Hardt v. Heidweyer
Suit by Engelbert Hardt, Marcus L. W. Kitchen, Frederick A. Von Bermuth, and others against Sigismund Heidweyer, Norbert Stieglitz, and others, charging that certain transactions between defendants constituted an assignment for the benefit of creditors of the defendants above named, and that such assignment was fraudulent and void as to creditors not preferred thereby, including plaintiffs. A demurrer to the bill was sustained, and the bill was dismissed. Plaintiffs appeal.

On April 23, 1889, the appellants, as plaintiffs, citizens of the state of New York, filed their bill in the circuit court of the United States for the northern district of Illinois, making as defendants the following persons, citizens of the state of Illinois: Sigismund Heidweyer, Norbert Stieglitz, the National Bank of Illinois, Siegmund Florsheim, Philip Florsheim, and Simon Florsheim. On January 15, 1890, they filed an amendment to their bill. To the bill, with its amendment, the defendants demurred on the several grounds of a want of equity in the bill, the laches of plaintiffs, a lack of jurisdiction, and a defect of parties. On May 5, 1890, this demurrer was sustained, and the bill dismissed. From the decree of dismissal the plaintiffs have appealed to this court.

The facts, as stated in this bill and its amendment, are as follows: The plaintiffs were judgment creditors of the defendants Heidweyer & Stieglitz, a firm doing business in Chicago from July, 1875, to October 15, 1884. As early as January 1, 1884, the latter were hopelessly insolvent, their liabilities exceeding even their nominal assets, as they well knew. By the assistance of friends, however, they were enabled to keep up the appearance of doing business until October. Early in September they ascertained and determined definitely that they must fail, make a general disposition of their property among their creditors, and go out of business. At that time their indebtedness amounted to about $240,000, their assets to about $150,000, of which $125,000 was the value of their merchandise and $25,000 that of their bills receivable and open accounts. Among other creditors were the following parties, to whom Heidweyer & Stieglitz claimed were due at the time the sums set opposite to their names: National Bank of Illinois, $12,000; Siegmund Florsheim, $2,628; Julius Heimann, $5,000; Julius Heimann, administrator, $5,000; Florsheim Bros., $5,000; Philip Florsheim, $9,000; Simon Florsheim, $5,000; Herman Hahlo, $2,500; Hahlo, Stieglitz & Co., $2,086.56. In fact, the true amount due to such parties was much less than the sums so named. In addition to this, the defendant Siegmund Florsheim was liable, as they pretended, as indorser on their commercial paper for the sum of $22,925.

It was their duty, so the bill avers, in view of their financial condition, under the policy of the assignment law of Illinois, to make in due form a general assignment to some person of all their property for the benefit of their creditors, and without any preferences; but instead of doing this they consulted with counsel as to the best means to prefer the creditors above named. On September 16th, by the advice of such counsel, they executed certain judgment notes, payable on demand to the parties, and for amounts as follows: National Bank of Illinois, $12,000; Siegmund Florsheim, $41,553.50; Florsheim Bros., $5,000; Philip Florsheim, $9,000.

On the note in favor of Siegmund Florsheim, $16,000 was subsequently credited as paid. On October 13th they executed further judgment notes, payable on demand, as follows: Julius Heimann, two notes, each, $5,000; Simon Florsheim, $5,000; H. Hahlo & Co., $2,500; Hahlo, Stieglitz & Co. $2,086.56.

