118 F. 626 | U.S. Circuit Court for the Southern District of Georgia | 1901
The questions for determination here have been presented in a full hearing upon an application for the appointment of a permanent receiver in the above-stated case. Th.e case itself was originated by a creditors’ bill brought by judgment creditors of Richard Hobbs and A. W. Tucker, formerly conducting a banking firm under the name of Hobbs & Tucker. The bill is intended to reach and subject to 'the judgment debts of the plaintiffs certain lands and other assets which it is alleged were fraudulently conveyed, and are fraudulently protected from the liens of said judgments.
It is contended by the respondents that the jurisdiction of the court to redress the injury complained of has been nullified by the bankruptcy act of 1898, and the voluntary petition in bankruptcy filed by Hobbs & Tucker. Now, it cannot be intelligently denied that the court had jurisdiction when the bill was brought. The remedy in equity sought ^s not only the one most usually resorted to by creditors holding executions with return of nulla bona under similar circumstances, but it constitutes the most ancient foundation of jurisdiction of equity courts. Bump, Fraud. Conv. § 532, p. 525. The return of nulla bona is conclusive of the fact that the remedy at law no longer exists. Jones v. Green, 1 Wall. 330, 17 L. Ed. 553. It is true, moreover, that if the contention of defendant’s counsel that the proceeding here has abated because of the voluntary petition in bankruptcy is true, it follows that the defendant by his own act effectually precludes all relief in the courts of the United States, and the doors of these courts are effectually closed to creditors who may have occasion to apply to them to enforce judgments against fraudulent transfers by the debtor of his property. Plowever clear the right, however glaring the fraud, it is then competent for a defendant who has made fraudulent conveyances to destroy this valuable power of a court of equity, secured to nonresidents by the constitution of the United States, by merely filing a voluntary petition in bankruptcy. If this power resides in the debtor, he can exercise it at any stage of the case; and, no matter what the court has done, or how far the cause has proceeded, the lawfully acquired jurisdiction must be relinquished, and the plaintiffs, at their own expense, denied the bene-*
“Judgment, execution, and a return of nulla bona place the judgment creditor in a position to assail conveyances made by the judgment debtor to defraud his creditors; and the filing of a bill for that purpose, and the service of process in the action, create a lien in equity upon the lands described in the bill, and entitle the plaintiff to priority over other creditors. The lien thus created is not displaced by the subsequent bankruptcy of the judgment debtor, but is protected by the bankrupt act.”
Again:
“Where an action is pending in a state court of competent jurisdiction to enforce a specific lien on property of the debtor, the subsequent bankruptcy of the debtor does not devest the state court of its jurisdiction to proceed to a final decree in the cause, and execute the same. The assignee in bankruptcy may intervene in such action, but the jurisdiction of the state court, and the validity of its decree, is not affected by his failure to do so.”
The court continues:
“The judgment creditor filed his bill, had a subpoena served, and thereby acquired a lien, before the commencement of proceedings in bankruptcy. He did not prove his debt against the estate of the bankrupt, or in any manner voluntarily submit himself to the jurisdiction of the bankrupt court, but was allowed to proceed to enforce his lien without objection from that .court or its assignee. In this state of the case, the state court had a right, and it was its duty, to proceed with the cause. Its jurisdiction was complete, and its decree and the title acquired under it are as valid and effectual as if the bankruptcy of the defendant had not intervened.”
The following cases are cited, and fully sustain .the ruling of the court: Sedgwick v. Menck, 6 Blatchf. 156, Fed. Cas. No. 12,616; Clark v. Rist, 3 McLean, 494, Fed. Cas. No. 2,861; In re Davis, 1 Sawy. 260, Fed. Cas. No. 3,620; Goddard v. Weaver, 6 N. B. R. 440, Fed. Cas. No. 5,495; Second Nat. Bank v. National State Bank, 10 Bush, 367; Davis v. Railroad Co., 1 Woods, 661, Fed. Cas. No. 3,648; Norton’s Assignee v. Boyd, 3 How. 426, 11 L. Ed. 664; Townsend v. Leonard, 3 Dill. 370, Fed. Cas. No. 14,117; Johnson v. Bishop, 1 Woolw. 324, Fed. Cas. No. 7,373; Reed v. Bullington, 49 Miss. 223; Waller’s Lessee v. Best, 3 How. 111, 11 L. Ed. 518; Marshall v. Knox, 16 Wall. 551, 21 L. Ed. 481; Eyster v. Gaff, 91 U. S. 521, 23 L. Ed. 403. The jurisdiction of the court is complete.
