In re Ruos

• Decision Date: 27 February 1908
• Docket Number: 1,093.
• Parties: In re RUOS.
• Court: U.S. District Court — Eastern District of Pennsylvania

159 F. 252

In re RUOS.

No. 1,093.

United States District Court, E.D. Pennsylvania.

February 27, 1908

John C Swartley and William Stuckert, for trustee.

Francis Shunk Brown and Webster Grim, for bankrupt.

J. B McPHERSON, District Judge.

The question certified by the referee calls upon the court to determine whether the privilege that protects confidential communications between attorney and client justified the witness in refusing to answer certain questions that were asked during the course of his examination. The referee has been engaged in an effort to discover the whereabouts of the bankrupt's estate, having been directed to examine the bankrupt and other witnesses for this purpose. In order to understand the situation now presented, it is necessary to state briefly the facts out of which the controversy arises The bankrupt was a merchant, dealing (among other articles) in agricultural implements, and Adriance, Platt & Co. are manufacturers of such implements, who had made consignments thereof to the bankrupt as their agent or factor. When the petition was filed and the adjudication was entered, in September, 1901, the bankrupt owed several thousand dollars upon this consignment account, and the consignors were pressing for payment. The claim was in the hands of Thomas Ross, a member of the Bucks county bar, and he is the witness who has refused to answer the questions hereafter quoted that were put to him by the counsel for the trustee. Other facts relevant to the present dispute are thus stated by the learned referee:

'Henry D. Ruos testified: That shortly after execution was issued against him on September 4, 1901, an agent from Adriance, Platt & Co. called on him and threatened him with arrest if he did not pay the money which was due them on a consignment account, amounting to about $6,000. That on September 6 or 7, 1901, he consulted Robert M. Yardley, Esq. (now deceased), his counsel, in relation to the matter, and paid him (Yardley) the sum of $4,000 in cash 'for any thing that might turn up,' and told Mr. Yardley to use his own judgment about this money. This $4,000 was secured from the sales of his stock in the general course of business.

'That he was afterwards arrested at the instance of Adriance, Platt & Co., on the charge of embezzlement as consignee, and the case returned to court, but that he was not tried, and that the case had been settled. That after he had been arrested he did not tell Mr. Yardley to pay the money he had given him to his prosecuting creditors. That he does not know of his own knowledge what was done with this money, or if any of it was paid to Adriance, Platt & Co. in settlement of their claim against him. He was not called on afterwards to pay any more money to them, but that Mr. Yardley had subsequently told him 'it had been fixed,' and had given him to understand that the money he had given had been used in settlement of the criminal prosecution against him. The bankrupt also testified that the reason he did not present this evidence at former examinations was that Mr. Yardley had advised him not to say anything about it, inasmuch as the Adriance, Platt & Co. claim was a consignment account. The bankrupt's schedules withheld the information that he had placed the sum of $4,000 in Mr. Yardley's hands, which he says was done under advice of counsel.

'Joseph A. Ruos testified: That on or about September 8, 1901, a Mr. Pulsifer came to see him in relation to the account due from the bankrupt to Adriance, Platt & Co., and that he (Pulsifer) stated that unless the same was paid the bankrupt would be arrested. That on or about the day the bankrupt was arrested he told Mr. Yardley at his office what Pulsifer had told him and then Mr. Yardley went to his safe and gave him (Joseph A. Ruos) the sum of $3,900 in cash in an envelope, and told him the Adriance, Platt & Co. claim had better be settled. That he took the $3,900 and gave it to Mr. Brock, who sealed the envelope and placed it in a vault in the Doylestown National Bank. He subsequently consulted Henry Lear, Esq., who advised him that the Adriance, Platt & Co. claim or contract was a consignment account, and the money belonged to them. That a year or more afterwards he received the said envelope and money from Mr. Brock, and paid to Adriance, Platt & Co., or their representatives, between $3,000 and $3,500 of the $3,900, and retained the balance. He could not fix the exact amount that was paid or the time, other than it was some time after Henry D. Ruos had been declared a bankrupt. Questioned as to whether or not the Adriance, Platt & Co. claim had been assigned to him, he stated he did not know how the matter had been fixed, and refused to answer whether or not he received the first dividend on the bankrupt's estate on the Adriance, Platt & Co. claim.

