embodies five creditors' bills, or bills in the nature of creditors' bills, filed by creditors of Day Bros. & Co., to set aside certain alleged unlawful preferential payments made by said firm. The first case was brought by Coffin et al. v. Day et al., by a bill filed in the circuit court of Peoria county, in June, 1885, and removed to this court, and was for the collection of judgments at law recovered by the complainants against Day Bros. & Co., between February 13, 1885, and June 2, 1885. The second case was brought by Dornan et al. v. Day et al., in January, 1886, for the collection of two judgments at law rendered in January, 1885, against Day Bros. & Co. The third case was brought by Parker et al. v. Day et al., in January, 1886, for the collection of a judgment at law rendered in July, 1885. The fourth case was brought by Simpson et al. v. Day et al., in March, 1885, for the collection of a judgment rendered in December, 1884. And the fifth case was brought by Richard et al. v. Day et al in May, 1886, for the collection of a judgment rendered in May, 1886. On May 24, 1886, all these cases were by an order of the court, consolidated, with the provision 'that said suits should henceforth proceed as one cause without prejudice to the priority of the respective creditors therein. ' It appears from the pleadings and proofs in the case that the firm of Day Bros. & Co., the principal defendants in this case, was organized about the 1st of January, 1882, and consisted of Lucius L. Day, Gordis R. Cobleigh, Normand S. King, William G. Marsters, Samuel H. Van Sickler, and Herbert F. Day, and from the time of its organization up to September 23, 1884, said firm conducted a wholesale dry-goods business in the city of Peoria, and also had two retail stores in said city, and a retail store in Canton, Fulton county, in this state, and an overall manufactory in the city of Peoria. From some time in the spring of 1884 said firm had been in embarrassed circumstances, and had been obliged to obtain extensions upon its commercial paper, and in obtaining such extensions they had secured the indorsement of the defendant Charles B. Day, so that on the 23d of September Charles B. Day was indorser for the firm and its individual members to the amount of about $100,000; and on the last-named date the entire stock of the wholesale store was sold to Charles B. Day at the rate of 75 cents on a dollar, and the stock of the two retail stores in Peoria were sold to him at the rate of 62 1/2 cents on a dollar. There was also sold to him certain horses, trucks, wagons, etc., used in and about the firm business, the aggregate of the purchase amounting to $228,550. For the payment of these goods Charles B. Day assumed the payment of paper and obligations of the firm, and of the individual members thereof, to the amount of $214,043.88, and gave his notes for the balance of said purchase money, $14,506.12, payable in one and two years. The transaction was evidenced by a bill of sale signed by the members of the firm, and a bond of Charles B. Day in which he obligated himself to pay a schedule of indebtedness aggregating $214,043.88, and to save said firm harmless therefrom; the bond reciting that all the indebtedness included in the schedule forming a part of the bond was the indebtedness of the firm of Day Bros. & Co., and that upon the greater portion thereof the said Charles B. Day was liable as indorser or guarantor for said firm; and within a day or two after the purchase of the stock of goods as above mentioned, Charles B. Day also bought of the firm the stock of manufactured goods at their overall factory, amounting to $2,302.06, for which he executed his note to the firm, payable six months from date. While, as before stated, the bond recited that all the indebtedness which was assumed to be paid by Charles B. Day was the indebtedness of Day Bros. & Co., in fact there was in said schedule one note held by one of the banks in the city of Peoria for $5,000, which was the individual indebtedness of Van Sickler, one of the members of the firm, and one note of $5,000, and another of $1,300, which was the individual indebtedness of W. G. Marsters, another member of the firm; and another note of $7,453, which was the individual indebtedness of L. L. Day, another member of the firm, but which was indorsed by the firm. Soon after the sale to Charles B. Day, King, one of the members of the firm, with the consent of the other members of the firm, took the two notes of Charles B. Day, amounting together to $14,506.12, and the note which C. B. Day had given for the purchase of the overall stock, amounting to $2,302.06, and a note which had been given to W. P. Day for $1,500, for the purchase of the overall factory, and turned them over to the defendant Mrs. Elizabeth Griswold, as collateral security for the sum of nearly $50,000, which King individually owed Mrs. Griswold; and Gordis R. Cobleigh, one of the members of the firm, being individually indebted to the said Charles B. Day, withdrew from the assets of the firm two notes of L. B. Day for $2,314, which he turned over to Charles B. Day in payment of his individual indebtedness to Charles B. Day.

The bill charges that the sale to Charles B. Day of the stocks of goods was fraudulent and void, and made to hinder and delay creditors, and also attacks the several transactions where the assets of the firm were applied for payment of the individual indebtedness of the members of the firm, on the ground that these creditors, as copartnership creditors, had a first and prior lien upon these copartnership assets for the payment of their debts before any individual indebtedness of the members of the firm could be paid.

I see nothing in the proof, or in the character of the transaction itself, which should render void or inoperative the sale of the stock of goods. There is no proof that the sale was for an inadequate price, or that it was made in bad faith. Charles B. Day had, at the request of the firm, involved himself to a very large amount as the indorser of this firm; and they had the right, undoubtedly, under the law, to prefer him, and see that he was protected as against their other creditors; and no challenge is made but that the price which he gave for the goods was as much as they would have brought if sold in any other manner. Nor is any question made in the proof as to the validity and good faith of the indebtedness which was assumed by C. B. Day.

This leaves us to consider the question of the validity of these transactions so far as they relate to the payment of the individual debts of the members of the firm out of the assets of the firm, and to determine whether these complainants are entitled to have those transactions set aside, and to recover these assets so applied to the payment of individual debts.

In making their terms for the sale of their stocks of goods to the defendant Charles B. Day, the firm required him to pay as part of the...