there is,for that reason, a defeCt in the record. ·Defects of substance in the. averment of jurisdictional facts cannot 'beamended in the circuit court, because the record in the state court must a:ffirmatively show that the case is removable, (Crehore v. Railroad Co., 131 U. S. 240, 9 Sup Ct. Rep. 692;) but where jurisdictional facts are not properly stated in the petition, an amendment may be permitted, if seasonably applied fOf, in the original petition; fOf the purpose of stating them properly, (Ayres v. Watson, 113 U. 8;594, 5 Sup. Ct. Rep. 641.) There is an apparent difference ofol)inion whether, if the case was manded to the superior court, and the petition was there amended, the filing of a oopy of the amended petition and record in this court would present a removable case; the point against any jurisdiction of the circuit court being that the order to remand was final and conclusive. v. Donvan, 30 Fed. Rep. 395; Freeman v. Butler, 39 Fed. Rep. 1. I therefore think it preferable not to issue an order to remand until the defendant hail had a reasonable time within which to seek to amend its petition in the state court, and to take such action, upon notice to .the plaintiff, in regard to the amended record in this court, as it may be The remaining ground for an order to remand which was insisted upon is the fact that the signature of the only surety upon the bond was and is without seal. This omission makes the bond a defective one, but dearising from non-compliance with the directions of tne third section of the act, which are formal, may be supplied. Ayres v. Watson, supraj Harris v. Railroad Co., 18 Fed. Rep. 833. Inasmuch as there is in the petition' a defective or insufficient statement of a jurisdictional fact, and the Suggestion has been made that the defect may be cured by prompt amendment in the state court, the bond should be made perfect in that court also.
et al. v.
(Circuit Court, E. D. Virgirlia. June 19, 1891.)
ASSH1NMENT FOR BENEFIT OF CREDITORS-RESERVATIONS.
Clauses in the assignments of insolvents, requiring releases from, creditors accepting dividends, regarded with great disfavor by courts.
2. SAME-AcTION' TO SET ASIDE. . Such an assignment must embrace all tbe estate of the insolvent, must give full information as to the character and probable value of the assets, and must allow ample time to creditors to determine whether to accept and release or not. Where all the inSOlvent's estate is Conveyed, and the claim of plaintiff is'acknowledged fully and exactly, and the piaintiff is left without redress in an action at law, in such case, a bill in equity may be brought to set aside an assignment as hindering delaying, and defrauding creditors, before judgment is obtained at law, as required in Scott v. Neely, 11 Sup. Ct. Rep. 712.· (SyLlabUS by the C'ourt.)
In Equity. On a general creditors' bill·. A. L. HaUiday, Wm. Plegenhcirner, Sarnl. Proskauer, and Joseph Christian, for plaintiffs.
CUR'rAIN fl. TALLET.
J. A1.LJW.n Cabell and lIdgh R. Page, for
HUGHES, J. Erne!?tH. Chalkley, one of the defendants, and ll. citizen' of Richmond, was engaged in the business there of buying raw hidos, tanning them, and selling the leather in other markets. 'fhe deed which is the subject of this controversy was by him on the 18th Jan- . uary, .1889. It conveys to Williamson Talley, of Richmond, as trustee, a tannery in Manchester, Va., opposite Richmond, with all its implements,"utensils, and fixtures, supposed to be worth about $3,000; all hides 011 hand, and leather in process of 'manufacture, bark, materials, etc., supposed to be worth $10,000; leather stored in the tannery, supposed to be worth $150; debts and accounts due grantor, amounting to $529; a buggy and harness worth about &40; a lot of land in Manchester, . supposed to be worth about $6,000; all the title, and interest of '. grantor, whatever it may belin and to real estate in the city of Richmond, consisting of five lotsofland, most of them containing buildings on them; also any interest the grantor may have in the firm of J. T. Stratton & Co., and in the uncollected assets of the late firm of O. H. Chalkley & Co., consisting of uncollected debts of little or no value; and all other property of every kind and description, whether real or personal" and all debts, claims. rights, and securities to which the grantor may be entitled from any source,-but in trust to secure the payment of all the debts of the said Ernest H. Chalkley in the order set forth in the deed. Power is given the trustee to make pur.ehases and continue the business for the purpose of preventing