Avery v. Hackley

ERROR to the Circuit Court for the Western District of Michigan.

Avery, assignee of Blake, a bankrupt, brought trover in the court below against Hackley & Co. to recover the value of certain saw-logs, alleging that they had been transferred by the bankrupt to the said Hackley & Co. in fraud of the Bankrupt Act.

The case, as found by the court on a waiver of a jury, was thus:

Hackley & Co. were owners of saw-mills and engaged in sawing logs, and so making boards from them. Blake was a lumberman without capital, and engaged in buying logs and bringing them to saw-mills to be thus sawed into boards.

On the 25th of January, 1868, a contract was made between the two parties, by which Blake, on the one hand, agreed to deliver at the saw-mill of the defendants 18,000,000 feet of saw-logs to be sawed into boards, and by which Hackley & Co., on the other, agreed to advance to him $4 per 1000 feet, to be paid from time to time as the sawing advanced, and to be applied exclusively to the purchase of logs to be brought to them to be sawed.

To secure the advances, the property in the logs was conveyed to the defendants and the right of property vested in them; and they covenanted that when the lumber was manufactured they would send it to market and sell it to the best advantage; the proceeds to be equally divided between the parties.

Blake accordingly sent to the defendants large quantities of logs, and the defendants advanced large sums ($77,000) of money upon them; the case, as found, showing that but for the advances Blake could not have got this lumber from the forests, and thence to the defendants' mills.

During the spring of 1868 the price of lumber fell largely, so much so that it seemed likely that all the logs which Blake had sent to the defendants would be inadequate to repay to them their advances on account of it. Hereupon Blake, on the 25th of May, in the year just named, informed the defendants that he was unable to pay his debts, and proposed to make an assignment. They objected to his doing this and requested him to make a bill of sale of his property to them. This he made; the bill of sale embracing not only the logs then at their mills, but certain land from which it was cut, and various property, saws, horses, oxen, wagons, &c., which had been used in getting it from the place where it grew to the mills. The defendants, however, did not deliver up nor cancel, nor agree to deliver up or cancel, the contract of January 25th, but contrariwise, kept it in their possession.

The bill of sale of May 25th was made afterwards, with a view to give the defendants a preference, and therefore in violation of the Bankrupt Act.

On the 2d of June, 1868, Blake was decreed a bankrupt, and Avery, the plaintiff below, appointed his assignee. Soon afterwards, the creditors objecting to the bill of sale, the defendants transferred to the assignee all the property conveyed by the bill except the logs. These they had sold, the proceeds paying them nothing above their advances previous to May 25th, and on their refusing to pay to the assignee these proceeds he brought the action below.

The question, of course, was whether this contract of the 25th of January was abandoned by the defendants doing what they had done subsequent to it (that is to say, by their taking, in the circumstances which they did, the bill of sale of May 25th), and merged in that bill. If so, the defendants had lost their lien, since it was obvious that they could not stand on the new contract of May 25th, it having been plainly void as to creditors. On the contrary, if the old security was not abandoned, then, although the defendants had attempted to strengthen their hold on the logs by an additional security, voidable at the election of creditors, and which the creditors did avoid, the right of lien justly acquired was not lost to the defendants, and they were at liberty to assert it in this action.

The court below decided that the lien was not affected by what was done on the 25th of May, and from that decision this writ of error was taken.

Mr. J. W. Champlin, for the plaintiff in error; Mr. E. A. Storrs, contra.

Mr. Justice DAVIS delivered the opinion of the court.