Horton v. Bamford

• Decision Date: 10 November 1911
• Citation: 79 N.J.E. 356,81 A. 761
• Parties: HORTON v. BAMFORD et al.
• Court: New Jersey Court of Chancery

81 A. 761

79 N.J.E. 356

HORTON

v. BAMFORD et al.

Court of Chancery of New Jersey.

Nov. 10, 1911.

[Copyrighted material omitted.]

Bill by Rayton E. Horton, trustee in bankruptcy of Joseph Bamford, Jr., against Walter Bamford and wife and others. Heard on pleadings and proofs in open court. Decree for complainant.

This is a bill filed by the trustee in bankruptcy of Joseph Bamford, Jr., against the said Joseph Bamford, Jr., his brother, Walter Bamford, and the wife of the latter. (The wife is made a defendant solely because of a claim of inchoate right of dower in certain of the property which formerly belonged to Joseph, and which was purchased by Walter.) The purpose of the bill is to obtain a decree declaring null and void, as against the creditors of Joseph Bamford, Jr., represented by the trustee in bankruptcy, the sale of certain property, both real and personal, previously owned by Joseph Bamford, Jr., and purchased by Walter Bamford. The charge of the bill is that these transfers were effected in fraud, to hinder, delay, and defraud the creditors of Joseph Bamford, Jr., and that some of them were within four months of the filing of the petition in bankruptcy, and therefore preferences forbidden by the bankruptcy law. The defendants Walter and Joseph Bamford, Jr., have each filed answers denying that the purchases made by Walter Bamford of Joseph Bamford, Jr.'s, property were fraudulent, or were to hinder, delay, and defraud the creditors of Joseph, and affirming and asserting the validity and legality of each of said purchases. Heard on bill, answers, replications, and proofs in open court.

Clifford L. Newman (Alexander Simpson, Francis C. Lowthorp, and Alexander Thain, of the New York Bar), for complainant.

Harry V. Osborne and William B. Gourley, for defendant Walter Bamford.

Wayne Dumont, for defendant Joseph Bamford, Jr.

GARRISON, V. C. (after stating the facts as above). I find the facts as follows: About 1891, Joseph Bamford, his eldest son, Joseph, Jr., and his youngest son, Walter, incorporated the Bamford Bros. Silk Manufacturing Company. Its plant was at Paterson, N. J. Eventually this company issued 6,000 shares of capital stock, of the par value of $100 each, and of these each of the parties above named had 2,000 shares. The elder son, Joseph, the defendant herein, was the superintendent or manager and also the secretary of this company. Walter was the treasurer, and, at first, the father was the president, and subsequently, Walter. The father died in April of 1909. About 1906 Joseph Bamford, Jr., became connected with a corporation named Baxter & Co., which was engaged in railroad construction, and had its headquarters in New York City; and in 1907, by reason of his connection with this business, he was very largely indebted. There were at least $80,000 of notes of his which were unsecured, and there were between $38,000 and $40,000 more of notes for which he had given security. In the summer of 1907 he was in dire financial difficulties, and, as Walter phrased it in his testimony in the bankruptcy proceedings, it was "public property" that Joseph was in poor condition, that he had been losing money through what Walter termed "robbers," and had financially ruined himself. At this time, in addition to the $200,000 par value of stock which Joseph owned in the Bamford Bros. Silk Manufacturing Company, he is shown to have been the owner of the following: 26 shares of the capital stock of the Hamilton Trust Company of Paterson, N. J., of the par value of $100 each; 30 shares of the capital stock of the Silk City Safe Deposit & Trust Company of Paterson, N. J., of the par value of $100 each; 142 shares of the common stock of the United Shoe Machinery Company, of the par value of $25 each; 75 shares of the preferred stock of the United Shoe Machinery Company, of the par value of $25 each; 10 shares of the capital stock of the Bank of Charleroi, Pa., of the par value of $100 each; 17 shares of the capital stock of the German-American Trust Company of Paterson, N. J., of the par value of $100 each; 3 bonds of the Paterson & Passaic Gas & Electric Light Company, of the par value of $1,000 each. 1 bond of the United States Steel Corporation, of the par value of $1,000 each; a residence in the city of Paterson, on Arlington street; 3 automobiles; 17 different parcels of land in the city of Paterson, which he owned as tenant in common with his brother Walter. At the time of which I am now speaking (which is in the spring and summer of 1907) the 26 shares of Hamilton Trust Company stock and the 30 shares of Silk City Trust Company stock were pledged at the German-American Trust Company for a loan of $12,000. There had also been obtained from this last-named company, by Joseph Bamford, Jr., either $15,000 or $16,000 in addition, for which there had been pledged the 142 shares of common and 75 shares of preferred stock of the United Shoe Machinery Company, the 10 shares of the stock of the bank of Charleroi, the 17 shares of stock of the German-American Trust Company, the 3 $1,000 bonds of the Paterson & Passaic Gas & Electric Light Company, and the $1,000 bond of the United States Steel Corporation. A concern in Pittsburgh, named Ivory, Cascadden & Moore, had taken over this loan and the securities just mentioned as collateral.