The allegations of the bill are very comprehensive and, for the purposes of the interlocutory decree sought, may be sufficiently gath■ered from the .discussion following.
The original complainant is the National Bank of the Republic of New York. The Chicago Packing & Provision Company of Chicago, 111., has intervened and joined as complainant; and subsequently the •Chemical National Bank of New York and Mrs. Annie E. Hamlet, a citizen of -the same state, were also made parties complainant by
“Where a party has the means in his power of rebutting and explaining the evidence adduced against him, if it does not tend to the truth, the omission to do so furnishes a strong inference against him.”
In Wardour v. Berisford, 1 Vern. 452, cited in Broom, Leg. Max. p. *903:
“An account of personal estate having been decreed in equity, the defendant charged the plaintiff with a debt as due to the estate. . It was proved that the defendant had wrongfully opened a bundle of papers relating to the account, which had been sealed up and left in his hands. It further appeared that he had altered and displaced the papers, and that it could not be known what papers might have been abstracted. The court, upon proof of these facts, disallowed defendant’s whole demand against the plaintiff, although the lord chancellor declared himself satisfied, as, indeed, the defendant swore, that all the papers intrusted to the defendant had been produced; the ground of this decision being that in odium spoliatoris omnia prsesumuntur.”
Thus, “if a devisee under a first will destroy a subsequent will, it will be presumed, as against him, that the first will has been revoked.” Harwood v. Goodright, Cowp. 87, decision by Lord Mansfield. It is true that this presumption only arises where there is suspicion of fraud, and it is also true that, where the deficiency of evidence arises from negligence of the party who ought to have produced it, he who is accountable for that negligence cannot be benefited by it. Powell, Ev. *50. Nor can it be with justice concluded in this case that the members of the firm of Hobbs & Tucker were unaware of ■the importance of these books. The bank closed on June 10, 1893. The books were proven to be in existence on December 25th of the same year. The senior member of the firm, Richard Hobbs, has been for many years one of the most well known and experienced lawyers in the state; also over a large part of that time occupying judicial stations of importance. He had amassed a large fortune, and had multitudinous interests. The other member of the firm, A. W. Tucker, was an expert bookkeeper. Mr. Hobbs immediately after the failure was given possession of all the assets of the insolvent firm, all the individual property of A. W. Tucker, and was charged with the duty of winding up the affairs of the bank and of
What were the liabilities of the insolvent firm of Hobbs & Tucker on the date of the failure, namely, June io, 1893? The answer of Richard Hobbs states the amount to be $225,000. In the absence of the books, this statement can be neither verified or disproved. Next, what were the assets? It is not disputed that these were very large, but what they consisted of, or what disposition was made of them, or what was their aggregate amount, for the same reason, cannot be precisely determined. We have the right to presume that their face value must have exceeded the liabilities, for the banking firm continued to receive deposits up to the time of the failure, and, if its assets had been less than its liabilities, it would have been so plainly insolvent that to have received deposits would have made its officers guilty of felony. Pen. Code Ga. par. 207. Laws Ga. 1878-79, p. 170. And of the felony they are presumed to be innocent. There can be no doubt that deposits were received up to the last moment. This appears from the memorandum cash books. Besides, the defendants swear that they believed their assets were largely in excess of their liabilities. In fact, in March before the failure in June, the firm of Hobbs & Tucker wrote two letters, both of which are in evidence,—one of them to Charles E. Wilson, dated March 16th, and the other to Stedman, Stern & Wheeler, Boston, Mass., dated March 15th. In both of these letters they state that they had in the business at the time $50,000, and the property owned by Richard Hobbs individually, outside of the business, on which there was no indebtedness at all, is stated to be $200,000. This evidence is clearly admissible. The defendants cannot be heard to deny its truth. Besides, the general ledger was then in existence, and on this the
