Smith v. Craft

• Decision Date: 05 December 1887
• Parties: SMITH and otheres v. CRAFT and others. 1
• Court: U.S. Supreme Court

8 S.Ct. 196

123 U.S. 436

31 L.Ed. 267

SMITH and otheres v. CRAFT and others.¹

December 5, 1887.

[Statement of Case from pages 436-440 intentionally omitted] Benj. Harrison and Horace Speed, for appellants.

J. E. McDonald and J. M. Butler, for appellees.

GRAY, J.

This case, also, comes before the court upon a certificate of division of opinion, and resembles in many respects that of Jewell v. Knight, ante, 193, argued with it, and just decided. It is a bill in equity by several creditors, each of whose claims is for less than $5,000, to set aside as fraudulent a sale made by their debtor, Craft, a dealer in watches and jewelry, of his whole stock in trade to Fletcher & Churchman, a banking partnership, known as 'Fletcher's Bank.'

The first question certified is whether the understanding between the bank and Craft, that, if the bank would lend him money from time to time, and that if anything should occur by which he was not able to pay his debts, he would secure the bank, constituted a fraud upon his other creditors, so as to invalidate the subsequent sale of his stock. What the understanding here referred to was, or how long it had existed, can only be gathered from the statement of a different understanding at the time of the giving of the latest notes by Craft to the bank; from the recital of a conversation between Craft and Churchman, on the very day when the bank was first informed of Craft's insolvency and when the bill of sale was executed; and from the other circumstances set forth in the certificate of division. As the debtor might lawfully prefer one of his creditors if there was no actual fraud, it cannot, in the absence of any finding upon that point, be said, as matter of law, either that the previous agreement to prefer was fraudulent, or that it was not; but the question of fraud or no fraud involved a question of fact, which, if this case had been on the common-law side of the court, and either party had desired it, must have been submitted to a jury. Bank v. Hunt, 11 Wall. 391; Bank v. Whitmore, 104 N. Y. 297.

The second question certified is whether the bill of sale was rendered void as to other creditors by containing a stipulation that the bank should 'employ said Craft in said business at the rate of $150 per month so long as' the bank should 'carry on or continue said business.' But whether such a stipulation is valid or invalid depends upon its intention. If its object appeared on its face to have been to secure a benefit to the debtor or his family, it would & W. 83; Harris v. Sumner, 2 Pick. 6 Wall. 78; McClurg v. Lecky, 3 Pen. & W. 83; Harris v. Sumner, 2 Pick. 129. But if its sole purpose was to obtain services necessary to wind up the business and turn the goods into money as promptly and economically as possible, for the benefit of the other party, it...