Beattie v. Gardner.

survey held and report made, as prescribed by sect. 10.

The mode prescribed by law for the correction or revision of the estimated producing capacity of the defendant's distillery not having been followed, the original survey and report furnished the only legal basis upon which the tax could be assessed, and that amount, as the evidence shows, has been paid, with the exception of a small balance of $32 20. For that amount, conceded to be due, the Government is entitled to judgment. The rest of the demand must be disallowed.

Northern District of New York.

JANUARY, 1871.

BEATTIE, ASSIGNEE, &c. vs. GARDNER ET AL.

PREFERENCE.-Fraudulent Judgment.-Procuring or Suffering PROPERTY TO BE TAKEN ON LEGAL PROCESS.

Where a bankrupt had absconded from the State, and four suits had been commenced against him in a State Court, by attachment of his property, and publication of the summonses had commenced, and the bankrupt thereafter met one of his creditors and a lawyer who had been and then was attorney for the bankrupt, in Canada, at Niagara Falls, and the bankrupt accompanied them to the American side of the river, where the lawyer served upon him the summonses and complaints in the four suits, on which service judgments were thereafter entered up and executions issued and levies made, and then proceedings in bankruptcy were commenced, and an assignee appointed, who, after demanding the property levied on, filed a bill in equity to set aside the judgments: Held, That, on the facts, the bankrupt had procured the property to be seized on the executions with intent to give a preference to the creditors, and that the judgments were therefore void under the provisions of the 39th section of the bankruptcy Act.

Beattie v. Gardner.

An act which directly tends to defeat the purposes and policy of the bankruptcy Act, and which was done in contravention of and with the intent to defeat such purposes and policy, is, for that reason, fraudulent.and void.

This is a bill in equity, filed by the plaintiff, as assignee in bankruptcy of Daniel Morse, an involuntary bankrupt, to set aside four judgments recovered and docketed against the bankrupt on the 21st day of May, 1868, one of such judgments being in favor of the defendant, Hiram Gardner, and the other three being severally in favor of said Scoville, Harwood and Stone, respectively. The defendant Ransom was the Sheriff of Niagara County, who had levied upon the real and personal property of the bankrupt, by virtue of executions issued on such judgments, on the said 21st day of May, 1868, and who had advertised such personal property for sale on the 27th day of the same month.

On the 26th day of the same month, a petition in bankruptcy was filed against Daniel Morse, the defendant in such judgments, and an injunction staying the sale so advertised was granted by the Bankruptcy Court. The plaintiff was subsequently duly appointed and qualified as the assignee of said Morse, and then, after demanding possession of the property levied on, filed his bill in this suit. The defendants having answered the bill, and the plaintiff having replied to such answers, it was referred to one of the counsellors of this court to take the proofs of the respective parties, and to report the same, with his conclusions of fact thereon.

The report of the referee states in substance, among other things, that the petition in bankruptcy against the said Daniel Morse was filed at the time above stated, and that an adjudication in bankruptcy, and such other proceedings were had thereon that the plaintiff was duly appointed and qualified as his assignee; that thereupon all the estate, property, &c., of the bankrupt was duly assigned to him by the Register

Beattie v. Gardner.

in charge of the case; that on the 3d day of April, 1868, Morse committed the acts of bankruptcy charged in the bill, viz., that he did, on the 3d of April, 1868, depart out of and from the State of New York, of which he then was and, for many years preceding that date, had been an inhabitant, with intent to defraud his creditors, and did on the same day, being a banker in the city of Lockport, in this district, fraudulently stop and suspend, and did not resume, payment of his commercial paper within a period of fourteen days; that after said bankrupt had so departed from the State, and on the said 3d day of April the defendants Scoville and Gardner, commenced their suits against him; that, on the 6th of the same month, the said defendant Harwood, and on the 18th of the same month the defendant Stone, commenced their suits against Morse; that such suits were commenced against the said Morse by summonses only, delivered to the Sheriff of Niagara county, to whom attachments in the same cases were also delivered; that on and prior to the 18th of the same month the publication of the summons, as required by the New York code, was commenced in each of said cases; that the Sheriff attached the property of Morse under said attachments; that after leaving the State of New York, on the 3d of April, said Morse went to Detroit, and that, prior thereto, Phineas L. Ely, an attorney and counsellor at Lockport, had been, in some instances, the attorney and legal adviser of said Morse; that, prior to the 30th day of April, said Ely had had some correspondence with said Morse about appearing for him in the aforesaid actions, and had received from said Morse copies of the summonses and complaints in said actions, with a letter from said Morse, stating that the Sheriff claimed to have attached in those suits all the household furniture in his house, and that he had two infant children, and directing said Ely to insist upon his exemption, under the New York statutes; that, in consequence of the receipt of said letter and papers, said