Estimating the Ragan properties at from $25,000 to $35,000 in value, the next inquiry will be, what has become of $40,000 or $50,000 of valueless assets which the defendant Richard Hobbs tells us was the amount which proved uncollectible? The assets having been shown to exist, the court cannot accept silence as to their disposition as proof of worthlessness, especially in the absence of the books which deprive the parties of all opportunity of examining the truthfulness of that allegation. If, however, we should accept $75,000 as valueless, as stated by the defendant Hobbs, there would still remain a balance of assets of $194,000. Much is said of losses to the insolvent firm on account of what are termed “rediscounts.” This expression has represented throughout the hearing transactions of the following character: Hobbs & Tucker would sell in Eastern markets the notes and obligations made to them by their immediate customers. They indorsed such evidences of indebtedness, and, of course, in case the original maker failed to pay, became liable themselves to the purchaser. The creditors who hold now rediscounts are the National Bank of the Republic, Henry Talmage & Company, the Yale National Bank, the Chemical National Bank, and the Savannah Banking & Trust Company. The aggregate amount owing to all of these creditors, except the National Bank of the Republic, is $26,651.70 principal. Of this, $1,115.96 owing the Savannah Bank & Trust Company is an open account. With regard to the claim of the National Bank of the Republic, it appears that after the failure certain lands which stood in the name of A. W. Tucker in Worth county, and one-half interest in certain lands in Decatur county owned by Hines & Hobbs, a law firm composed of R. K. Hines and the defendant Hobbs, were conveyed to the bank as a further security for the debt. These lands were sold for $2,961.81, and the amount credited on the debt, leaving a large balance due the bank. The evidences of this indebtedness on the part of the original makers and Hobbs & Tucker, guarantors, were sent by the National Bank of the Republic to Richard Hobbs, to be collected by him. in the capacity of their attorney at law. The makers were principally
It also appears that A. W. Tucker, one of the partners, owned-certain property individually. Some of this was conveyed by him. to the creditors of Hobbs & Tucker. The great bulk of his property, however, shortly after the failure of the bank, was conveyed to Richard Hobhs to be used in paying debts of the firm of Hobbs & Tucker. Among these were 5,300 acres of land lying in Baker and Mitchell counties, before referred to as the Ragan lands. Tucker also conveyed to Richard Hobbs about the same time 405 acres of land in Dee county, and an undivided half interest in 1,225 acres more. These 405 acres Richard Hobbs on October 20, 1893, conveyed to William H. Newsome for $2,000; taking a mortgage to secure the purchase price, to be paid in five annual payments. Mr. Hobbs, in one of his affidavits, states that these Newsome notes were assigned to a Mrs. Du Pont and to Reich & Geiger. It appears, however, that only one of them (a note for $350) was assigned to Mrs. Du Pont, and that to Reich & Geiger was for only $237.91, as-appears from the list of debts of Hobbs & Tucker “settled with the assets of the bank after the failure” referred to above. These two payments to Mrs. Du Pont and Reich & Geiger amounted to only-
At the time of the failure of Hobbs & Tucker, Mr. Hobbs owned in his own right a large amount of property. This included brick warehouses and other valuable property in the city of Albany, and many thousands of acres of plantation and timbered lands in Dougherty, Baker, Decatur, Mitchell, Lee, Worth, and Calhoun counties, and other counties in this state, and also some lands in Florida. Without enumerating in detail the numerous properties in several counties which he exclusively owned and in which he had a half interest, it plainly appears that his holdings were worth, on his tax valuation, $89,641.50; and adding to this one-half interest in Florida lands, the worth of which appears from the consideration expressed
These transfers to Mrs. Hobbs are supported by the respondents upon the grounds—First, that Hobbs & Tucker owed her money at the time of the failure; second, that Richard Hobbs owed her money at that time; third, that she paid or.agreed to pay off the debts of the firm, and, under a circuitous and uniform system of transfers, became, as a result of such agreement and alleged, payment, the purchaser of these properties, not from Richard Hobbs himself, but from the person or creditor to whom he should convey it as part of
This brings us to the inquiry, was there any such indebtedness on the part of Hobbs & Tucker to Mrs. Annie T. Hobbs as would súpport the conveyance of those large properties to her? The answer of Richard Hobbs directly and positively states that at the time of their failure Hobbs & Tucker were indebted to Mrs. Hobbs in the sum of $7,550; that, of this sum $2,140 was a note on Hayes & Heath, collected by Hobbs & Tucker “the very day that their doors were closed”; that Hobbs & Tucker used the money that day without the knowledge or consent of Mrs. Hobbs; that they did not pay her this money,' but paid it by transferring to her a number of notes which belonged to them, and which they estimated to be worth $4,150. If the original indebtedness was $7,550, this payment of $4,150 to settle a $2,140 debt would leave, it seems, but $3,471.98 due from Hobbs & Tucker to Mrs. Hobbs. This reduction of the firm’s indebtedness to her is modified, however, by the further statement of Hobbs that the $4,150 of notes which were given to her in lieu of the $2,140 were used by him in paying up some creditors of Hobbs & Tucker. Who these creditors were, his evidence does not inform us, but he states that he gave Mrs. Hobbs another note of $2,000 for the $4,150 of notes. A court seeking the truth finds it difficult to accept any such statement as this, in the face of the balanced books of Hobbs & Tucker, which show that five days before the failure Mrs. Hobbs drew out every dollar she had in bank. It is true that Hobbs & Tucker did collect $2,140 from Hayes & Heath for Mrs. Hobbs. This collection, however, was not on the day that the doors were closed, but it was collected on May 19th, more than three weeks before the day of failure. This in fact appears on the memorandum cash book of the bank. No bank officer would have
