Jacobson & Co.'s Assignees v. Sims, Harrison & Co.

MANNING, J. Jacobson & Co. were doing business as merchants at Meridian, Mississippi, and, on the 1st of May, 1872, filed their petition to be adjudged bankrupts, and discharged as such. With their petition, they filed schedules, alleged to be complete, of all their partnership property and effects, but none of their individual estates, for the reason that they had no individual property, as they said, and owed no debts as individuals, from which they desired to be released. Nevertheless, they asked leave to file additional schedules, if found necessary, by way of amendment. At the first meeting of their creditors, on the 20th of May, three-fourths in value of those who proved their claims elected and resolved, in accordance with one of the sections of the bankrupt law (§ 5103, Rev. Stat. U. S.), that the estate of the bankrupts should be wound up and settled, and distribution made among the creditors, by trustees, under the direction of a committee of the creditors ; and they elected appellants trustees, and Charles Hopkins & Co., and Taylor & Co., of Mobile (among the largest creditors), the committee ; which action of the creditors was confirmed by the court. About a month before this time, Sims, Harrison & Co., appellees in this cause, being creditors of Jacobson & Go., to a considerable amount, had, in April, 1872, and before the application of the latter to Ice declared bankrupts, sued them by an attachment against their property, returnable into the Cir [189] cuit Court of Sumter county, Alabama, and bad it executed by a levy upon merchandise found in possession of Joseph Zimmern in that county, as the property of Jacobson & Co., and by having Zimmern and one Wise severally summoned to answer, as garnishees, what they were respectively indebted &c. to Jacobson & Co. Wise answered, acknowledging an indebedness of a few hundred dollars. Zimmern made no answer; but having claimed the goods attached as his own, the sheriff required of Sims, Harrison & Co. an indemnifying bond, with sureties, to the amount of $10,000, for his protection against damages for making the levy; and on this bond Zimmern, in September of the same year, sued them and their bondsmen for that sum. Jacobson & Co. did not report the goods thus levied on to the bankrupt court, as their property, nor did the trustees set up any claim to them, except as will be hereafter shown. But in October following, when Sims, Harrison & Co. filed their complaint in the attachment cause, Jacobson & Co. appeared specially therein, and pleaded in abatement certain defects in the papers, and that the goods attached did not belong to them, and that the levy was made within four months of the time before they were adjudged bankrupts. Out of the pleas grew motions, on the part of Sims, Harrison & Co. for leave to amend the defects in their papers, and, on the part of Jacobson & Co., for a dissolution of the attachment; which motions were decided in favor of Jacobson & Co., in the Circuit Court, and against them on appeal to this court; from which the cause was remanded for further proceedings therein below.—Sims, Harrison & Co. v. Jacobson & Co., 51 Ala. 186. In the meantime, about three years had elapsed; during all which time, Zimmern’s suit against Sims, Harrison & Co., conducted by the same attorneys who were representing Jacobson Co. in the other, was suspended in the Circuit Court. About a year afterwards, April 21st, 1876, upon a trial by jury, a verdict was rendered in the cause against Zimmern, deciding that the good$ he claimed were subject to the attachment in favor of Sims, Harrison & Co. against Jacobson & Co. Thereupon, Henry crncl Smith, who were elected four or five years before, by the creditors of the bankrupts, as trustees for them, immediately intervened, by the same attorneys who had represented Jacobson & Co. and Zimmern throughout, and moved the court “to dissolve the attachment in this case, upon the ground that the same was sued out within four months of the commencement of the said bankrupt proceedings, and that the money for which the goods, which were perishable, had been sold, be paid over to them as trustees.” [190] This motion was overruled, and Sims, Harrison & Co. and the trustees having thus all become parties to the cause, by agreement, through their attorneys, ‘all parties consenting to try the issues before the court, without the intervention of a jury,’ the judge, upon the evidence, and admission of the discharge in bankruptcy of Jacobson & Co., considered that no personal judgment should be rendered against them, but that plaintiffs were, in effect, entitled from the proceeds, so far as sufficient, of the property and effects attached, to have $6,739.24, besides the costs of suit, and that after the costs