Hennequin v. Clews - 111 U.S. 676 (1884)
U.S. Supreme Court
Hennequin v. Clews, 111 U.S. 676 (1884)
Hennequin v. Clews
Argued March 13, 1884
Decided May 5, 1884
111 U.S. 676
One hypothecating, to secure a debt due from himself, securities which had been pledged to him to secure the obligation of another, and failing to return them when such obligations discharged does not thereby create a debt by fraud, or in a fiduciary capacity, which is exempted by $5117 Rev.Stat. from the operation of a discharge in bankruptcy.
In October, 1871, Henry Clews & Co. opened a line of credit on their London house of Clews, Habicht & Co., for £6,000 in favor of Hennequin & Co., a firm doing business in New York and Paris, authorizing the latter to draw from time to time bills of exchange on the London house at ninety days from date, with the privilege of renewal, it being agreed that Hennequin & Co. should remit to Clews, Habicht & Co., a few days before the maturity of each bill, the necessary funds to meet and pay the same so that Clews, Habicht & Co. should not have to advance any money to pay it. In consideration of such accommodation acceptances, Hennequin & Co. deposited with Clews & Co. certain collateral securities, for the purpose of securing them in case Hennequin & Co. failed to remit the requisite funds to pay the said bills of exchange, amongst which collaterals were twenty-nine Toledo railroad mortgage bonds, for $1,000 each. Clews & Co. used the said bonds by depositing them with third parties as collateral security to raise money for their own purposes, although not called upon to make any advances to pay the bills of Hennequin & Co., all of which were protected and paid according to agreement. After the bills were all retired, Hennequin & Co. demanded a return of the collaterals; but Clews & Co. having failed in business, did not return them. Thereupon, to recover the bonds, or their value, and damages, this suit was brought in the Superior Court of New York City by Hennequin & Co. against Clews & Co. and the parties with whom they had deposited the bonds. The suit was dismissed as to the latter
parties, and Clews & Co., among other things, pleaded that on the 18th of November, 1874, they were adjudged bankrupts under the laws of the United States, and that a trustee was appointed, who succeeded to all their interest in said securities, and by a supplemental answer, filed afterwards, they pleaded their discharge in bankruptcy. The following is a copy of the substantial part of this answer, namely:
"The supplemental answer, as amended, of the defendants Henry Clews and Theodore S. Fowler to the complaint in this action, served by leave of the court first had and obtained, shows to the court that subsequent to the service of the original answer herein, in pursuance of the bankruptcy proceedings mentioned in said answer and the order of the court of bankruptcy, the District Court of the United States for the Southern District of New York, sitting as a court of bankruptcy, did make an order and grant to said defendants certificates of discharge under seal of said court on the 24th day of December, 1875, discharging the above-named defendants, and each of them, from all debts and claims which, by the Revised Statutes, title 'Bankruptcy,' are made provable against the estate of said defendants which existed on the 18th day of November, 1874, excepting such debts, if any, as are by said law excepted from the operation of a discharge in bankruptcy. . . . And the defendants further allege that the claim and indebtedness set forth in the plaintiffs' complaint herein, is one that was discharged by the operation of said bankruptcy discharge, and was provable in said bankruptcy proceedings, and was not one which was exempt from the operation of the bankruptcy statutes."
Copies of the certificates of discharge were annexed to the answer.
The parties thereupon went to trial, and the facts disclosed by the evidence were substantially in accordance with the above statement. The certificates of discharge of the defendants were given in evidence under objections, and the plaintiff asked to go to the jury on the question as to whether the debt was created by fraud, and also on the question whether it was a debt created by the defendants while acting in a fiduciary
character, both of which requests were refused, and the court directed the jury to render a verdict for the defendants, to all which rulings and directions plaintiffs duly excepted. Judgment being entered for the defendant, the plaintiffs appealed to the Court of Appeals of New York, which affirmed the judgment, and remitted the record to the superior court. The plaintiff sued out this writ of error.