We must now consider the contention that Richard Hobbs individually owed his wife the sum of $18,270.45, and that the conveyances to her should be sustained in consideration of this alleged indebtedness. This amounit is made up largely of notes which it is claimed that Richard Hobbs collected at various times, and, instead of delivering the proceeds to his wife, retained them until after the failure of the bank, and then charged himself up with the aggregate sum, with the interest annually compounded on each note. It is to be observed that none of these notes were produced in evidence, and yet, with transactions so numerous, it would seem readily competent, by process directed to the various holders of these paid or canceled notes, to have produced them before the court. This might have afforded evidence of cogent and valuable import. Indeed, on the hearing in -the state court before Hawes, auditor, Richard Hobbs, after enumerating certain notes, testifies as follows;
“These notes I have mentioned all appear on the bill book from time to time according to the dates. Wherever I bought a note for her, I put it down on the book in her name. The entries were all made on the book long before I had any intimation that there was any trouble coming. The indebtedness to my wife is positively correct.”
It is, however, true that in the subsequent examination in bankruptcy before Shelby Myrick, referee,—had since the cause under consideration was begun,—the following examination, with the answers of Mr. Hobbs, appears, and is now in evidence before the court:
“Q. You said this morning that you owed your wife a good, large sum of money. Have you any book or record that would show accurately how much you owed her on the 10th of June, 1893? A. No, sir; I tried to make up a statement from memory at that time, and swore to it before the auditor, Mr. Hawes.”
And further:
“Q. Where are the books that show your transactions with your wife? A. I told you that I did not keep any books with her. Mr. Wimberly, you are a funny fellow. Q. I understand you to say that when the auditor's hearing came on, in 1896, that you then sat down and figured up this account as to what you owed your wife from recollection? A. Yes, sir.”
To demand that the court should accept this contradictory testimony to establish an alleged indebtedness between husband and wife, much of it covering a period of 13 years, all of it bearing compound interest, with no written evidence, in the nature of books, notes, or other evidences of indebtedness, is certainly unusual, and as certainly deserves the most critical scrutiny. The alleged principal due from Richard Hobbs to Mrs. Hobbs is $13,372.99. Of interest alleged to be due there is $4,897.46. The respondent contends that each sum of his wife’s money which he invested for her by buying negotiable notes during all the period mentioned is to be charged against himself, from the date each note fell due to the date of the
It will, perhaps, not be justifiable, in view of the necessarily great length of this opinion, to discuss in detail a number of other items in this account where Mr. Hobbs has charged himself with moneys alleged to be due to Mrs. Hobbs to make up the sum of his alleged indebtedness to her, in nearly all of which his inaccuracy, proceeding perhaps from infirmity of memory, is equally apparent. We, however, call attention to a few instances: With regard to the note of Hoyt, it appears from the books that Mrs. Hobbs was paid principal and interest. With regard to the note of Alford & Sloan, it appears that Mrs. Hobbs had only a half interest in the land sold, and one-half the purchase price, together with interest, is credited to her on the books of the banking firm. Hobbs charges himself with the proceeds of notes alleged to be due to Mrs. Hobbs by one M. M. Gambetti, when it clearly appears from the testimony that Mrs. Hobbs did not own the land sold to Gambetti. It further appears 'from an analysis of the interest charges Mr. Hobbs makes against himself in Mrs. Hobbs’ favor that, even if it should be conceded that- she did not receive the proceeds of the notes which appear in her deposit account, he has calculated interest upon a fallacious basis, and compounded it from the 1st of each January, when in fact the notes were paid at various periods throughout the years covered by the transactions referred to in his account. It further appears that the total deposits of Mrs. Hobbs with Hobbs & Tucker amounted to $15,697.74, and that before the failure of Hobbs & Tucker the last balance on this account, amounting- to $2,155.14, as we have seen, was drawn by her from the bank. It is not contended that any of this money was paid by Mrs. Hobbs to Mr. Hobbs, but, on the contrary, he distinctly testifies that he collected various sums which he claimed to be due her in his statement, and kept the money in his
