National Bank v. Warren, 96 U.S. 539 (1877)

U.S. Supreme Court

National Bank v. Warren, 96 U.S. 539 (1877) National Bank v. Warren

96 U.S. 539

APPEAL FROM THE CIRCUIT COURT OF THE UNITED

STATES FOR THE SOUTHERN DISTRICT OF NEW YORK

Syllabus

The mere nonresistance of a debtor to judicial proceedings in which a judgment was rendered against him, when the debt was due and there was no valid defense 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.

The Tenth National Bank of New York, having an undisputed

Page 96 U. S. 540

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.

MR. JUSTICE HUNT, after stating the case, delivered the opinion of the Court.

This action goes upon the theory that the mere nonresistance of a debtor to judicial proceedings against him, when the debt is due and there is no valid defense to it, is the suffering

Page 96 U. S. 541

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 circumstance 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.