loss or sacrifice of property in course of. manufacture, and this power is modified by conferring. more or less control over the trustee upon creditors. These provisions need not be here described. The debts secured are of three classes; most of those composing the two first classes being specifically scheduled. The first class. consists of debts amounting to about &8,200. The second class consists of debts amounting. to about $42,700, 80 far as they are enumerated,. and also of debts which are not given in detail, but are described as "all the other debts of Ernest H. Chalkley upon which he is bound as surety,. and not as principal debtor." One of the debts enumerated in thil\ class; is that of the plaintiff in this suit, which is acknowledged in the exact amount claimed in the bill. The third class consists generally of debts due to all other creditors, none of which, nor the amounts of them, severally or aggregate, are specified. After enumerating the two first classes of creditors, and before mentioning the third, the deed contains a clause in these words: "But this deed is made upontbe distinct understanding that no creditor intended to be herebysecnred in the above classes shall receive any benefit whatever under it unless he shall, within ninety days from the date of its recordation. signify in writing his acceptance of the provision of this deed, and release the said Ernest from all further liability for his debt." .
. 'The deed has also a concluding clause declaring that"It is the intent and meaning of this instru ment that each class is paid any. part of the S!lill ijecnred in ,them; and, if is noL Ilnough assets to puy,
FEDERAL nEPOR;I'E.Jt .. · . . ".' ,
any class in full, all of that cl.ass shilre equally ill ilny sum app\;rabJe to any in that class, and nb one in any'alassshall h,nte' priority over any other in the. same. class." .
. to !let.aside the deed. !ut ,9flla,y;, and, cre<litors. In reof a$$ignm M spect to ju;riflAtct),OQ,,' Mlif7,pase; is, rule4:.pyOrYlir-.v. U. S. 679, 19 py/BlX/it v: :Ct. Rep. 712j for here the fully in. debtor's deed, and taken'[oJ.: .cqp.t:essed ·...:ije.re, all:Jo, the debtor, by assignfor final proCeSS to reach, and has ing his :whj)le!ilstate,:hal'l: deprived la"" . . I deem it.unn.ecesslil,ry;JQ.oonsider from any other point of than that of-the: J:elease clauses last quoted above, It is plain: fi'om .the of tQl'l.dj:J.t1d thatjif the assets conveyed should pro"e sufficient ,t.o·>pay .as first preferJ'ed debts, they. will certainly. sPtlrt.oJ the $42,700 of;debts· .0Hhe second olass, which it enumerates in detaU. The almost necessary istliat less than.6Qper cent. al1<.l,ul0$t· probably less. than 20 per·oent. of th6se debts can.bapaidj but, be. the percentage what it may,· the 'deed' requires:evefy. onei of the second .class creditors, within 90 days after its.· registr8ltioll1e" to release his claim against the grantor, as a condition: of. reeei"ing the. petcentage which 'may in the end atures oithe deed of assignment under fall to him .. These arei1had' sideration which raise ihe'questi'cmqfits validity;r :Under the tIed law, it is :validity of any deed' of assignment giving preferences andcontaining'oarelease dause that the diJed shall convey all the estate of shall give to his creditors all the formation.inthe debtor 1s:power lts 'to 'the natnre and vaineof the property conveyed, and the amount ot the debts provided forj and also a reasonable tinle to 'enable creditors to obtain such information as the deed may not afford, in whieh to make up their minds deliberately and in. telligently whether to accept or reject the offer made to them. In the clanses for the creditors of the second class. this deed, after enumerating debts amounting to about $42,700, 'provides, in addition, for "all other debts of Ernest H. Chalkley upon which he is bound as surety, and not as principal debtor; Il. but gives no schedule of such suretyships, nor any particulars whatever of their amounts or dates, or the persOIlS indorsed for. In the granting clause of the deed the grantor's interest in se\'eral pieces of real estate in Richmond is assigned, but the value of the property is not stated even approximately, and the interest of the grantor in it is not indicated in any manner, but, on the contrary, the most indefinite phrase that could' be framed is used, the interest being describ'ed as l<whatevt;lr it way be.," . If it be pretend,ed that the clauses referring to this real estate are sufficient to put' creditors 011 inquiry as to what Chalkley's interest in it really inquiry develops that it has required a chancery suit,not likely to be concluded for a year or more, to be instituted, to deterrninewhat that interest is. As to the property held by Chalkley in his own right, it was of a character to render it im-