'From this testimony it is evident that the bankrupt or his agents, a year or more after he had been adjudicated a bankrupt, disbursed $4,000 taken from his business, of which sum between $3,000 and $3,500 was paid in settlement of a claim and criminal prosecution against him, and that the balance, between $750 and $900, remains in the hands of Joseph A. Ruos. * * *

'In contradiction of the above testimony that the claim of Adriance, Platt & Co. was paid by the bankrupt, Mr. Stuckert, the attorney for the trustee, called George G. Mills, to show that he (Mills) settled the claim, and not the bankrupt; but the witness declared he never heard of this claim, did not pay any money in the purchase or settlement of the same, and disclaimed any knowledge in relation to the matter whatever. The attorney for the trustee thereupon called Thomas Ross, Esq., to prove that he (Ross) was the attorney for Adriance, Platt & Co., that as attorney the witness made a settlement of the claim after the bankrupt had been arrested, and that the sum of $3,150 was paid to Adriance, Platt & Co. in purchase of the claim. Mr. Ross refused to testify at all in relation to the matter because of his professional relation with Adriance, Platt & Co., and, after declining to answer the questions of Mr. Stuckert, the attorney for the trustee, Mr. Stuckert moved that the testimony of the witness be certified to this court for action thereupon to determine whether or not the said witness was guilty of contempt and should be compelled to answer, which motion was granted by the referee, and said question has been this day certified to the court for its opinion thereon.' In support of the theory that the bankrupt's money had been used to settle the claim-- the name of one George G. Mills having been used as a mere cover-- the two papers following were exhibited to Mr. Ross:

'Exhibit F.

'Doylestown, Pa., May 21, 1902.

'It is hereby agreed as follows:

'Adriance, Platt & Company agree to sell to George G. Mills their claim against Henry D. Ruos, bankrupt, consisting of two promissory notes and check aggregating five thousand five hundred and seventy-nine dollars and ninety-eight cents ($5,579.98) for the price or sum of three thousand one hundred and fifty dollars ($3,150). This sale is made without recourse to Adriance, Platt & Company.

'George G. Mills hereby agrees to buy said claim for the price aforesaid and pay for the same $1,500 in cash and the balance on or before September 1st, 1902, with lawful interest; the said Mills to execute a promissory note for the deferred payment. It is further agreed that the said Mills shall have the right to use the name of Adriance, Platt & Company in collecting any dividend in bankruptcy on said claim, protecting and indemnifying Adriance, Platt & Company from all liability for costs; or, if said Mills desires it, Adriance, Platt & Company, through their attorney, will collect any dividend in bankruptcy and pay same over to Mills without any counsel fee or charge for collection.

'Witness our hands and seals the day and year first aforesaid.

'Signed, sealed and delivered in the presence of (as to Pulsifer) Thos. Ross.

'Adriance, Platt & Co. (Seal.) 'H. D. Pulsifer, Genl. Agt. ' . . . . (Seal.)

'Received May 21, 1902, of George G. Mills, fifteen hundred dollars, first payment on account of above contract as stipulated for.

'Adriance, Platt & Co., 'H. D. Pulsifer, Genl. Agt.

'Received May 29, 1902, of George G. Mills, twelve hundred and fifty dollars on account of the amount mentioned in above agreement.

'Thos. Ross, 'Atty. for Adriance, Platt & Co.

'June 25, 1902, $400, balance principal of contract & $2. interest-- $402 paid.

'Ross, Atty.'

'Exhibit H.

'It is hereby stipulated and agreed that a general release executed and delivered by Joseph A. Ruos and Henry D. Ruos to Adriance, Platt & Co., dated the 24th day of September, 1902, does not affect the right of the said Joseph A. Ruos to receive from Adriance, Platt & Co. all dividends and sums of money received from the bankrupt estate

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