
    JOFFÉ BROTHERS & COMPANY ET AL., Complainants, v. J. FERNANDEZ & COMPANY ET AL., Defendants.
    Opinion on Application por Appointment op Receiver.
    1. General military order 224, relative to suspension of payments, construed in connection with, the Code of Commerce and Code of Procedure, does not bind creditors who are not present at the creditors’ meeting, and who have not been notified of the proceedings.
    2. In a case of violation of trust, or to prevent abuse or fraud, a court of equity will interfere even in case a suspension of payment has been decreed, and a receiver may in such case be appointed.
    January 10, 1901.
    
      Messrs. Pettingill & Keedy, solicitors for complainants.
    
      Messrs. Horton & Cornwell, solicitors for defendants.
   Holt, Judge,

delivered the following opinion:

Tbis is an application for the appointment of a receiver of the property of the defendant firm, J. Fernandez & Company. The complainants, Joffé Brothers & Company and Hinne & Company, are foreign creditors. It appears that the defendant firm, being indebted in a large amount, applied on April 26th, 1900, to the insular district court for suspension of payment. Some time prior to this, the defendant firm had agreed in writing to transfer to the complainant Joffé Brothers & Company certain securities, to wit, debts and claims on other parties, for the payment of their debt. This was not carried out, as the defendant firm afterward asked that these claims be taken in absolute payment, pro tanto, of the debt of Joffé Brothers & Company. The agent of the latter firm was willing to do this, but having no power to agree to it, wrote to Joffé Brothers & Company for the necessary authority, and soon after the defendant company applied for a suspension. It is claimed the defendant company entered into this negotiation with the complainant firm merely to deceive and gain time. Some time thereafter the application for suspension of payment was granted by the insular court upon the terms that the creditors were to be paid in four equal instalments, not beginning, however, for three years from then, making a period of seven years before payment would be completed.

Ooadministrators of the firm were selected, but they appear to have paid no attention to the business in conjunction, leaving its entire conduct to the defendant José Fernandez. It is claimed, under military general order 224, that the complainants are bound by this proceeding, and that said order repealed the existing law as to the suspension of payments. The Code of Commerce gives this right, and by § 873 the procedure must conform to the special law, and the law of procedure then in force was the Code of Procedure, and the Code of Commerce recognizes it as being in force. Creditors residing beyond the seas are not affected by the proceedings for the suspension of payments unless they attend the meeting of the creditors. General order No. 224 does not alter this rule, and if it purported to do so, and bind them without notice, it would be unreasonable in character. It is claimed the complainants Joffé Brothers & Company were present at the meeting of the creditors by an attorney; but it is not shown that anyone was present with documentary evidence o-f such authority Code Civ. Proc. § 1137.

Had it been so, even this would not prevent this court from now interfering, at the interest of said complainant firm, to prevent abuse or fraud, or a violation of the trust. In my opinion, however, the complainant firm is not affected by the action of the creditors, for the reason that they were not present or talcing part in the meeting. A large proportion of the indebtedness was owing to foreign creditors. The securities, or mortgage claims, which were to have been transferred to Joffé Brothers & Company, have, with others, been sold to another party by the defendant José Fernandez, acting as liquidator, since the suspension of payment, and for about one half their face value. It is claimed this was done to raise money, and to buy debts on the defendant firm, but which debts were bought in at much less than their amounts. It also appears that before the application for suspension of payment, the defendant firm issued evidences of large indebtedness to certain parties, among whom are two of the special partners of the defendant firm, to wit, Cerrecedo Hermanos and Victor Martinez. It is claimed this was bona fide indebtedness; but it is, at least, suggestive of deceit, and that there should have been, instead of doing this, an effort to pay outside creditors. The defendant José Fernandez has seemingly managed and controlled the entire business without advice or restraint; but, passing by all these matters, and allowing that they only serve to raise suspicion, it further appears that the defendant firm had, when it suspended payment, over $270,000 in notes, drafts, mortgages, accounts, merchandise, and cash, and that it has only paid its creditors something over $10,000, and this has been done-in the purchase of debts by the defendant José Fernandez. No account is given of the condition of the balance of the assets, — where they are or in whose hands. In fact, it is shown that, at the time of the suspension of payments, the defendant company had on hand a large stock of merchandise, to wit, over $10,000 worth; and that just before suspension, or since, the greater portion of it has been removed or disposed of; and that there is not on hand now more than $8,000 worth. It is shown that a portion of this merchandise was shipped to another place, to one of the special partners, on November 12th, 1900, and this suit was brought seven days thereafter.

It thus appears that the creditors have been paid comparatively little, and this only by a large discount of debts. The character of this estate forces the conclusion that a large sum of money could have been realized- in a short time and paid to the creditors, if such had been the desire of the defendant company.

The power to appoint a receiver should be sparingly exercised; but one should be appointed whenever in the exercise of sound discretion it appears that an indifferent person should have charge of the estate.

The defendant Fernandez has not responded by affidavit satisfactorily to the interrogatories in the bill, or made such disclosures as a trustee should make; and he stands in that attitude as to the creditors. I am of the opinion that a receiver should be appointed, and a decree will be so entered.  