In re American Brewing Co.

• Decision Date: 07 January 1902
• Docket Number: 777.
• Citation: 112 F. 752
• Parties: In re AMERICAN BREWING CO. v. KETCHAM. MAGNUS et al.
• Court: U.S. Court of Appeals — Seventh Circuit

112 F. 752

In re AMERICAN BREWING CO.

MAGNUS et al. v. KETCHAM.

No. 777.

United States Court of Appeals, Seventh Circuit.

January 7, 1902

Amos C Miller, for appellants.

Levy Mayer and George W. Wall, for appellee.

There is no dispute about the facts in this case, which are as follows, as exemplified by the record:

On March 10, 1899, John McNulta, as receiver of the National Bank of Illinois, together with two others,-- the three being creditors of the American Brewing Company,-- petitioned to have the brewing company adjudicated an involuntary bankrupt. The petition shows that John McNulta, as receiver, on March 9, 1899, recovered in the United States circuit court a judgment against the brewing company for $27,744.20. The two other petitioners had claims against the brewing company respectively, for $4,775 and $396.17; the total of the claims of the petitioners aggregating $32,915.37. The petition alleges that the brewing company is insolvent, and is indebted to the extent of over $900,000. The following acts of bankruptcy are expressly charged: (a) That on February 27 1899, while insolvent, it permitted Magnus' Sons, one of whom (August) is a brother-in-law of George A. Weiss, president of the brewing company, to procure a judgment on confession in the superior court of Cook county against the brewing company for $10,050; that on that date an execution issued, and was levied by the sheriff of Cook county upon the personal property of the brewing company, including beer manufactured and in process of manufacture; that the sheriff has advertised the property for sale on March 12, 1899. (b) That the brewing company on February 9, 1899, delivered its judgment note to the Illinois Trust & Savings Bank, which bank, at a time when the brewing company was insolvent, entered judgment thereon in the superior court of Cook county on March 1, 1899, for $2,705.18; that upon that date execution issued, and a levy was made by the sheriff on the same property as that levied upon the judgment in favor of Magnus' Sons. (c) That on February 27, 1899, the brewing company held a meeting of its board of directors, 'at which meeting said board of directors resolved to forthwith cease doing business, with the mention of never resuming the same, and that the officers of said American Brewing Company forthwith then and there abandoned its property and corporate franchises; * * * that on said February 27, 1899, * * * at the time of the adoption of said resolution, said American Brewing Company was insolvent.' (d) That on February 28, 1899, there was filed in the circuit court of Cook county a bill by two stockholders, owning 320 shares, and a creditor of the brewing company; one of said stockholders (Binder) being a brother-in-law of said Weiss, the president of the brewing company; the claim of the creditor (Daly), a driver of a beer wagon for the brewing company, being for $100. That immediately upon the filing of the bill the brewing company consented to the appointment of a receiver by the state court, and a receiver was accordingly appointed on February 28th. (e) That on February 26, 1899, the brewing company transferred very valuable property to the Gottfried Brewing Company of Chicago, with the intention to hinder, delay, and defraud the creditors of the American Brewing Company; that John H. Weiss is the president of the Gottfried Brewing Company, and is the brother of George A. Weiss, president of the American Brewing Company; that the good will of the American Company consisted of its patronage and customers, with whom it had built up an annual trade of 70,000 barrels of beer; that on February 26, 1899, the American Company, through its president, George A. Weiss, delivered to his brother John H. Weiss a list of the customers and trade of the American Company, and transferred and delivered to the Gottfried Company the good will, trade, and customers of the American Company, without any consideration; that said good will, trade, and customers were a very valuable and substantial part of the property of the American Company, and the acquisition of which had cost the American Company $350,000; that George A. Weiss immediately associated himself with the Gottfried Company, and took over to the latter a number of the employes of the American Company, in order to maintain and control for the Gottfried Company the trade and good will transferred to it by the American Company; that in order to carry out this scheme the Gottfried Company, shortly prior to February 26th, stocked the ice house of the American Company with beer belonging to the Gottfried Company, and on the day (February 28th) and preceding the day of the filing of the bill for a receiver the Gottfried Company, in its wagons, delivered its beer to the customers of the American Company.

