Opinion
Argued May 28, 1874
Decided September term, 1874
Benj. Estes for the appellant. Roger A. Pryor for the respondent.
The appeal is by the plaintiff from an order of the General Term, reversing a judgment entered upon the report of a referee, and ordering a new trial. The order not stating the reversal to have proceeded upon any error of fact, we are to assume it was made for some supposed error of law.
The action was brought by the plaintiff, as the assignee in bankruptcy of one Oppenheimer, to recover from the defendants moneys alleged to have been collected in violation of the thirty-fifth and thirty-ninth sections of the bankrupt act of the United States. Oppenheimer was a merchant in Nebraska and was the debtor of the defendants, merchants in New York, to the amount of over $1,000, which, in July, 1868, had been several months over due; and, thereupon, they handed their claim over to Ledyard, Archer Co., a law and collection agency in the city of New York, with instructions to collect it, and they forwarded to one McClellan, an attorney in Nebraska City for that purpose. He was one of the firm of McClellan Archbold, and this firm sued Oppenheimer in Nebraska on the claim of the defendants, and on the 10th of August, 1868, obtained judgment by confession. An execution on the judgment was, on the same day, placed in the hands of the sheriff, and the money realized thereon sought to be recovered in this action. This money was remitted, after deducting costs, to Ledyard, Archer Co., but no part of it ever reached the defendants, it having been otherwise disposed of by Ledyard, Archer Co. Oppenheimer was, at the time, insolvent beyond all question, and this was known to the attorneys who obtained the judgment and collected the money. Within less than four months after the judgment was obtained Oppenheimer was adjudged a bankrupt by the District Court of the United States in Nebraska, and the plaintiff duly appointed his assignee.
In order to entitle the plaintiff to recover, it must, among other things, be made to appear that, at the time the confession of judgment was obtained against Oppenheimer, the defendants had reasonable cause to believe that Oppenheimer was insolvent, and confessed the judgment to give a preference in fraud of the bankrupt act.
The defendants' account against Oppenheimer was over due, and shortly after it matured the defendant Greenbaum, who had charge of closing up the affairs of his late firm, wrote to the debtor for payment, and he replied, that business having been very dull, he would thank them to wait on him, and he would send the money in a short time; but he failed to remit, and hence the claim was handed over to Ledyard, Archer Co., for collection. Greenbaum swears that, at this time, he had no knowledge of the financial condition of Oppenheimer, or that other suits had been commenced against him, or of other claims or judgments. This does not authorize a finding that he had reasonable cause to believe that Oppenheimer was insolvent within the meaning of the bankrupt act. Greenbaum did not know that the judgment had been taken by confession, or by whom the claim was being prosecuted in Nebraska, or that any money had been collected or remitted to Ledyard, Archer Co., until after a demand was made upon him to pay it over to the plaintiff. It is, therefore, impossible that he can be charged personally with a reasonable cause of belief of any fraud committed in violation of any of the provisions of the bankrupt act; and I think there must be some condition of the creditor's personal participation in the alleged illegal act before the extraordinary remedy given by the act of Congress can be enforced. The defendants had the undoubted right to pursue Oppenheimer to judgment, execution and levy, and the fraud is supposed to consist in the confession, which, no doubt, did operate to secure a largely qualified preference, but of this the defendants, in fact, knew nothing.
There was no relation of attorney and client or principal and agent between the Nebraska attorneys and the defendants, which, by construction, can charge them with the knowledge of the affairs of Oppenheimer they had, or of any action of theirs had in fraud of the bankrupt law. (72 Penn., 124.) In any view they were not commissioned or authorized to commit any fraud whatever which can be imputed to the defendants. No instructions were given them, and no communication had with them, and the defendants did not even know what lawyers had charge of the claim in Nebraska, and the agents employed by them in New York had no instructions to subject their clients to any of the penalties of fraud, but only to do their best to collect the debt, and it does not appear to me that if, in their zeal, any of the provisions of the bankrupt act has been violated, this knowledge can be imputed to the defendants within the meaning of the act. (Kerr on Frauds, 261, and cases cited in note; Cobb v. Beake, 6 Q.B.R., 930; Scammon v. Cole, 5 Nat. Bank. Register, 259; Wager v. Hall, 16 Wall. [U.S.], 595; Condit v. Baldwin, 21 N.Y., 219; Wilson v. City Bank, 17 Wall. [U.S.], 473.)
If, in fact, the defendants had received the money in dispute with any reasonable suspicion of all the facts as now disclosed, it might, perhaps, have been said that the acts of the agent had all been ratified, including the supposed fraud; but it is unnecessary to consider that question.
Upon every material question of fact in the case touching the liability of the defendants, the evidence was uncontradicted, and we may therefore consider whether it in law authorized the finding of the referee, and we are of the opinion that it did not.
The order appealed from must be affirmed, and judgment absolute ordered in favor of the defendants, with costs.
All concur.
Order affirmed and judgment accordingly.