Both Walter and Joseph Bamford, Jr., were stockholders in the German-American Trust Company and in the Hamilton Trust Company, and Walter was a director in the Hamilton Trust Company. Before the 2d of March, 1907, according to the testimony of Mr. Parmelee, the treasurer of the Hamilton Trust Company, Joseph was not indebted to that company. Walter, in his testimony before the referee in bankruptcy, stated that it was his understanding that Joseph was indebted in the sum of $10,000 to that company before that time. However this may be, it appears that on the 2d day of March, 1907, Joseph Bamford, Jr., desired to negotiate a note for $10,000 with the Hamilton Trust Company, and it is, of course, immaterial whether this was to renew an existing indebtedness or for a fresh one. Mr. Parmelee states that he was unwilling to loan this money to Joseph unless Walter should approve; and, upon having a conversation with Walter, he was requested by Walter to make the loan, and, because Walter informed him that he wanted him to loan the money to Joseph, he did so, and subsequently Walter Indorsed this note. The note was for $10,000, at four months, and became due on the 1st of July, 1907. Pledged with it, as collateral, were the 2,000 shares of Bamford Bros. Silk Manufacturing Company owned by Joseph. When this note came due, on the 1st of July, 1907, Walter testifies that he is in doubt whether he indorsed it, that he believes that he only indorsed once—that would be the note of March 2, 1907. Parmelee, however, testifies that Walter did indorse the note of July 1, 1907, given in renewal of the note of March 2, 1907. It further appears that before this time the $15,000 or $16,000 note held by Ivory, Cascadden & Moore, with the collaterals attached to it as above set forth, was sent to a Paterson bank for collection; and on the 1st day of July, 1907, Joseph, according to the testimony of Parmelee, applied to the Hamilton Trust Company to advance him, in addition to the $10,000 which he already owed them, $16,000 more to take over the note and securities that had been with Ivory, Cascadden & Moore. Walter in his answer says that Parmelee consulted him respecting this, and wanted to know if he would guarantee this $16,000 loan, and that Walter replied that he would if these securities were to be applied toward the liquidation of the note, and that by reason of this "verbal guarantee" he felt himself bound to pay any deficiency. Parmelee says that at the time that they loaned the additional $16,000 it was distinctly understood that the purpose was to get these securities liquidated as quickly as possible so as to pay Joseph's debts. Therefore the situation, so far as the Hamilton Trust Company and Joseph and Walter Bamford are concerned, on the 1st day of July, 1907, was that the trust company held a note of Joseph Bamford's for $10,000 due November 1, 1907, with which was pledged 2,000 shares of Bamford Bros. Silk Manufacturing Company stock owned by Joseph Bamford, Jr. They also held the note of Joseph Bamford, Jr., for $16,000, which was made payable on demand and on which Walter Bamford was what he terms "a verbal guarantor."

Joseph Bamford, Jr., was not only obligated on these two notes, but on another one of $12,000 at the German-American Trust Company, and owed more than $80,000 of other indebtedness for which he had given no security. There was a judgment against him, recovered on the 1st day of March, 1907, by the First National Bank of Guttenberg, for something over $5,000, under which his house in Arlington street, Paterson, and his three automobiles had been levied upon. On the 12th day of July, 1907, a summons and declaration were served on Joseph Bamford, Jr., at the suit of Chauncy Ives. The suit was in the Passaic circuit court, and was upon two notes, one of March 27, 1907, and the other of April 2d, 1907, at three months, aggregating $3,500. Although there is no proof of any demand having been made on Joseph Bamford, Jr., to pay the $16,000 demand note held by the Hamilton Trust Company, as above set forth, it is proven that on the 12th day of July, 1907 (the same day upon which the summons and declaration above mentioned were served upon Joseph Bamford, Jr.), the Hamilton Trust Company sold at private sale to Walter Bamford for $965 the $1,000 United States Steel Corporation bond.

Thereafter suits against Joseph Bamford, Jr., were brought as follows: In the United States Circuit Court for the District of New Jersey, by Robert B. Ivory et al., on a note of $2,500, dated July 8, 1907, at 10 days; the summons and declaration being served August 2, 1907. In the ...