Upon these specific grounds the petitioners prayed for a restraining order against the sheriff, Magnus' Sons, and others, and for the issuance of a subpoena. On March 10 1899, the date the petition was filed, a restraining order as prayed for issued, and was served on the same day. On March 17th it was, upon motion of solicitors of Magnus' Sons, 'all parties in interest consenting thereto,' ordered that the injunctional order be modified so as to permit the sheriff to sell the property levied on, and that the net proceeds of the sale shall be paid to the clerk of the district court, 'to abide the further adjudication of the rights of the parties in the premises. ' On March 10th, the day the petition was filed, the brewing company was served with a subpoena. Neither the sheriff, Magnus' Sons, American Brewing Company, nor any of the other respondents, answered. Accordingly, on April 5,1899, the petition went by default, and an order was entered that 'the said American Brewing Company is hereby declared and adjudged a bankrupt accordingly. ' The order of adjudication followed the form prescribed by the supreme court. 172 U.S. 688, 18 Sup.Ct. xxiv., 43 L.Ed. 1211. On April 6, 1899, the sheriff of Cook county, pursuant to the consent order of March 17th, turned over to the clerk of the United States district court $9,756.69, the proceeds of the sheriff's sale. On October 2, 1899, Magnus' Sons, upon their own motion, were given leave to file an intervening petition, and the trustee in bankruptcy was directed to answer the petition within 15 days. On October 2, 1899, Magnus' Sons filed their intervening petition, in, which they allege that on January 8, 1898, the brewing company applied to the petitioners to sell to the brewing company during the year following malt and brewers' supplies to the extent of $10,000; that the petitioners refused to make such sale and extend credit except upon condition that the brewing company should give petitioners a note, with power of attorney to confess judgment, for $10,000, and should agree that petitioners might at any time, whenever the brewing company failed to pay bills when issued and levied, 'and thereby secure a preference over the other creditors of said American Brewing Company to the extent of the value of said personal property'; that the brewing company assented to said terms, and gave its judgment note for $10,000; that prior to February 27, 1899, after the making of said agreement petitioners delivered to the brewing company a large amount of brewers' supplies upon the terms of said agreement; that the value of the supplies so delivered was far in excess of $10,000; that on February 27, 1899, said supplies so delivered amounted to $11,000, of which $5,000 was past due; that on February 27, 1899, petitioners brought suit on the note, and recovered judgment by confession thereon, and caused an execution to issue on the judgment, and a levy to be made by the sheriff upon the personal property of the brewing company; 'that at the time of the making of the aforesaid agreement, * * * at the time of the execution and delivery of the aforesaid $10,000 note, * * * at the date of entry of said judgment, and at the date of said levy of said execution, said American Brewing Company was solvent and was a going concern'; that the sheriff of Cook county levied said execution, and gave notice of sale for March 13, 1899; that on March 10, 1899, John McNulta, as receiver, and others, filed their petition in the district court to have the brewing company declared bankrupt, and that on said date the district court ordered a warrant to issue to the marshal to seize the property of the brewing company, and ordered that the sheriff of Cook county be restrained from interfering with the property of the brewing company; that on March 20, 1899, 'your petitioners appeared before said date the district court ordered a warrant to issue that the sheriff of Cook county be restrained from interfering with the property of the brewing company; that on March 20, 1899, 'your petitioners appeared before said district court and moved for the dissolution of said injunction; * * * thereupon, * * * by consent of your petitioners and said petitioners in bankruptcy,' the district court modified the injunction so as to permit the sheriff to sell and pay over the proceeds of the sale to the clerk of the district court; that the sheriff did sell and did turn over said proceeds to the district court clerk; that on April 6, 1899, 'said American Brewing Company, upon the petition, hereinabove mentioned, of said John McNulta, receiver as aforesaid, * * * was declared a bankrupt in the United States district court, but that neither of your petitioners was a party to said proceeding or contested said adjudication.' The intervening petition prays that Ketcham, trustee, be required to answer the petition, and that 'upon the hearing of this cause the said fund now in the hands of said clerk * * * may be...