BT. VOL. IV.-31

Beattie v. Gardner.

Ely appeared in said actions for said Morse, for the purpose of protecting his right under the exemption laws that, excepting as aforesaid, the said Ely had no authority to act for said Morse in said actions; that some time between the 3d and 30th days of April, 1868, said Ely arranged a meeting with said Morse, to take place on said last mentioned day, at Elgin, in Canada; that said meeting was to be held for the purpose of enabling said Morse to consult with said Ely and Judge Bowen, of Lockport, with reference to his children; that said Ely informed the attorneys for the plaintiffs in said actions that said Morse was or would be in Elgin as aforesaid, and that he should try to have him come to Lockport; that one of the attorneys for said Harwood and Stone thereupon, and on the 29th or 30th day of April, 1868, gave to said Ely a copy of the summonses and complaints in the said actions of Harwood and Stone, to serve upon said Morse; that Elgin is situated upon the Canada side of the Niagara river, at the point where the Suspension Bridge crosses said river; that said Hiram Gardner was one of the attorneys of said Scoville in his said action; that said Gardner informed said Ely that he would like to see the said Morse, and would go with him for that purpose; that on the 30th day of April, 1868, said Ely and said Gardner went to Elgin, and that while there said Gardner handed to said Ely a copy of the summonses and complaints in the said actions of Gardner and Scoville, for the purpose of having them served on said Morse; that, having finished their business at Elgin, the said Morse, Ely and Gardner left the hotel at Elgin, and walked across the bridge nearly as far as the American side of the Niagara river-the said Ely and Gardner being on their way home, and the said Morse accompanying them, at the request of the said Ely, for the sake of their society; that after reaching a point within the county of Niagara, said Ely served upon said Morse a copy of the summons and complaint

Beattie v. Gardner.

in each of the aforesaid actions of Gardner, Harwood, Scoville and Stone against said Morse, and left the same with him; that up to that time the said Morse had had no notice of any of the aforesaid conversations had between the said Ely and the attorneys for the plaintiffs in said actions, or that it was the intention of said Ely to serve said papers upon him, and that he did not procure the service of said copies of said summonses and complaints to be made upon him; that the judgments entered in said actions were entered upon proof of the personal service of the summonses and complaints as aforesaid, and not by virtue of the publication of the summonses therein; that executions upon such judgments in favor of Scoville and Gardner were delivered to the Sheriff on said 21st day of May, 1868, at 10.30 A. M., and in Harwood's and Stone's cases ten minutes later; that the real and personal property described in the bill of complaint constituted all the property of said Morse at the times aforesaid, and that he was indebted to other persons besides the plaintiffs in the said judgments and executions, in the sum of about twenty thousand dollars; that at the time of the personal service of said summonses and copies of complaints, and at the time of the seizure of said property upon said executions, the plaintiffs in said suits knew, or had reasonable cause to believe, that said Daniel Morse was then insolvent, and had committed the acts of bankruptcy alleged in the complaint; that such judgments were recovered upon bona fide debts due from said Morse to said judgment creditors respectively; that the summonses in said actions of Gardner and Scoville were mailed to said Morse, at Detroit, on or about the 18th day of April, 1868; that the summons and copy of complaint in favor of Harwood was so mailed to him on or about the 10th day of April, 1868, and those in favor of Stone on or about the 21st day of April, 1868, and that there was, at the time aforesaid, and ever since has been, a regular communication by mail from Lockport to Detroit.