were paid, the residue of the proceeds, not to exceed the amount of the judgment, should be paid to the plaintiffs. Judgment was entered accordingly ; and Henry and Smith, the trustees, have appealed to this court, claiming to be entitled to the money adjudged to Sims, Harrison & Co., and assigning as error the ruling and judgment of the Circuit Court to which they excepted. The judgment of the court below was, probably, based upon the opinion, that appellants should have intervened with their motion to dissolve the attachment, or get possession of the attached goods, within the two years which the bankrupt law prescribes as a bar to any suit by or against an assignee or trustee. But they contend, that this limitation does not relate to suits for goods and effects that should have gone with the property surrendered by the bankrupts, but were kept back by collusive arrangements between them and a third person; and that whenever it is ascertained that they belonged to the bankrupts, the trustees have a right to demand them. Without considering any other question that might arise, let us see what was the situation in the present case. The goods in controversy were in possession of Zimmern: they were transferred to him in March, 1872 : he, residing in an adjoining county to that in which Jacobson & Co. resided, but in another State, held and claimed them there as his own ; and Jacobson & Co. did not mention them in the schedule, which they swore contained a list of all their property. Here, then, were goods, held adversely to them, apd to the trustees. The former could not recover them at all; and Zimmern would evidently have acquired a good title against the trustees, by their mere omission to sue him for them within two years,if he had retained them so long. This would hardly be disputed. In that situation, the goods were lost to the creditors, if not sued for within two years. But Sims, Harrison & Co., believing that they were about to be defrauded, sued out an attachment, and had the goods taken, not from Jacobson & Co., who disclaimed all interest in them, but from Zimmern. The controversy, therefore, was with him. [191] Tbe trustees might also have sued him; and if necessary to enforce their superior rights under the bankrupt law, might have also sued the attaching creditors with him. But, by failing for two years to assert any title against Zimmern, his title would have become good against them. When, therefore, the attaching creditors afterwards obtained a judgment for the goods, or the proceeds of them, against Zimmern, they did not get anything in which the trustees had, or could then assert, any interest whatever. Upon what principle can they claim, from the attaching creditors, the fruits of their long and expensive litigation with Zimmern, about property which, in his hands, was perfectly secure from them ? Shall the diligence and risks of these creditors, in their own behalf, be imputed, and the results of their struggle be appropriated, to the trustees, who have done nothing, or to the other creditors, whose committee have stood by without raising a hand, while the attaching creditors were carrying on their contest against the fraudulent bankrupts and their fraudulent grantee, year after year, and in court after court ? That would be an injustice which the law can not sanction. Besides, there is nothing in this record to show that these goods, which were in Zimmern’s hands, were at any time subject, or could have been made subject, to the debts mentioned in the bankrupt schedule. The goods were transferred to Zimmern, in March. When those debts were contracted — whether before or after that time — does not appear. The petition mentioning them was filed in the bankrupt court in May. True, it is very probable, from the amount of the indebtedness reported, that some of it was contracted before March. But, on the other hand, Jacobson & Co. may not have owed a dollar of them then. Their bankruptcy may have suddenly been brought on, by unfortunate dealings with those creditors, and heavy losses consequent thereon, or otherwise; and it might have been that it was only against Sims, Harrison & Co., that the transfer of the goods to Zimmern was void. The decisions of courts must be founded on evidence, not conjectures. “The record of a judgment rendered against the defendant in execution, after his sale to the claimant” [however short the time before], “is not admissible evidence against the claimant, to prove an indebtedness prior to its rendition.” Snodgrass v. Br. Bank, 25 Ala. 161. And there is nothing in this record to show that any of the persons reported as creditors of Jacobson & Co., in their schedule, became such one week before the schedule was filed. There is no error against appellants ; and the judgment of the Circuit Court is affirmed.