Wolf v. Stix (99 U.S. 1)

APPEAL from the Circuit Court of the United States for the Western District of Tennessee.

On the 8th of December, 1866, Louis Stix & Co. commenced a suit in the Chancery Court of Shelby County, Tennessee, against Marks, Pump, & Co. and M. Wolf, to recover a debt owing by Marks, Pump, & Co., and to set aside a sale of goods by the latter firm to Wolf, on the ground, as alleged, that it had been made to defraud creditors. In accordance with the practice in that State, a writ of attachment was sued out and levied upon the goods in the possession of Wolf.

The Code of Tennessee provides that (sect. 3509) 'the defendant to an attachment suit may always replevy the property attached by giving bond with good security, payable to the plaintiff, in double the amount of the plaintiff's demand, or, at defendant's option, in double the value of the property attached, conditioned to pay the debt, interest, and costs, or the value of the property attached, with interest, as the case may be, in the event he shall be cast in the suit;' and that (sect. 3514) 'the court may enter up judgment or decree upon the bond, in the event of recovery by the plaintiff, against the defendant and his sureties for the penalty of the bond, to be satisfied by delivery of the property or its value, or payment of the recovery, as the case may be.' As soon as the attachment was served, Wolf moved the court to ascertain the value of the goods and fix the amount of the bond to be given in replevying them. This was done, and the value ascertained to be $10,000; and on the 24th of December, 1866, Wolf, as principal, and Lowenstein and Helman, as his sureties, filed in the cause their bond, a copy of which is as follows:--

'We, M. Wolf, as principal, and Elias Lowenstein and Leon Helman, as sureties, hereby bind ourselves unto Louis Stix & Co. in the sum of $20,000.

'The condition of the above bond is that, whereas, in the suit now pending in the Chancery Court at Memphis, in favor of said Louis Stix & Co. and against Marks, Pump, & Co., and in which said Wolf is joined as a defendant, an attachment has been issued against said Marks, Pump, & Co. for $18,699.54, besides interest and costs, and has been levied upon a stock of goods and other property as the property of said Marks, Pump, & Co., which were in the possession of said M. Wolf, and were and are claimed by him as his property; and this bond given by him for the purpose of replevying said stock of goods and other property attached, being, altogether, as it is agreed by the parties, of the value of ten thousand ($10,000) dollars. Now, in the event said M. Wolf shall be cast in said suit, and said stock of goods and other property shall be found and decreed by the court to have been subject to said attachment, and liable thereunder to the satisfaction of the debts of complainants against Marks, Pump, & Co., then and in that event, should said Wolf pay to complainants, as the court may order and direct, the said sum of $10,000, the value of said stock of goods and other property, with interest thereon from this date, this bond shall be void, otherwise to remain in full force and effect.

'Witness our hands and seals, this-day of December, 1866.

'M. WOLF. [L. S.]

'ELIAS LOWENSTEIN. [L. S.]

'L. HELMAN.' [L. S.]

The property attached was thereupon surrendered to Wolf. All the members of the firm of Marks, Pump, & Co. were afterwards discharged in bankruptcy, and in due time, by leave of the court, they severally filed formal pleas setting up their respective discharges. Wolf put in his answer, claiming title to the goods and denying all fraud. Testimony was taken; and on the 13th of December, 1872, after hearing, the Chancery Court found and decreed that there was no fraud in the sale to Wolf, and dismissed the suit as to him. As Marks, Pump, & Co. had been discharged in bankruptcy, it was also dismissed as to them. From this decree Stix & Co. appealed to the Supreme Court on the 21st of March, 1873. On the 28th of March, 1874, Wolf obtained on his petition therefor a discharge under the bankrupt law. On the 28th of April, 1877, the Supreme Court, upon hearing, reversed the decree of the Chancery Court, and, after finding the amount due from Marks, Pump, & Co., and ordering a recovery, concluded as follows:--

'And this court being of opinion, as before recited, that said sale was fraudulent and void, and that said stock of goods, fixtures, &c., so attached and replevied, were subject to said attachment, and liable for complainants' said debt. And it further appearing from simple calculation that said sum of $10,000, with interest from the date of said bond, Dec. 24, 1866, to the present time, amounts to the sum of $16,200: it is, therefore, further ordered, adjudged, and decreed by the court, that said fraudulent sale be and is hereby set aside, and for naught held, as to complainants' said debts herein against defendants Marks, Pump, & Co., and that the complainants Louis Stix & Co. in their own right, and also for the use of Rinskoff Bros. & Co., do have and recover of and from the defendant M. Wolf, and Elias Lowenstein and L. Helman his sureties on the aforesaid replevin bond, the said sum of $16,200, the value of the property replevied, and interest thereon to this date, for which execution may issue. And it further appearing from the record that the said defendants, Marks, Pump, & Co., have been since the filing of complainants' bill discharged in bankruptcy, no execution is awarded against them for complainants' recoveries herein; and the cost of this cause, and the court below, will be paid out of the said recovery of $16,200, against defendant M. Wolf and his aforesaid sureties on replevin bond.'

