Jackson v. Sedgwick

• Decision Date: 22 July 1911
• Citation: 189 F. 508
• Parties: JACKSON v. SEDGWICK.
• Court: U.S. District Court — Eastern District of New York

189 F. 508

JACKSON v. SEDGWICK.

United States Circuit Court, E.D. New York.

July 22, 1911

Frank Benjamin, for plaintiff.

Robert J. McDermott, for defendant.

CHATFIELD District Judge.

This is an action in equity to set aside the transfer of some $8,638 face value, of merchandise accounts, made December 15, 1906 by the United Syndicate Buyers, a corporation doing business in the city of New York and organized under the laws of the state of New Jersey, and for an accounting as to collections from these accounts. This corporation had very little capital and hardly any stock, but bought goods for export and discounted or pledged the bills or accounts for these sales in order to meet the bills becoming due for goods previously purchased and disposed of in other transactions. The secretary and active man in the business was a son of the present defendant. The defendant became a director and stockholder and participated in the business in order to help her son, who was not yet 21 years of age and could not engage in business as he wished on that account. This son became of age before the transactions in question, and his mother ceased then to act as director, but seems to have remained legally a member of the board. The corporation not only had an unusual business, but conducted this business in an unusual manner, and negotiated loans substantially with two men, who received interest on the advances, being protected by an agreement on the part of the corporation, to refund or purchase back all of the accounts which were not paid within the time in which the debt to secure which they were assigned fell due. The defendant was frequently called upon to advance money to help the corporation out in taking over or repurchasing these bills which were not paid promptly, and it appears that in the month of December, 1906, about $1,000 was due to her in this way. She also had a claim for money loaned of $500, and at that time advanced $500 more by check. To secure this the corporation assigned to her some $9,000 worth of accounts, which had then not been paid or were of doubtful value, and had been taken back from the pledgees. The corporation then proceeded, within the next few months, to borrow from the two gentlemen who had previously made loans over $5,000 more, with which they paid all the creditors having claims at the time of the assignment. Ultimately, in the month of February, 1907, a proceeding was brought in New Jersey to have the corporation liquidated, and for the appointment of a receiver. At this time the corporation was insolvent. But, this plan not working out as was expected, a petition in bankruptcy filed in the Southern District of New York in July, 1907, caused the assets of the corporation to be taken in charge of by the bankruptcy court. Ultimately a trustee was appointed, who brought the present action against Mrs. Sedgwick, on the ground that the transfer to her in December previous to the filing of the petition was with intent to hinder, delay, and defraud creditors, and therefore void.

It is apparent that this transfer was more than four months prior to the filing of the petition, and, while the circumstances were such that the assignment seems to have been plainly preferential, nevertheless the proceedings in bankruptcy were not brought within the period in which a preferential payment could be attacked. The trustee therefore seeks to show that the transfer was not...