The materiality of this inquiry, which has thus resulted in what seems a demonstration, under the law governing such cases, that this indebtedness claimed by Mr. Hobbs as due his wife was fictitious, will more distinctly appear from the subsequent inquiry into the validity of those transfers by which his great and valuable holdings of real estate finally reached the possession .and control of Mrs. Hobbs, to the great injury of his creditors. Take, for instance, the transfer to C. W. Arnold of 2,1663^ acres in settlement of certain debts amounting to $6,343.96. Arnold on the same day agreed to convey these lands back to Mrs. Hobbs at the same price, but this is not the whole transaction. Hobbs had transferred to C. W. Arnold the Albany Inn and the Rawson Corner property, to which he held title, for $5,000, and this Arnold also contemporaneously agreed to convey to Mrs. Hobbs at the same price; but in the latter transaction it is not pretended that Mrs. Hobbs paid any debt of Hobbs & Tucker. Mr. Hobbs contends that he paid $5,000 for Mrs. Hobbs, but that it was paid by him on the alleged debt of $18,270.14. We have seen, however, that there was no such debt. This transaction is a typical one. Nothing can more clearly demonstrate the propriety of this bill to redress the wrongs of the creditors than certain testimon) of Arnold on cross-examination, and now in evidence here:
“Q. What was the agreement between you and Mrs. Hobbs at the time you bought this property as to who you should deed it to? A. I think that a day or two afterwards (I do not remember whether the same afternoon or the next day) I made Sirs. Hobbs a deed, and she made me her note. Q. Was it not agreed between you and Hobbs at 'the time you bought this property and took this deed that you should make a deed to it to Mrs. Hobbs, and that she should give you her notes and mortgage for it? A. I cannot swear positively that there was an agreement of that kind. Possibly the matter was discussed and talked about. Q. You sold it to her on credit for $5,500? A. Yes. sir. Q. Was it not agreed at the time the sale was made to you, as a part of the sale, that you should sell this property to her, and deed it to her, and take her note and mortgage? A. I deeded it to her, and took her note. Q. Was not that the agreement at the time the trade was made with you? A. I do not think there was any agreement of that kind entered into. Q. Was not that the talk between you and him? A. There may have been some talk of that kind,—that I would deed it to her and she give me her notes,—but there was no absolute agreement. Q. Did you not sell it back to her on the same day? A. I do not remember whether it was the same day or the day after. The papers will show. Q. Why did you buy five thousand dollars’ worth of property, and pay five thousand dollars cash on it, and then turn right around and sell it on long time for five thousand five hundred dollars? What was your object in doing this? A. I and Mrs. Hobbs and the Hobbs family had been friendly a long time, and I always try to help my friends when they get in a tight place in any way„*646 Q. You did It, then, to befriend Mrs. Hobbs? Was that It? A. That is the reason I purchased the property. Q. So she could get it? A. I do not know that I put it that way. I gave you the facts. We had been friendly,—Mrs. Hobbs and the Tarver family,—and I always try to help my friends when I can do it in a way that is right and proper. Q. You did this for that reason,—to help your friends? A. Well, five thousand dollars is some money, and I do not stick money down foolishly. Q. You did this because you were friends? A. You ask me my motive, and I give it to you. That is the reason I bought the property. Q. You say the city assessed the Rawson corner at eight thousand dollars? A. I said that was my recollection. I may be wrong. Q. Was your check on the bank for that money paid? A. I took the check up with the cash money. Q. It has never been paid back to you? A. No, sir; I hold Mrs. Hobbs’ note for it yet. Q. Was it paid to anybody for you,—that five thousand dollars? Was it paid to anybody else, or your wife, for you or for them,—that five thousand dollars that you paid Hobbs? A. Not to my knowledge. Q. Would you know it if it had been paid to your wife? A. Possibly I might, and possibly I might not. Q. Was there any agreement that that money should be paid to anybody else, between you and Hobbs, or Mrs. Hobbs,—that five thousand dollars,—or between you and any one else for them, or any one else, that that money should be paid to your wife or any one else? A. You don’t want me to state anything I have heard, do you? Q. Was there ever at any time any agreement? A. Define an ‘agreement,’ please. Q. It is just talking. (At this point defendants’ counsel asked to