On the third day of May, 1877, after this decree was rendered, Wolf and his sureties petitioned the court for leave to come in and plead in that court the discharge of Wolf in bankruptcy; but this was denied, as no new defence could be made in that court, and it was not allowable to set up the defence of bankruptcy by any proceedings there for that purpose.

On the 26th of May, 1877, these appellants filed this bill in the Chancery Court of Shelby County, setting forth the facts substantially as above stated, and praying that the judgment or decree of the Supreme Court might be decreed to be satisfied, and of no force and effect, by reason of the discharge of Wolf in bankruptcy, and that Stix & Co. might be enjoined from enforcing the collection.

The case was afterwards removed to the Circuit Court of the United States for the Western District of Tennessee. The answer of Stix & Co. does not deny any of the material facts alleged in the bill, but sets up as a defence:--

1. That the discharge of Wolf does not release him from his liability upon the decree of the Supreme Court, because the decree is founded upon a debt created by fraud;

2. That if Wolf is discharged, his co-complainants, the sureties upon his bond, are not; and,

3. That the appellants have been guilty of such laches as to cut them off from relief in a court of equity.

The Circuit Court dismissed the bill, and from a decree to that effect this appeal has been taken; the appellants assigning for error that the court below erred, 1. In dismissing the bill; 2. In not decreeing that the appellees should be perpetually enjoined from enforcing the decree rendered by the Supreme Court of Tennessee in their favor against the appellants.

Mr. William M. Randolph and Mr. Henry Craft for the appellants.

The Code of Tennessee (sect. 3509) gave Wolf the right to execute the bond and replevy the goods, which were then in the custody of the law. His doing so cannot, therefore, by the most strained construction of the act of Congress, be regarded as creating a debt by fraud or embezzlement; executo juris non habet injuriam. There must be positive fraud or fraud in fact. Neal v. Clark, 95 U.S. 704. The debt arose out of the bond which he executed to the appellees, for it cannot be seriously insisted that he incurred any other liability to them; and they, as parties to that instrument, are estopped from showing that it was tainted with fraud. Palmer v. Preston, 45 Vt. 154; Sherman v. Strauss, 52 N. Y. 404; Brown v. Broach, 52 Miss. 536; Fowler v. Treadwell, 24 Me. 377; Jones v. Knox, 46 Ala. 53. The conveyance under which he held them when they were attached has no connection with the bond, and his liability upon the latter was extinguished by his discharge in bankruptcy.

In order that the bond shall remain in full force and effect as to the sureties, Wolf must be 'cast' in the attachment suit. He cannot, by reason of his discharge in bankruptcy, be so cast, as under the decision of this court in Wolf v. Stix (96 U.S. 541) he is, in view of the peculiar practice which prevails in Tennessee, entitled to relief by this bill, and it furnishes him an appropriate and efficient remedy for asserting the rights and exemptions which that discharge secures. The decree of the Supreme Court has no validity against him; and it could not have been rendered if the rules of that court had permitted him to plead the discharge granted to him after the appeal had been taken, and when it was pending there. The contingency, therefore, upon which the liability of the sureties depends-a valid decree or judgment against him which can be enforced-has not arisen, and it cannot arise. The condition of the bond has been discharged, and they are released. Smith v. Eakin, 2 Sneed (Tenn.), 456; Carren v. Breed, 2 Cold. (Tenn.) 465; Payne v. Able, 7 Bush (Ky.), 344; Odell v. Worten, 38 Ga. 224; Loring v. Eager, 3 Cush. (Mass.) 188; Carpenter v. Turrell, 100 Mass. 450; Hamilton v. Bryant, 114 id. 543; Braley v. Boomer, 116 id. 127; Williams v. Atkinson, 36 Tex. 16; Nettleton v. Billings, 17 N. H. 453; Kirby v. Garrison, 1 Zab. (N. J.) 179; Barber v. Rodgers, 71 Pa. St. 362; Herbert v. Horter, 81 id. 39.

Wolf's discharge will be of no practical benefit to him, so far as the liability in question is concerned, if his sureties be bound. If they are compelled to pay, his liability to them at once accrues. Loring v. Kendall, 67 Mass. 305; Fowler v. Kendall, 44 Me. 448; Ellis v. Ham, 28 id. 385; Leighton v. Atkins, 35 id. 118; Holbrook v. Fox, 27 id. 441; Porter v. McDonald, 32 id. 418; Pogue v. Joyner, 6 Ark. 241.

Mr. Josiah Patterson, contra.

MR. CHIEF JUSTICE WAITE, after stating the case, delivered the opinion of the court.