Opinion
OCTOBER TERM, 1877.
The mere non-resistance of a debtor to judicial proceedings in which a judgment was rendered against him, when the debt was due and there was no valid defence to it, is not the suffering and giving a preference under the Bankrupt Act; and the judgment is not avoided by the facts, that he does not file the petition in bankruptcy, and that his insolvency was known to the creditor
Mr. A.J. Vanderpoel for the appellant.
This case is, in substance, identical with Wilson v. City Bank, 17 Wall. 473.
There is no evidence whatever of any intent to give the bank a preference. Partridge v. Dearborn, 2 Low. 286; Hoover v. Greenbaum, 61 N.Y. 305; Sleek v. Turner, 76 Pa. 142; Henkelman v. Smith, 42 Md. 164.
Mr. Austen G. Fox. contra.
This case comes within the class of cases represented by Buchanan v. Smith (16 Wall. 277), and not that represented by Wilson v. City Bank (17 id. 473).
The liens obtained by the bank were a preference, and therefore void as against the assignees in bankruptcy.
APPEAL from the Circuit Court of the United States for the Southern District of New York.
The Tenth National Bank of New York, having an undis puted debt against the firm of Sanger Co., of about $10,000, endeavored to obtain its money by persuasion, but received only fair words in return. After pursuing this policy for several months, it brought suit against the debtors, Nov. 3, 1870. They received delay and indulgence in its prosecution, and judgment was rendered against them on the 12th of January, 1871. Execution was issued on that day, and a levy made upon their property. Yielding again to their solicitations, the bank did not press an immediate sale under the execution, and on the 24th of February, 1871, bankruptcy proceedings were commenced by their other creditors. The sale upon the execution was stayed by an injunction in the present suit, which was instituted by Warren Rowe, assignees in bankruptcy of Sanger Co., to set aside the judgment and execution as fraudulent and void.
This injunction was afterwards modified by allowing a sale, and directing the sheriff to hold the proceeds subject to the order of the court.
The District Court ultimately dismissed the bill with costs. That decree having, on appeal, been reversed by the Circuit Court, the bank brought the case here.
This action goes upon the theory that the mere non-resistance of a debtor to judicial proceedings against him, when the debt is due and there is no valid defence to it, is the suffering and giving a preference under the Bankrupt Act. This theory is expressly repudiated in the case of Wilson v. City Bank, 17 Wall. 473. It is also held in that case that the facts that the debtor does not himself file the petition in bankruptcy under such circumstances, and that the creditor was aware of the insolvency of the debtor, do not avoid the judgment and execution. In the present case, there is not proven a single fact or circumstance tending to show a concurrence or aid on the part of the debtors in obtaining the judgment or securing the payment of the debt. Their only effort was to obtain delay, apparently in the hope of relief from the embarrassments which finally overwhelmed them.
The decree of the Circuit Court must be reversed, and that of the District Court, dismissing the bill with costs, affirmed; and it is
So ordered.