Vaccaro v. Security Bank

• Decision Date: 13 July 1900
• Docket Number: 795.
• Citation: 103 F. 436
• Parties: VACCARO et al. v. SECURITY BANK OF MEMPHIS et al.
• Court: U.S. Court of Appeals — Sixth Circuit

103 F. 436

VACCARO et al. v. SECURITY BANK OF MEMPHIS et al.

No. 795.

United States Court of Appeals, Sixth Circuit.

July 13, 1900

The firm of A. Vaccaro & Co. was composed of three brothers-- A Vaccaro, B. Vaccaro, and A. B. Vaccaro. A. Vaccaro died August 7, 1899, and the Memphis Trust Company qualified as his administrator. The surviving partners, B. and A. B Vaccaro, continued in possession of the partnership stock and assets, and were engaged in closing up the business, until August 24, 1899, when, under a proceeding instituted by the administrator of the deceased partner in the chancery court of Shelby county, Tenn., a receiver was appointed for the purpose of liquidating the partnership affairs, who immediately took possession of the firm assets. In this condition of affairs certain creditors of the firm holding provable debts aggregating about $10,000 filed a petition in bankruptcy against said B. and A. B. Vaccaro as surviving partners of the said partnership of A. Vaccaro & Co., praying that they be declared bankrupts. The petition, as amended by leave of the court, set out a number of alleged acts of bankruptcy, only three of which were relied upon at the final hearing. These acts, as averred, were as follows: (1) That said A. Vaccaro & Co. were insolvent, and that within four months preceding the date of the filing of their petition the 'said A. Vaccaro & Co., composed of the members individually as aforesaid, committed an act of bankruptcy, in that they did heretofore, to wit, on the 24th day of August 1899, make a general assignment for the benefit of their creditors, in this, to wit: That on said 24th day of August 1899, make a general assignment for the benefit of their creditors, in this, to wit: That on said 24th day of August, 1899, they did procure, with intent to hinder and delay their creditors, all of their partnership property located at 278 Front street to be transferred to O. B. Polk, as receiver, a copy of which transfer is herewith filed, marked 'Exhibit No. 1.' That said transfer was made with intent to hinder and delay the collection by their creditors of their creditors of their debts, and consisted in this: that the Memphis Trust Co., as administrator of A. Vaccaro, a member of said partnership, lately deceased, exhibited its bill in the chancery court of Shelby county, Tennessee, August 24, 1899, against B. Vaccaro and A. B. Vaccaro, wherein it averred substantially that A. Vaccaro, B. Vaccaro, and A. B. Vaccaro, all of whom were brothers, had been engaged as partners in the wholesale liquor business in the city of Memphis under the firm name and style of A. Vaccaro & Co., and that said firm had been dissolved by the death of A. Vaccaro. That upon investigation into the condition of the affairs of said firm, it developed that it was very heavily indebted, and that it had not assets sufficient to pay off its indebtedness. That it owed, in round numbers, between $123,000 and $124,000. That its nominal assets were about the same amount, but that really the value of these assets was very much less than their face value, so that same will not yield enough to pay the debts of said firm. That there will be a deficiency of between forty and fifty thousand dollars. That B. Vaccaro and A. B. Vaccaro had comparatively small assets, and that the surplus of their individual estates, after paying their private debts, would not be sufficient to pay their share of the losses and indebtedness of the firm of A. Vaccaro & Co., so that it was more than probable that such losses would fall unequally upon the estate of A. Vaccaro. That the indebtedness of A. Vaccaro & Co. was daily maturing, and the surviving members of said partnership firm, were unable to raise any funds with which to pay them. That they are consequently unable to wind up said partnership, or make arrangements with their creditors as to their debts. That, under the circumstances, it was the duty of complainant in said bill to bring these matters before the chancery court, and apply for the appointment of a receiver to take charge of the assets and properties of said firm of A. Vaccaro & Co., and to collect them and administer them for the benefit of the creditors of said firm under the decrees and orders of the chancery court. Such bill prayed for the appointment of a receiver to take charge of all the partnership assets and properties, and administer the same for the benefit of the creditors of said firm. That said receiver be given orders and directions by said court, and that the creditors of said firm be required to file their claims in said cause for adjustment and settlement. Petitioners aver that, upon the filing of said bill application was made to J. S. Galloway, judge of the probate court of Shelby county, Tennessee, on said 24th day of August, 1899, for the appointment of such receiver, and that the said J. S. Galloway, the defendants appearing, waiving notice, and consenting to such appointment, did thereupon appoint O. B. Polk receiver as aforesaid. So these petitioners aver and charge that said appointment, effecting a transfer of the assets of A. Vaccaro & Co., was made to hinder and delay the creditors of said firm, and is, in legal effect, a general assignment, and an act of bankruptcy.' (2) 'That said firm of B. and A. B. Vaccaro, surviving partners, while insolvent, permitted its property, viz. its stock of goods and merchandise, to be removed and concealed with intent to hinder, delay, and defraud its creditors, in this: that on the 24th day of August, 1899, said firm did permit its stock of merchandise to be transferred and removed to O. B. Polk, receiver, hereinbefore set out.' (3) 'That said firm of A. Vaccaro & Co., by B. Vaccaro and A. B. Vaccaro, surviving partners, while insolvent, within four months next preceding the filing of the petition herein, did, on August 23, 1899, with intent to prefer on A. J. Vaccaro over other creditors of said firm, transfer to said A. J. Vaccaro, who was then a creditor of said firm to the amount of $400, evidenced by a promissory note, not then due, a large amount of whisky and other liquors, to the value of $400. ' The said B. and A. B. Vaccaro answered, and denied that they had made any general assignment within the meaning of the bankrupt act; admitted that they had not contested the bill filed by the administrator of A. Vacarro; admitted that the firm assets of A. Vaccaro & Co. were insufficient to pay the firm debts, to pay all the firm debts not paid by firm assets. They denied that they had procured the said equity bill to be filed, or that they had procured the appointment of a receiver. They insisted that the proceeding was in invitum as to them, and had been started and conducted in the general interest of the estate of A. Vaccaro, and that they had not contested the matter because they saw no object to be gained by such contest. They denied that they had permitted the firm property to be 'removed or concealed' 'with intent to hinder, delay, or defraud creditors,' within the meaning of the law, and denied the insolvency of the firm of A. Vaccaro & Co. They denied that they had transferred goods to A. J. Vaccaro with intent to prefer him over the other creditors, and again denied that A. Vaccaro & Co. were insolvent within the meaning of the bankrupt act. Much evidence was taken upon the issue thus formed. Upon a final hearing the bankrupt court adjudged the said B. and A. B. Vaccaro to be bankrupts 'individually and as partners.' From this adjudication both B. and A. B. Vaccaro have perfected this appeal.

