APPEAL from the Circuit Court for the District of Missouri; the case being thus:
Lucas purchased in April, 1869, from Darby (then in debt) a piece of real estate in St. Louis: the deed being made on the 24th of that month. At a meeting of Darby's creditors, held on the 17th of June following, he was told by them that he must file his petition to be adjudged a bankrupt, or that he would be forced into bankruptcy. On that day he discontinued business, and on the 1st of July presented his petition praying to be adjudged a bankrupt, and on the 12th following was adjudged a bankrupt accordingly; one Tiffany being appointed his assignee. Tiffany soon afterwards filed a bill in the District Court for the District of Missouri, to avoid the sale to Lucas as made in contravention of the 35th section of the Bankrupt Act. That section is thus:
'If any person, being insolvent or in contemplation of insolvency or bankruptcy, within six months before the filing of the petition by or against him, makes any payment, sale, assignment, transfer, conveyance, or other disposition of his property to any person who then has reasonable cause to believe him to be insolvent, or to be acting in contemplation of insolvency, and that such payment, sale, assignment, transfer, or other conveyance is made with a view to prevent his property coming to his assignee in bankruptcy, or to prevent the same from being distributed under this act, or to defeat the object of, or in any way impair, hinder, or delay the operation and effect of, or evade any provision of this act, the sale, assignment, transfer, or conveyance shall be void. . . . And if such sale, assignment, transfer, or conveyance is not made in the usual and ordinary course of business of the debtor, the fact shall be prim a facie evidence of fraud.'
The question, of course, was whether the sale had been made under any of the circumstances mentioned in this section. The facts seemed to be these:
The property was confessedly valuable. It was a large lot, at the southwest corner of Olive and Fifth Streets, St. Louis, 75 feet front on Fifth Street by 127 deep, with three marble stores, five stories high, upon it; that it had cost near or quite $100,000 to build; the position being by some thought, from their judgment as to the course trade in St. Louis was likely to take, and of prospective values, to be the best in that growing city; and by a few regarded even as such for its present advantages, though the general judgment was that a neighboring corner–the corner of Olive and Fourth–was at that time a better situation than this. Whatever was its relative advantage, its positive value was attested to in many ways. Among them, by the fact that in the summer of 1868, Darby wanting to borrow $150,000 on mortgage of an insurance company in Philadelphia on this property, Lucas, who had long lived in St. Louis, was possessed of great wealth and was particularly conversant with the values of real estate, along with a certain Britton, president of the National Bank of the State of Missouri, also very conversant with values, gave him a certificate thus:
'Having been called upon by Mr. Darby to estimate and state the value of his property in the city of St. Louis, on the southwest corner of Olive and Fifth Streets [description], we state that we are well acquainted with it, and that we consider it well worth the sum of $300,000. We value the same accordingly at that sum.
'ST. LOUIS, September, 1868.'
Lucas in buying the property paid $50,000 in cash, and assumed to pay the mortgage of $150,000, which had five years from November, 1868, to run, and bore interest at 8 per cent. a year. The mortgage required the owner of the property so long as it remained unpaid to keep the stores insured to the extent of $100,000. After the sale to Lucas was completed, there were different persons who said to Darby that they could have found a man who would have given more; 'fellows,' said Darby, 'who came around and talked.' One of them made mention particularly of a certain Robert Campbell, a man of property, who he said would have given more. But Campbell had never offered more. Darby had in fact, in a private way, been trying unsuccessfully for some time to sell the property. Certain persons testified, on the other hand, that in their opinion Lucas had given as much as the property was worth, in the then state of prices for real estate at St. Louis, where anticipations prevailed, among several persons, of a prompt return to specie payments, an event which, if it should occur, the dealers in real estate supposed would cause a great fall in the values there of that kind of property. Assuming, as the fact seemed to be, that productive real estate in the best parts of St. Louis commonly yielded 6 p. c. on its cost, and that money was worth 8 p. c. (the rate paid on the mortgage of $150,000), the rental of this particular property during a year that Lucas held it, indicated that the price, so far as present income, and estimates divested of anticipations of future value were concerned, was not unfair. Thus––
The gross rental was, .................. $17,500
Deduct interest on $200,000 at 8 p.c., . $16,000
Insurance, $100,000 at say 3/4 of 1 p.c., . 750
Taxes (in 1869), ................ 2,900
Repairs, agency, care of the buildings, &c. (say), 350
Loss of annual income, compared with income -------
from $200,000 personally, at interest at 8 p.c., $2,500
In fact the buildings, though very costly, had been injudiciously arranged. Adverting to the small income from the rents, witnesses who estimated the property at $300,000, and even $330,000, conceived that a 6 p. c. rental on that sum could soon be had, if about $10,000 were laid out in 'gutting' part of the buildings and changing the plan.
When Lucas purchased the property of Darby there was just coming due to the insurance company six months' interest ($6000) on the mortgage given by Darby. This, and also the State and county taxes for the current year, Darby promissed to pay. The former, he did pay; the latter, inasmuch as the collector did not come round until after he was bankrupt, when he was unable to pay, Lucas had to discharge.
The first movement in regard to the sale came from Darby, through one Hogeman. This Hogeman was cashier of the Boatman's Saving Bank, of which Lucas was a director–an 'ornamental director,' as he styled himself,–who 'did not by any means consider himself responsible for what was done, and who went there more for the sake of getting the news than anything else.' This same bank had been for a long time in the habit of discounting (when it was well indorsed) Darby's paper, and its cashier thus knew that Darby was always pressed for ready money. In this way, Hogeman stood in a sort of friendly relation to both the parties, and to both had apparently good feelings. Darby talked with Hogeman confidentially. 'I told him,' said he, 'that I wanted to sell my property and settle my debts and quit-off everything; and I asked him to sell it for me if he could, and do all that he could to sell it for me; and he promised to do it.' Hogeman then offered the property to Lucas, and urged him to make a proposition. Lucas after a certain time offered $50,000. Darby wanted him to assume the payment of the taxes, $2900, for the current year. This he refused to do. He would give $50,000 and assume nothing but payment of the mortgage of $150,000. Things remained a few days, when Hogeman advised Darby to accept the offer. He said he thought that more could not be got; that the sum offered would enable Darby 'to get out of debt, pay all up, square out, and relieve himself, and go on and sell out the residue of his real estate.' Darby ...