Swan v. Robinson

• Decision Date: 11 January 1881
• Citation: 5 F. 287
• Parties: SWAN, CLARK & CO. v. ROBINSON, Assignee, etc.
• Court: U.S. District Court — District of Delaware

5 F. 287

SWAN, CLARK & CO. v. ROBINSON, Assignee, etc.

United States Circuit Court, D. Delaware.

January 11, 1881

BRADFORD D. J.

The facts proven in this case, as we think, are as follows:

Thomas J. Graves was adjudged an involuntary bankrupt on September 30, 1873. It is certain that during July, 1873, up to the fourth day of September, 1873, when he made his voluntary assignment for the benefit of his creditors, he was much embarrassed in his pecuniary circumstances. He had not the means of paying his indebtedness as it matured, and struggled in vain to relieve himself of this pressure. Now whatever may be thought the value of his real estate and personal property at this time, it was not available to give him any relief. On the first of August, 1873, Swan, Clark &amp Co., after having made inquiry, bought of Thomas J. Graves the bankrupt, 20 shares of the Aid Loan Association, a building association incorporated under the laws of the state of Delaware, estimated and agreed upon by all parties to be worth at that time $2,126 in cash. This stock was paid for by an antecedent debt of about $1,388.04, $625 in cash, viz., complainants' checks for $425 and one Barlow's check for $200, and the further amount of $113 in goods sold and delivered to Graves. This stock formerly belonged to William Graves, the father of the bankrupt, and had been transferred after his decease by his executor to the bankrupt, and after having been pledged by William Graves for the payment of some $4,000 theretofore borrowed on mortgage by Thomas J. Graves, the bankrupt, from the Aid Loan Association. The stock was pledged as collateral security for the payment of the said mortgage, and the transfer of the same as collateral security was made to the said Aid Loan Association on the twenty-second of April, 1868.

On the first day of August, 1873, the complainants bought of the bankrupt the same 20 shares of stock thus pledged for the payment of the $4,000 borrowed by the bankrupt; and on the same day retransferred the said shares to the said Aid Loan Association as collateral security for the payment of the said mortgage, which transfer was in the following words, viz.: 'Know all men by these presents, that we, Swan, Clark & Co., of the cities of Philadelphia and Chicago, in the states of Illinois and Pennsylvania, have hereby transferred, assigned, and set over to the Aid Loan Association all our right, title, and interest in and to 20 shares, 1 S., of the stock of a certain corporation of the state of Delaware, denominated the Aid Loan Association, located in the city of Wilmington, in trust, that the said corporation shall have and hold the same as collateral security for the payment of a certain debt of $4,000, for which Thomas J. Graves and wife have executed to it a bond and mortgage; and in trust that the said corporation, its successors, and assigns will appropriate the value of said stock towards the payment of said debt, interest, and fines, and for no other purpose whatsoever. Witness my hand and seal this first day of August, A.D. 1873. Signed and sealed by H. A. Clark, of the firm of Swan, Clark & Co., in the presence of George C. Maris and E. H. Gregg. ' This stock, according to the scheme in operation in such associations, matured and was fully paid up on the nineteenth of July, 1876, viz.: making each share of the said stock of the value of $200, and the aggregate value of the same,-- 20 shares,-- $4,000. After the purchase of this stock by the complainants, they paid to the said corporation monthly dues on said stock, amounting, in all, to the sum of $620, and the said assignee of said bankrupt also paid on said stock other monthly dues for five months amounting to $100--the aggregate amount of $720 being the requisite sum to fully pay up the said shares until their maturity, as aforesaid, in July, 1876.

The assignee, during the whole time from the adjudication of bankruptcy to the nineteenth of July, 1876, (the date of the maturity of the stock, as aforesaid,) paid to the said corporation the interest on the said mortgage of $4,000, i.e., $240 per year. The value of said shares thus paid up was on the nineteenth of July, 1876, applied to the payment of the mortgage aforesaid, and this mortgage was satisfied by the treasurer of the company against notice given and the protests of the complainants. This property, i.e., the property on which the mortgage was given, was sold by an order of the district court made the twenty-ninth of September, 1876, by said assignee, for the sum of $15,000, clear of all liens and encumbrances, and the funds remain in the hands of the assignee to answer any claims which may be equitably preferred against them.

