Neal v. Clark

ERROR to the Supreme Court of Appeals of the State of Virginia.

The facts out of which this case arises, so far as it is material to state them, are substantially these:--

William Fitzgerald, Jr., of the State of Virginia, by his will, which was admitted to probate in 1857, directed his executor to sell his entire landed estate, and distribute the proceeds among those entitled to them, according to the provisions of the will. The lands were sold as directed, in the same year, the purchasers giving bonds, with security, payable to the executor as such. Two of these bonds, each dated Dec. 1, 1857,-one for $1,000, due Nov. 18, 1859, with interest from Nov. 18, 1858, and the other for $2,293, due, with like interest, Nov. 18, 1860,-were sold and assigned by the executor, in June, 1859, to Griffith D. Neal, the plaintiff in error, for the sum of $2,780, who sold them to Richard Jones for $3,056. The latter collected them. When this transaction occurred, the executor, who was a brother of the testator, was a man of large property and undoubted solvency. Neal made no inquiry as to the condition of the estate, but the executor gave, as a reason for selling the bonds, that the estate was in debt to him for moneys advanced.

In 1860, a suit was instituted against the executor in the Circuit Court for Pittsylvania County, Virginia, to obtain a settlement of his accounts and a distribution of the estate. In 1861, in obedience to an order of court, he gave a new bond, with Clark and Holland as sureties; and in 1868 they were made defendants, and a decree was asked against them for whatever sum should be ascertained to be due from the executor. In 1869,-ten years after Neal had purchased the bonds, about seven years after the executor had become insolvent and removed from the State, and without any question having been previously raised as to Neal's liability, Clark and Holland exhibited their bill in the same court against the executor, the distributees, Neal, Jones, and others. They allege that the executor, in disposing of the bonds, committed a devastavit of the estate, and that, in view of the circumstances under which he received them, Neal became a participant in that devastavit, and is liable to the distributees for the amount of the bonds. They ask that, as sureties of the executor, they be substituted to the rights which the distributees have against Neal by reason of his alleged unlawful appropriation of the testator's assets. In the event of any judgment against them, they pray that it be rendered to be first satisfied by the purchaser of the notes.

In the District Court of the United States for the District of Virginia Neal was duly adjudged a bankrupt, and received his certificate, dated Feb. 11, 1869, showing his discharge from all debts and claims which, by the bankrupt law, were provable against his estate, and which existed on the 25th of January, 1868, 'except such debts as were exempted from the operation of a discharge in bankruptcy.'

Neal pleaded his discharge in bar of the action against him, but the Circuit Court for Pittsylvania County gave judgment against him and Jones for the amount of the two notes purchased from the executor. That judgment, so far as it held Neal liable, was affirmed in the Supreme Court of Appeals of Virginia, but, so far as it related to Jones, was reversed. Thereupon Neal brought the case here.

Mr. William A. Maury for the plaintiff in error.

The 'fraud or embezzlement' described by the bankrupt law of 1867 refers only to transactions involving criminal intent and wilful wrong-doing.

The object of statutes in relation to embezzlement is to embrace certain cases where, although the moral guilt was quite as great as in larceny, the technical objection, arising from the fact of possession lawfully acquired by the offending party, screened him from punishment. They were, therefore, declared crimes punishable by law. Commonwealth v. Simpson, 9 Met. (Mass.) 192.

The association of 'fraud' with 'embezzlement' fully justifies the conclusion that the legislature used the former word to indicate a transaction involving moral turpitude.

To deprive a party guilty of no intentional wrong of the benefit of his discharge in bankruptcy, upon the ground that he has committed a technical devastavit, defeats to that extent an act for the relief of the unfortunate debtors who in good faith surrender their property to their creditors.

No counsel appeared for the defendant in error.

Mr. JUSTICE HARLAN delivered the opinion of the court.