Thompsen v. Diffenderfer

[RECEIVER-RULES OF EVIDENCE AND PRACTICE.] The court interposes, by appointing a receiver against the legal title, with reluctance, and fraud, or imminent danger, if the intermediate possession should not be taken by the court, must be clearly proved. Though the court will not, by the appointment of a receiver, deprive a prior mortgagee, having the legal title, of his right of possession, it will not permit him to object to such appointment, by any act short of a personal assertion of his legal right, and taking possession himself. The power of appointing a receiver, is a delicate one, and to be exercised with prudence and circumspection, yet, upon a sufficent cause stated and proved, the court will exercise the power, though, by so doing, the business of the defendants as merchants would be broken up. It was urged, that the defendants should be required to offer proof in support of some of the statements of the answer, though responsive to the bill; because such proof was within their reach, whilst it was inaccessible to the complainants. Held— That the rule, that the answer, when responsive to the averments of the bill, shall be taken as true, unless discredited by two witnesses, or one witness with pregnant circumstances, is not subject to the modification which the introduction of such a principle would involve.

[The original and amended bills in this case, were filed by certain of the creditors of the firm of Diffenderfer and Brothers, against the members of said firm, and Sampson Cariss and Catharine S. Diffenderfer, stating that the defendant first named had commenced business in the city of Baltimore about the year 1846, and by falsely representing the extent of their means, had obtained credit with the several complainants and others, to a large amount; that about the month of October, 1849, they ceased to pay their debts, and afterwards called a meeting of their creditors, but at the meeting, and at others subsequently appointed by them, and in fact ever since, had refused to exhibit to their creditors the state of their affairs, putting them off on various pretences ; that since their suspension they had refused to pay their creditors in whole or in part, but had been engaged in selling off their goods for cash, and appropriating the proceeds to their own uses, and in this manner wasting and dissipating their resources ; that they had sent beyond the reach of their creditors large quantities of goods; that they had stated that they had made no transfer of their stock of goods to any one, nor created any lien upon the same, whereas in fact they had made two several bills of sale of their whole stock of goods, the one to Sampson Cariss and the other to their mother, Catharine S. Diffenderfer, to secure them in large sums of money, alleged to have been loaned by them ; and that these liens were created whilst they were insolvent, and had no expectation of extricating themselves from their difficulties except by taking the benefit of the insolvent laws. That at the time of calling together their creditors, the defendants (as complainants were informed) admitted their insolvency; and that Catharine S. Diffenderfer, at the period of the execution of the bill of sale to her and for a long time previous, was in no condition, from her own want of means, to lend money. That defendants had been warranted for sums of money less than a hundred dollars, and although admitting the justice of the claims, they had interposed injurious and improper obstacles to a recovery thereof, so that with the utmost diligence, judgments could not be recovered against them before the month of May, 1850, by which time their assets would be wholly wasted. That since the execution of said bills of sale, the defendants had held the property conveyed by them, or a large portion thereof, and were selling the goods without accounting with the grantees or to any of the creditors, for the proceeds of sale. The bill concluded with a prayer for the appointment of a receiver, and for an injunction to restrain the defendants from, proceeding with the business of the firm. The Chancellor granted the injunction, but ordered the application for the receiver to stand over for the coming in of the answers. The answer of the defendants, Diffenderfer, admitted that they began business as grocers in the city of Baltimore, in 1846, and had since continued to prosecute the same, but denied that they had ever falsely represented to the complainants the state of their affairs, or obtained credit from them or others thereby. They admitted their liability to the complainants, but denied that they had ever ceased to carry on their business, until restrained by the injunction, or had ever discontinued the payment of their just debts and liabilities, having, on the contrary, applied their receipts to the payment of large sums to their most importunate creditors. They admitted having called a meeting of the creditors of the firm, their object having been to procure an extension of time from them, which they believed would have relieved them from their embarrassments, and stated, that at the request of some of the creditors present, they undertook to prepare an exhibit of the state of their affairs, but that some of the complainants to whom they showed the result, pronounced their statement false and fabricated; whereupon they offered to have their books examined under the supervision of one of the clerks of the complainants, and had always been ready to do so ; that their books have ever been open to the inspection of their creditors, and that many of them, not parties to the bill, to whom they had been shown, expressed a willingness to continue their business relations with them. The defendants stated, that they were perfectly solvent, and had been so, ever since they began business, and never did admit the contrary to any one, nor did they ever state that they had created no liens upon their stock, but averred that some of the complainants, at least, had notice of said assignments immediately after they were made, that said assignments were not made in fraud of creditors, or with intent to take the benefit of the insolvent laws, but were made to secure the grantees on account of loans made by them to the defendants, and in compliance with promises made them by defendants, to secure them in that way whenever they should request it; and that it was only at the urgent request of the grantees that they had executed the bills of sale. They stated that they had been selling off their goods prior to the injunction, but without any deviation from the usual course of business, and had applied their receipts to the payment of their debts, or the replenishing their stock in trade; and that they had been pursuing a course of rigid economy in their private expenses. That they had not at any time sent out of the city of Baltimore, any portion of their stock, with the intent to diminish the same or defraud their creditors. That their mother was not, nor had' she been, in embarrassed circumstances, unless produced by the assistance she rendered to them; and that instead of her being supported by them, she had always refused to charge them any thing for their board, &c. They admitted that they had been warranted for various sums under one hundred dollars, and had procured the removal of said cases from the jurisdiction of the magistrate’s courts, and had complied with such requirements as were necessary to secure the advantages of such proceedings, but denied that they had admitted that the claims for which they were warranted were justly due, or that they intended to interpose improper obstacles to their recovery. They stated that it was true, that if any of their creditors were to bring actions at law against them, they could not, by using the utmost diligence, obtain judgments thereon before the month of May, 1850, but that none of the complainants had brought such actions, and that the assets of the firm were not being wasted in the mean time. They admitted the retention of possession of the property conveyed to Cariss and Mrs. Diffenderfer, with their permission, but denied that the proceeds of the sales made in the due course of their business were not paid over to the grantees or other creditors. They stated that their stock in trade consisted of perishable articles, and that great losses to them would be produced by a continuance of the injunction ; and that no injunction bond had been filed by the complainants. The answer of these defendants having been filed, an order was passed by the Chancellor, requiring the complainants to file an injunction bond, and so far modifying the injunction as to permit the defendants to sell their goods according to their usual course of business, and make such new purchases as were necessary, requiring them first to give bond to render an account of'such sales and purchases. Testimony was afterwards taken by the complainants to support the allegation of their bill, and the ease having been heard on the application for a receiver, and the motion to dissolve the injunction, the Chancellor delivered the following opinion:]