Benjamin N. Cardozo

“ The argument for the defendant is that the Freeman administrator is estopped by force of his acceptance of a junior lien upon the shares, and that the trustee as his champion enjoys no better right. To overcome the supposed estoppel it is enough to recall the fact that at the time of the unlawful pledge the Freeman administrator was not the only creditor. The uncontradicted evidence is that there were many other creditors whose claims are still unpaid. What the trustee recovers will be for the benefit of all. ”

“ A former partner, Freeman, had recovered a judgment against him for nearly $50,000. Freeman had been lenient, but Freeman was now dead, and the administrator was asking for security as the price of delay. There were other creditors too, though they are not shown to have been importunate. With these intruders visible, the family set out to build protective barriers. There is testimony that Henry Barceloux was indebted to the corporation in upwards of $33,000. On April 27, 1926, he secured part of this indebtedness by a pledge of 2,499 shares of the Barceloux stock. ”

“ Judgment was therefore ordered that the shares be resold under the direction of the court of bankruptcy; that out of the proceeds the Barceloux Company be paid its indebtedness with interest (less the value of the shares that it was unable to surrender) ; and that only the surplus, if any, be paid to the trustee. A writ of certiorari brings the case here, 288 U.S. 595, 53 S.Ct. 319, 77 L.Ed. --.
1. The evidence sustains the finding of the District Court that the pledge to the defendant was made in fraud of creditors.
More is here than a mere preference. ”

“ The pledge to the administrator is disregarded, and he is left in the same position with reference to any general creditors as if the transaction putting him ahead of them had been undone from the beginning. One who takes a mortgage or an assignment of an interest in property subject to a specific lien may be estopped while he retains the benefit from disavowing the attendant burden. Freeman v. ”

“ The standard of duty is no different whether the trust to be enforced is actual or constructive. United States v. Dunn, supra; Independent Coal & Coke Co. v. United States, supra; Newton v. Porter, supra. ”