be allowed to consult, which they did for several minutes.) Q. Do you want me to ask the question again? Was there ever any agreement or any talk or any incident at any time between you and Oapt Hobbs or Mrs. Hobbs, or any one for them, that this money that you paid for his city property should be refunded to any one? A. If I understand the word ‘agreement,’ it means that it takes two parties to constitute an agreement; that I must make a request, and the other party must make an assent to my proposition, and, if one requests and the other assents, that is an agreement. If I make a request of you, and you do not assent, or keep your mouth shut, say nothing, and a matter occurs, you do not understand that to be an agreement, do you? • Q. Yes, I do, if I do not say anything. A. Have not you frequently had that occur when you were deceived? Q. Yes; and I have been deceived when they proposed, as well. Tell the court exactly what occurred on that line. A. I gave the money to- Capt. Hobbs. Q. Tell what happened at that time. A. I gave the money to Hobbs, and took up the check. Q. What was he to do with the money? A. As far as an agreement between me and him that he was to do something with it, and on your definition of the word ‘agreement,’ I did not see him do anything with it. Q. What did he say to you he would do with it? A. I think he said he would eventually arrange the matter so the money would accrue to me. Q. How? A. By coming through some channel. Q. What channel? A. Through some of his folks or some of my folks. Q. How was he to do it? A. I presume I left that with him. Q. What did he say to you he would do with it? A. I think he left me to understand, without saying in so many exact words, what he would do. I think he left me to draw conclusions as to what he would do. Q. What was that? A. As I said to you, that the money would accrue to me in some way through some of his family or some of my family. Q. He was to deliver it to them for you? A. No, sir; I do not think that he was absolutely to deliver it. Q. Did you pay him the money to keep, or was it to come hack to you? A. I paid him the money for that check. Q. Was he to keep it, or was it to come back to you or your family? A. I presume it was to come back to me in some way. Q. Was not that the understanding? A. There might have been that understanding. Q. Do you know now what became of that amount of money? Have you been without it ever since then? A. I have not been without an equal amount of money since then. Q. I mean this particular five thousand dollars. Where has that been since you paid it to him? A. I have had some money since that date. Q. Representing that five thousand dollars? A. I get some money every once in a while from my wife. Q. Have you told all you know about that five thousand dollars, and where it went to, and has*647 been ever since? A. No, sir; I do not think I have. Q. Tell it all. You are sworn to tell the whole truth. A. I have had the use of the money, or a large portion of the money. I cannot tell you where it is now. The money is invested and loaned out. Q. By you? A. Some of it has been. Q. What have you done with the balance of it? A. My wife has got a little, there is some in the bank, and a little in the guano business. Q. You and your wife have had the use of it ever since? A. Yes, sir. Q. What are you holding that note and mortgage for? You have the money, you say. What was the understanding about your holding the note and mortgage? A. There has been no understanding about my holding the note and mortgage. Q. They have never called on you for the note and mortgage? A. No, sir; they have not. Q. Have you got the note and mortgage yet? A. I know I have the note, and I think I have the mortgage. Q. They do not owe you anything on it? A. I think the note could be collected. Q. You have got the money that it represented? A. I have got some mofiey. Q. Have not you got some money that that note and mortgage represents? A. Do you mean entirely? Q. The money you let go that covers that transaction. What you are holding that note and mortgage open for? A. The note has not been paid. Q. You have answered that you and your wife had had that five thousand dollars all the time. A. I did not say all the time. I said some time since then. Q. How long since then? A. I do not remember exactly. Q. Was it a day? A. It may have been a day, or it may have been longer. Q. What are you holding them for? A. It never has been paid. Q. Yet you have had the five thousand dollars from within a day of the time you paid it out. What would you call payment of it? A. A note is not paid until it is canceled. Q. If I have got your note, and you give me the money, have not you paid it? A. It is a negotiable paper. Q. Your construction is that if the note is not canceled it is not paid? A. I believe that is the legal construction. Q. Do you hold any bona fide debt against Mrs. Hobbs that you expect to collect? A. I should not press it. Q. Do you hold any bona fide debt against her that you expect to collect? A. I cannot answer that. Q. It is a plain question. Do you hold any bona fide debt against Mrs. Hobbs that you expect to collect from her? A. No, sir; I do not.”
