In re Vetterlein

• Citation: 44 F. 57
• Parties: In re VETTERLEIN.
• Decision Date: 05 November 1890
• Court: U.S. District Court — Southern District of New York

44 F. 57

In re VETTERLEIN.

United States District Court, S.D. New York.

November 5, 1890

Roger M. Sherman, for petitioner.

Edward Mitchell, U.S. Atty., and Maxwell Evarts, Asst. U.S. Atty for the United States.

John P Clarke, for assignee.

BROWN J.

In September, 1871, a first dividend was declared in favor of creditors in the above matter, including the sum of $1,125 to the petitioner's intestate, Thomas Hare, trustee. Warrants for all the dividends were executed, and most of them delivered. That to Hare, trustee, was not delivered, on account of some difficulty in the proper voucher to be given for it. Some considerable time afterwards the United States obtained a judgment for $99,951, against the bankrupts upon a forfeiture of the value of goods fraudulently imported by them before the bankruptcy, and in January, 1886, commenced suit against Demas Barnes, the assignee, personally, to recover the sum of $32,000, which he had paid out to creditors on the dividend of 1871. On the trial of the case, in February, 1886, in this court, a verdict was directed for the defendant, following the decision of GRESHAM, J., in U.S. v. Murphy, 15 F. 589. On a writ of error thereupon taken to the circuit court, the judgment was reversed, in July, 1887, and a new trial ordered. Meantime, in April, 1886, an application by petition was made by Mrs. Hare to this court for an order directing the assignee in bankruptcy to pay her the dividend of $1,125, declared in 1871. In view of the pendency of the litigation respecting the rights of the United States as against the assignee, the motion was denied without prejudice. On a review of this order in the circuit court, in May, 1886, the order was there so modified as to direct the assignee to pay Mrs. Hare the dividend upon her furnishing the assignee an approved bond with surety for the repayment thereof, with interest, in the event of judgment being 'recovered against the assignee by the United States in the pending suit. ' No bond was furnished, and the dividend, therefore, remained unpaid. After the reversal by the circuit court of the judgment below in the suit brought by the United States, the claim was compromised and settled between the government and the executors of the assignee, who had died in the mean time, and the action was thereupon discontinued. The reversal (24 Blatchf. 465, 31 F. 705) was upon the ground that the United States was not bound to come into the bankruptcy court to assert its priority, even as respects the fund being administered by the court; and that the assignee, when chargeable with notice of any existing claim on the part of the government, pays any dividend at his own peril, under section 3466 and 3467 of the Revised Statutes, notwithstanding any order of the court in bankruptcy for such payment; and that no laches or estoppel can be imputed to the government for the assignee's protection. Subsequently to the death of Mr. Barnes a new assignee was appointed on November 17, 1888, who, upon the order of the court, dated March 18, 1890, paid all the remaining assets, including the fund in question, to the government. In October following the present application was filed for an order directing the new assignee to pay the same dividend to Mrs. Hare, upon three grounds: (1) That the circuit court order for the payment to Mrs. Hare, on her filing a bond, was substantially an adjudication in her favor, and that, the suit of the United States having been terminated without any 'judgment being recovered against the assignee,' there is no longer any occasion for the filing of a bond as a condition of receiving payment; (2) because the dividend in question was, by the order of this court, dated April 22, 1884, in a proceeding in which the government was petitioner, recognized as a credit to the assignee to be paid to the proper person; (3) because, as it is said, the United States has already been paid more than the entire assets of the New York branch of the bankrupt's business, in which alone the forfeiture accrued, and that for the residue the United States had no priority over creditors of the Philadelphia branch as respects the assets there, because the business of the two branches was, as alleged, wholly distinct, and the assets must be marshaled, so that the creditors of each branch may have priority upon their respective assets. Even if the order of March 18, 1890, directing the new assignee to pay the funds in question, with other funds in his hands, to the United States, had not been made, and if the dividend in question were still in the registry, the petition could not be granted.

1. The order to pay Mrs. Hare, on her filing the bond, etc., was evidently a provisional order, intended to secure payment of the money to the assignee in case the United States should be held entitled to a priority as respects that money, and to indemnify the assignee for his liability, in that event, to pay the same moneys to the United States. The subsequent decision in the circuit court determined that the assignee was liable for similar payments previously made, and would be liable to the United States for any such payment made to Mrs. Hare. As the order was not acted on, no bond being given, it is immaterial that the language of the condition is not literally applicable in consequence of the suit having been settled by compromise, instead of by entry of final judgment against the assignee. In the memorandum accompanying the decision of the motion, Judge WALLACE says:

'It may turn out, however, by the result of the pending suit between the United States and the assignee, that the former is entitled to priority out of the undistributed estate over the claim upon which the dividend had been declared. In that event the present claim would have no equities against the assignee.'

The reversal by the circuit court of the judgment below in favor of the assignee was a direct determination that the United States was entitled to priority over the claims upon which that same dividend had been declared. The present claimant therefore, in the language of Judge WALLACE, has 'no equities against the assignee.' The adjudication made in the former order was plainly not a final adjudication on the merits, and the reversal of the judgment wholly supersedes its provisions, since it was never acted upon. On application it...