Union Trust Co. v. Bulkeley
Decision Date | 18 January 1907 |
Docket Number | 1,564. |
Citation | 150 F. 510 |
Parties | UNION TRUST CO. v. BULKELEY. |
Court | U.S. Court of Appeals — Sixth Circuit |
The following is the opinion of the District Court by Swan District Judge:
Macauley was adjudicated a bankrupt on his own petition November 23 1904. The petitioner is his brother-in-law and resides in Connecticut. The bankrupt had been engaged in business in Detroit for several years. He had received financial aid in starting in business from his father-in-law, the petitioner's father, who died in November, 1902, leaving a last will and testament in which he required repayment of the loan to the bankrupt and provided that in default thereof the amount-- some $15,000-- should be charged against the share of the bankrupt's wife in his estate. This fact was known to the petitioner and the heirs of the father. In January, 1903, the bankrupt visited Hartford and stated to petitioner, as the latter testifies, These notes were sent the bankrupt 'January 27, 1903, as is evidenced by the registry receipt of that date.
The petitioner testifies positively: That the indorsements were made on the assurance of Macauley's assignment of the book accounts to him, 'because,' as he states, 'I would have had no security of any sort at all for my indorsement with the exception of these insurance policies which were new policies practically and had no value to me and, of course, with the idea of continuing the indorsements from time to time I would have to have the book accounts, and it was my understanding as he talked to me that these book accounts and bills receivable at any time while I indorsed for him were pledged to me to cover my indorsements. ' That the bankrupt submitted to him a statement at the time of the agreement for indorsement showing bills receivable approximately $30,000 in amount, and assured petitioner that it was his privilege at any time to take the business to protect himself. Pursuant to this arrangement petitioner indorsed between January 27, 1904, and the bankruptcy for renewals and for accruing obligations of the bankrupt, some 40 promissory notes, all of which were produced and identified. Four policies of life insurance-- one for $1,000, two for $5,000 each, and one for $4,000-- are produced and identified as those which were turned over to the petitioner when the parol assignment was made. But one of these has any cash value, and that is but $29.02. The evidence is undisputed that petitioner has paid $15,000 and upwards on his indorsement, and the proceeds of all the notes went into the bankrupt's business. The testimony of the bankrupt fully corroborates in all essentials that of the petitioner as to the assignment, the time, place of its execution, and the consideration for which it was given. The proofs are explicit that the agreement covered all the book accounts and bills receivable 'at that time or might exist at any time while I (petitioner) was indorser," and that this was the result of two conversations between him and the bankrupt; that petitioner had no knowledge before November, 1904, that Macauley was in financial straits. His first protested note-- indorsed by petitioner-- matured November 29, 1904, after the adjudication. There is therefore no question of preference in the case, nor is there any controversy as to the terms of the agreement under which the petitioner indorsed, save as to its legal effect. The only criticism upon the testimony in its support is that it comes from interested parties-- the petitioner who is naturally desirous of recouping his loss, and the bankrupt, his brother-in-law, whose relation to him suggests a bias in the former's favor. The finding of the referee does not discredit the testimony of petitioner or the bankrupt. He expressly disclaims any reflection upon its truthfulness. His conclusion is in terms based upon two propositions: (1) The competency of the conversations to establish the assignment; and (2) the fact that possession of the accounts was not taken under the assignment. November 16f, 1904-- about a week before the bankrupt filed his petition for adjudication-- he executed a written assignment to petitioner and to Sarah B. Macauley, his wife, of the book accounts and bills receivable of R. H. Macauley & Co. (the bankrupt's firm name), which confirmed the parol agreements it recited to have been made with the grantees for their indorsements; and expressed its purpose to secure Bulkeley and Mrs. Macauley against loss on such indorsements. This instrument was made without the knowledge or consent of Bulkeley, and solely because of the bankrupt's desire to further secure the grantees in pursuance of the agreements under which he obtained the indorsements. In itself it has no legal efficacy, and is not to be considered as against petitioner. Its primary purpose was to protect Mrs. Macauley if there should be a surplus after paying petitioner.
The referee's expressed reasons for the rejection of the claim are that he
The question presented, therefore, is simply as to the legal effect of the testimony-- whether assuming its credibility it suffices to establish an assignment. It must be conceded that an agreement resting for its support upon the testimony of the two parties to it is suggestive of bias and open to suspicion, especially where the amount at stake is large, and there is no written evidence of the fact in controversy. But when it is not opposed by any evidence, except the considerations suggested by the interest of the petitioner and his relationship to the bankrupt, which the rejected as factors in his judgment, and undisputed facts tend to corroborate it, the referee's denial of the petition must be referred to the competency of the evidence accepting its truthfulness. It follows, therefore, that the exceptions to his ruling present a pure question of law.
The considerations tending to corroborate the testimony of Bulkeley and the bankrupt are: (1) The bankrupt visited petitioner intending and prepared to obtain financial aid upon the security of his bills receivable and his policies as is evident from the fact that he presented the statement of the former showing $30,000 outstanding, and by his delivery of the policies-- the only security of which he could make delivery. (2) Bulkeley immediately after the Hartford agreement of January, 1903, began and thereafter continued his indorsements of the bankrupt's notes to the extent of $15,000, as he agreed. (3) That with Bulkeley's knowledge that the bankrupt owed the estate of his father-in-law (Bulkeley's father) $15,000 for moneys advanced for the bankrupt's business before 1903, which moneys by the last will of Bulkeley, Sr., who died in November, 1902, were charged to the share of his estate falling to the bankrupt's wife, it is highly improbable that petitioner would have loaned his credit by indorsement or otherwise to his brother-in-law without security, and in reliance solely upon the sanguine hopes of the bankrupt that 'in two or three years his business would be in such a condition as to dispense with the aid of further indorsements.' (4) Bulkeley had not the ready money asked by Macauley. His reluctance to lend his credit to the limit of the indorsement desired, and his effort to reduce the limit, strongly indicates, in connection with his knowledge of Macauley's indebtedness to the estate of the elder Bulkeley, that the conditions were such as to justify security despite relationship. It cannot be assumed that he was willing to hazard his own patrimony, as the bankrupt's wife had done, without security. (5) The delivery by the bankrupt of his life insurance policies to petitioner as part of the security for petitioner's indorsement is part of the res gestae of the assignment. Their delivery as part security for the...
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