It, perhaps, did not occur to this witness, in his effort to aid his friends, that he was lending his assistance to hinder, delay, and defraud creditors, and that, however amiable may have been his motive, the transaction could not be deemed amiable by a court intrusted with the administration of justice.
There were two transactions with John A. Davis. Hobbs & Tucker were indebted to Carhart, an intimate friend and a favored creditor of Mr. Hobbs. A valuable piece of property was conveyed to Mr. Davis by Mr. Hobbs for $5,000. Davis paid $3,000 in money, and gave his note, payable to Capt. Hobbs, for $2,000. This was done with the understanding that Mrs. Hobbs should buy the property from Mr. Davis. This arrangement was carried out, and repayment was made to Davis to the' extent of $2,000 by returning him his note for that amount. This note, it was contended, was given to Mrs. Hobbs by Mr. Hobbs as a partial payment on his suppositious debt of $18,000. In the other transaction between the same parties, Mr. Davis paid to Mrs. Hobbs $4,000, which Mr. Hobbs ostensibly paid to Mrs. Hobbs on the alleged debt of more than $18,000, and this money Mrs. Hobbs handed back to Davis, whereupon Davis reconveyed to her. It will be observed by these transactions while one favored creditor may have been paid $3,000, yet Mrs. Hobbs is made to receive $6,000 on an indebtedness to her which is not shown to exist, and highly valuable properties, which ordinarily would be subject to the creditors of Mr. Hobbs, have been hitherto protected from
A most vital inquiry in this connection is to ascertain the source of the fund with which these partial payments to favored creditors were made, with results so beneficial to Mrs. Hobbs, and, as a consequence, to her husband. It nowhere appears in the evidence that Mrs. Hobbs at the time of the failure had any such sums of money as were paid out in these transactions. She returned no money for taxes as the law requires. She realized no money from the sale or mortgage of property by her individually. The rentals of her property amounted to only about $1,400 per annum, from which must have been deducted taxes, insurance, etc. On the contrary, Mr. Hobbs had not only his professional income, but an income of $10,000 per annum from his properties; and it will be seen that the considerable sums realized by him from turpentine leases, sales of sawmill timber, farm operations, etc., his professional fees, and salary as judge, went into the account of Mrs. Annie T. Hobbs. Nor can it be forgotten that the surplus of assets of Hobbs & Tucker remaining unaccounted for were not only ample to have paid every dollar which Mrs. Hobbs may have offered to obtain the title of Mr. Hobbs’' real estate in these circuitous transactions, but are, indeed, sufficient to pay every debt which the parties complaining are now seeking to enforce. It is, however, said that the creditors refused to take the lands, which, as we have seen, were finally transferred to Mrs. Hobbs, and that the plan he adopted was the only feasible method by which he could hope to pay the debts of Hobbs & Tucker. Upon this subject it will suffice to say that they were under no obligation to accept a tender of real estate in satisfaction of their debts. Nor does it appear that .the price at which he made the offers was anything like as moderate as that for which it is alleged Mrs. Hobbs secured these lands. For instance, it appears from the evidence of Askew that he offered the Malone place to him at $3 an acre. Mrs. Hobbs afterward bought this at cents per acre. Nor does it appear from Askew’s affidavit that he refused to take the land unless Mrs. Hobbs-would agree to buy it back at the same price, but he swears that this was suggested to him by Mr. Hobbs, and he was compelled to assent to this condition in order to obtain a settlement of his debt. Nor does it appear that the larger creditors of Mr. Hobbs, some of whom are parties to this bill, were disposed to be grasping with him in his difficulties. We find some of these leaving their claims in his hands as their attorney, and there they remained until the members of his family brought legal proceedings to defeat the enforcement of the claims which they had intrusted to him for collection. During all this period of trustfulness and indulgence on the part of his creditors, it is clear that he was diligently putting every value he pos