Josiah Patterson, for appellants.

Thomas M. Scruggs, for appellees.

Before LURTON, DAY, and SEVERENS, Circuit Judges.

LURTON Circuit Judge, having made the foregoing statement of the case, .

1. The great bulk of the evidence found in the transcript of the record relates to the question of the solvency or insolvency of the firm of A. Vaccaro & Co. at the date of the commission of the alleged acts of bankruptcy. The fact of solvency or insolvency is of no moment in respect to the alleged 'general assignment' made August 24, 1899. If the appointment of a receiver under the bill of the Memphis Security Company, administrator of A. Vaccaro, was, as charged, 'a general assignment,' within the meaning of subdivision 4 of section 3 of the bankrupt act of 1898, it was an act of bankruptcy, whether the firm was solvent or insolvent. West Co. v. Lea, 174 U.S. 590, 19 Sup.Ct 836, 43 L.Ed. 1098. Was the fact that a receiver was appointed in an uncontested suit the making of a general assignment? The situation was this: A. Vaccaro had died, leaving an estate worth at a fair valuation about $115,000. He owed practically not individual debts. The firm assets, at a fair valuation, amounted to $55,000, though nominally nearly double that sum. The individual estates of B. and A. B. Vaccaro, after paying individual debts, are valued at $30,000. The firm indebtedness on August 24, 1899, was, in round figures, $124,000. Of this firm indebtedness $53,000 was secured by a mortgage upon realty owned by A. Vaccaro and by pledge of personal securities owned by him individually. It was to pay firm debts, and that, after applying such assets, about $69,000 of firm debts would remain unpaid. It was also clear from the facts stated that the estate of A. Vaccaro would have to bear a much greater part of the burden of the firm debts than its proportion. When the administrator of A. Vaccaro ascertained this situation, it determined in the interest of the estate, and for the purpose of adjusting the equities between the partners, to apply for the appointment of a receiver and the liquidation of the partnership affairs under the orders of the chancery court. A bill was accordingly prepared, which...