On October 15th the counsel above referred to, acting for both the creditors and the debtors, caused judgments to be entered upon said notes in the superior court of Cook county, Ill., in favor of the creditors for the amounts of principal and interest and attorneys' fees, the attorneys' fees amounting in all the cases to the sum of $3,564.04. Immediately after the entry of such judgments executions were issued thereon to the sheriff of Cook county, who levied upon the stock of merchandise of said firm of Heidweyer & Stieglitz, being all the tangible property of which they were possessed, and of the value of $125,000. Of this merchandise about $8,500 was replevied from the sheriff before the sale, and the remainder sold at great sacrifice, producing only $65,537.38, which sum was applied upon the executions, leaving a small balance due upon most of them. The only property of value which the said Heidweyer & Stieglitz, on October 15th, possessed, other than the stock of merchandise, were certain bills receivable, of the value of about $18,000, and certain accounts receivable, of the value of about $6,000. It is charged: 'That as a part of the same scheme of preference said Heidweyer & Stieglitz assigned and delivered said bills and accounts receivable to the defendant Simon Florsheim, in trust to collect the same for the benefit of said judgment creditors as to the amounts remaining unpaid on their aforesaid judgments, and for the benefit of himself as to a claim of thirteen hundred dollars, due to him by said Norbert Stieglitz individually, the surplus, if any, to be returned to said Heidweyer & Stieglitz; so that, out of said accounts and bills receivable so assigned, and out of said replevied goods subsequently surrendered or paid for, said defendants' judgment creditors, as aforesaid, have received the amounts of their judgments and interest and said attorneys' fees in full. Said defendant Simon Florsheim has received payment in full of his claim against the defendant Norbert Stieglitz, as aforesaid, and the entire scheme originally devised by and between said Heidweyer & Stieglitz and said judgment creditors has been successfully accomplished, and all the property of said defendants Heidweyer & Stieglitz has been appropriated to prefer said creditors to the exclusion of all others.' And that all these 'judgment notes, judgments entered thereon, executions issued, levies and sales thereunder, transfers, assignments, and other dispositions of all their property, * * * are in effect but one instrument and one transaction, and, taken together, constitute a general assignment for the benefit of creditors,' and 'were all entered into and consummated in pursuance of a conspiracy between the parties thereto to defraud the other creditors of said Heidweyer & Stieglitz.'

It is further charged: 'That, while it is true that all the transactions aforesaid constitute an assignment for the benefit of creditors, yet said assignment is fraudulent and void as to creditors, in this: That said judgment notes were purposely given for sums greater than was due the payees thereof respectively at the time they were so given; that the sum provided in said judgment notes for attorneys' fees, being thirty-five hundred and sixty-four 4-100 dollars, and which was included in said judgments confessed, and thereafter collected thereon, was so inserted in said instruments with actual intent to hinder, delay, and defraud the creditors of said Heidweyer & Stieglitz, and actually has defrauded them, whereby said notes, judgments, and everything that was done under them became wholly fraudulent and void as to the creditors of said Heidweyer & Stieglitz, and that all of said transactions constituting such assignment were conceived and executed from beginning to end with the sole and only purpose of defrauding the law and defrauding all the creditors not intended to be protected thereby, including your orators.'

The amendment was intended to cover the objection of laches, and its allegations in respect thereto are as follows:

'And your orators further represent that at the time of the several transactions hereinbefore mentioned they were, and ever since have been, residents of the city of New York, and that the judgment creditors aforesaid, who were defendants to this bill, were, and now are, residents of the city of Chicago; that immediately after the entry of the judgments aforesaid your orators caused an investigation to be made as to the genuineness of the indebtedness represented by said judgments and the good faith of the judgment creditors in having them entered and enforced in the manner set forth herein. That it was upon such investigation given out, represented, and stated to your orators by each of said judgment creditors, defendants herein, that their said judgments were for full value, and were entered aggressively by them for the sole purpose of realizing the moneys due them respectively, and that they did so without the knowledge, privity, or procurement of the debtors themselves; and said debtors then stated that they had still a large amount of property remaining in their hands in the form of book accounts and bills receivable, applicable to the payment of their other debts; and that they proposed to convert the same, and apply the proceeds thereof to such payment as soon as possible.

'Relying upon which statements, and believing the same to be true, your orators refrained for a considerable time to take legal measures to collect the large indebtedness due them, in the belief also that the transactions as to said judgments were bona fide, and having no knowledge or information of any fact tending to show that they constituted, constructively, an assignment for the equal benefit of all creditors.

'A long time afterwards, and within, to wit, less than one month from the time of bringing this suit, your orators for the first time learned not only that said judgments covered and took all the tangible property of said Heidweyer & Stieglitz, but that the entry thereof was procured by them for the express purpose of preferring said judgment creditors, and that at the same time they transferred all their remaining property to a trustee for the benefit of creditors, as heretofore in this bill alleged, thereby creating an assignment, as herein alleged.

D. K. Tenney, E. O. Browne, Chas. E. Pope, and Sydney R. Taber, for appellants.

[Argument of Counsel from pages 553-556 intentionally omitted]

Curtis H. Remy, for appellees.

Mr. Justice BREWER, after stating the facts, delivered the opinion of the court. 

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Uncategorized United States Supreme Court decision