With regard to the conveyances of valuable city lots in Albany to Mrs. E. G. Tarver, it will suffice to say that, for the purposes of this hearing, the evidence seems clearly to indicate that they belong to the same general scheme to hinder, defraud, and delay creditors. This property is described in a deed from Richard Hobbs to Mrs. E. G. Tarver dated August 14, 1893, and comprises half of north lot No. 88, also lots 90, 92, three-fourths of lot 94, all of lot 95 on South street, and lots 53, 55, 57, and 59 on Mercer street. The consideration of this deed was ostensibly $5,000. Contemporaneously with its execution Mrs. E. G. Tarver executed to Richard Hobbs a mortgage upon the same property to secure notes of even date, payable to Richard Hobbs or bearer, in the sum of $1,666.66 each, with interest from date, payable one, two, and three years from date, respectively. Two of these notes were sent to the Yale National Bank September 28, 1895, and neither of them, or any part thereof, has been paid. It is claimed by the defendant Mrs. Tarver that the other note has been paid by her, but it is not shown how or when payment was made. It clearly appears from the evidence that, at the time of the failure of Hobbs & Tucker, Mrs. Tarver had no monev to her credit in any of the Albany banks, and had never had a deposit with either of them', although Albany had been her home for a number of years. Her entire deposits with Hobbs & Tucker for two years prior to the failure had amounted to only $409.55, and at no time after October 28, 1891, had she to her credit with Hobbs & Tucker more than $140.05. She returned no money for taxes in 1893. If she had made any payment on this alleged purchase from Richard Hobbs, it never got into his bank account. The execution of this conveyance was a little more than a month after the failure of Hobbs & Tucker, and Mrs. Tarver’s failure to pay either one of the notes given for the purchase of this property, and her close relationship with Richard Hobbs, —she being his mother-in-law,—taken in connection with what follows, seem to indicate with distinctness that this transaction was a part of the same general scheme to defraud. The other transaction with
“I told him he must he mistaken; that there was some on the records in his name. He asked me to let him see it, and I took him to the hook and showed it to him. He seemed to he surprised, and went away whistling, and said no more about it. He said he did not have any real estate, and I took him to the records and showed him the deeds. I think it was some city property. If I remember right, Oapt. Hobbs made the deed to him, though it may have been Hobbs & Tucker.”
There are other transactions with other parties, relatives, friends, and business associates, fully described in the bill and amendments, to the same general character,, all marked by the same general features, and all of which the evidence, we think, plainly indicates that they were conveyances made to hinder, delay, and defraud creditors of Hobbs & Tucker and of Richard Hobbs.
There is a great deal of evidence in the extensive record which relates to the particular transactions. This evidence bears out in almost every particular the conclusions which the court has drawn from the general survey of the case hereinbefore taken. It is not deemed essential upon this hearing to examine more in detail than we have already done the evidence relating to each transfer attacked as fraudulent, and intended to hinder and delay creditors. The opinion of the court, indeed, upon this hearing, is not conclusive of the rights of the parties, except in so far as the appointment of a permanent receiver may affect them. We have very anxiously and carefully considered the evidence, the comprehensive and painstaking oral arguments of counsel and the elaborate briefs and reply briefs which have been filed. With every disposition to accord the distinguished and aged lawyer, soldier, and jurist who is the principal defendant in this case every right to which he is entitled, we are nevertheless, by the overwhelming character of this evidence, constrained to conclude that the great mass of his property has been conveyed to his wife with the intent to hinder, delay, and defraud his creditors, and that such consideration as was nominally paid for such conveyances was, in the main, derivable from the assets of the insolvent firm of Hobbs & Tucker, which assets the creditors were equitably entitled to apply to the payment of their debts. The appointment of a receiver is tantamount to an equitable levy upon all of the property thus subject, or which in contemplation of equity should be subjected, to the satisfaction of the demands of creditors. No other remedy, under such circumstances, is so adequate; no. other, indeed, adequate at all. It may be possible that upon the final hearing of the cause, if that stage in the proceeding is reached, the examination of all the witnesses on oath, and the production of evidence now not before the court, may induce a different conclusion. As our duty, however, now appears, the appointment of a permanent