On these facts the complainants claim that the entry of satisfaction of the said mortgage was without authority of law and in violation of their rights as owners and pledgors of the said stock; second, that as said stock was pledged by said complainants as a further and additional security for the payment of the said $4,000 debt, the primary security for which was the mortgage aforesaid, it was the duty of said corporation to exhaust its remedy on said mortgage before resorting to the application of the said stock to the payment of said debt; third, that, upon the application of the said stock to the payment of the said $4,000 debt, the complainants were entitled to receive from the said corporation an assignment and transfer of the said bond and mortgage, and to be subrogated to all the said corporation's and interests in the same; fourth, that upon the state of the said mortgaged premises the complainants were entitled to receive from the fund in the hands of the assignee the said $4,000, with the interest on the same from the said nineteenth of July, 1876, less such payments as may have been made by said assignee for monthly dues on the said stock.

On the other hand, the defendant, the assignee of the bankrupt, claims--First, that there was no valid or legal sale of the said stock by said bankrupt to the complainants, because, by the terms of the transfer, all monthly dues paid in up to that time were only payments on account of the principal of the said mortgage, and that therefore the complainants did not acquire any right or title, either in law or equity, to the said 20 shares of stock, or any part thereof; and, further, that upon the siad corporation applying the said stock to the payment of the principal of the said mortgage all sums due thereon became, and were, paid in full, extinguished, and discharged, and it became the duty of the said corporation to enter satisfaction on the record of the said mortgage, and to deliver up said bond and mortgage to the assignee.

The defendant further claims that the complainants, by reason of the terms of the said assignment and transfer of the said stock, are estopped from denying that the said stock was not properly so appropriated; or that the said debt on bond and mortgage is not paid, extinguished, and discharged; or that said entry of satisfaction should be decreed to be void; or that said bond and mortgage should be assigned and delivered up to them; or that said mortgage should be decreed to be a lien upon the said purchase money; or that any sum should be paid to them by this defendant by reason of any allegations in the bill contained.

The defendant further claims that on the first of August, 1873, the bankrupt, being insolvent, or in contemplation of insolvency, within four months before the filing of a petition in bankruptcy against him, with a view of giving a preference to the said complainants, did make an assignment of the said 20 shares of stock to them,-- they, the said complainants receiving the said assignment, then having reasonable cause to believe the said Graves was then insolvent,-- and that such assignment was made in fraud of the provisions of the bankrupt act, and that by reason thereof the said sale of stock was and is void; and, further, such alleged sale was not made in the usual and ordinary course of business of the said debtor, Thomas J. Graves; and also alleging that the complainants, having reasonable cause to believe the said bankrupt to be insolvent, or to be in contemplation of insolvency, by reason of the acceptance of the assignment as aforesaid, hindered and impeded the operation of the said bankrupt acts. This is substantially the defence of the assignee of the bankrupt.

The Aid Loan has put in an answer admitting the sale and facts as stated by the complainants, but denying that they ever acquired any right, title, or interest, in law or equity, in the said stock by reason of the transfer of Graves, the bankrupt, to them. The Aid Loan has no pecuniary interest in this suit; its mortgage is paid and satisfied; it has no claim on the shares of stock aforesaid whatever, and the case will be considered on bill of complainants, the answer of assignee, and testimony taken in the cause. It is proper to observe that this Aid Loan stock, the subject of the present controversy, has a marketable value, and is as much the subject of purchase and sale as any other stock, and its ownership carries with it all the rights or obligations which attach to it by virtue of the rules and regulations of the said loan association, and there is no rule of law to make its purchase and sale an exception from that of any other stock.

Throwing aside, for...