practicable for creditors to arrive at any approximate estimate of its selling price within 90 days of the registration of,the deed. This property consisted of a tanneryand of hides pfi process of being tanned; the latter requiring expense and tinieto' be incurred by the trustee in lnaturing them into salable Tanneries are salab] e to but a small class of purchasers, most of whom live in different and distant localities. This circumstance made any judicious sale of the tanningestabJishment of E. H. Chalkley im practicable within a period as brief as 90 days from the registration of his deed. Other provisions of this assignment contravening the conditions which the courts hold to be essential to the validity of assignments requiring releases from creditors might be pointed out, but I have stated enough to show that this deed does not give to creditors all the information which it was in the power of its grantor to give, and which it was his duty to give, as to the value of the property conveyed, as to his interest in it, and as to the amount of his indebtedness. On the contrary, it is exceptionally at fault in each of these particulars, and that to a degree' which rendered it wholly impossible for any creditor to decide intelligently whether to accept its terms or not within any reasonable time after the deed went lIpon record, certainly within the 90 days prescribed by the deed. The Virginia court of appeals have had but very few cases of deeds of assignment by insolvents containing release clauses to deal with, and we do not find as full an adjudication of the subject in its decisions as would be desirable, and as the courts of other states have made. Turning, therefore, to the general law of the subject, it may be stated generally that assigriments exacting releases from credito.rs arc looked upon with great disfavor br the. courts. These provir:;ions are attempts on the part of the debtor to coerce his creditors to accede to his terms, and a withholding of his property from them unless they do accede.' , It is to. be observed that a debtor by a release clause affects to do what a sovereign state of this Union is forbidden by the national constitution to authorize. He affects toin8titute a proceeding in bankruptcy on an individual scale, by which he may il\diyidually be discharged from his obligations, by his own individual authority. Such a proceeding cannot cornmand much favor in the courts. Of course they all hold that if a debtor, with his property still open to the legal pursuit of his creditors, can satisfy them that it is for their interest to accept a compromise, and give him an absolute discharge on his assigning his estate to them, he may do so. But the case is different when the debtor first assigns oflegal process, and his whole estate away, putting it beyond the then proposes to his creditors, in the form of a release clause, terms of accommodation. He thereby obstructs their legal remedies, and hinders and delays them in the prosecution of suits against him. Naturally, therefore, the courts look upon such provisions with great dida\'or. It is true they will uphold deeds containing such clauses, if the circumstilnces are suoh as to preclude the imputation of intentioLal fraud, and if the utmost candor alld 'iiirness are used towards cteuitorsj but they
will not uphold them if this candor and fairness are wanting. If creditors are not afforded all the information necessary to an intelligent decision on the expediency ofa full, release to the debtor, and if ample time and opportunity for, Inakingup a decision be not given, then this delinquency is itself a badge of fraud; and, when it is as palpable and manilest as in this case, the deed ought to be set aside. I \V-ill decree accordingly.
Co. et at.
(Circuit Court, W. D. Missouri, St. Joseph, Division. June 18, 1891.)
CREDITORS' BILL-WHE:lif MAIKTAINABLE.
A creditor of a corporation obtained a jlidgment in personam against it in a federal court of Kansas. On the return of execution unsatisfied in that state, he instituted attachment proceedings in a state court of Missouri against land there situated, the legal title to which was in the directors, and held by them in trust for the corporation. Held that, after a lien against this land by prosecuting the attachment to judgment, the creditor had the right to maintain a bill in equity in the state court to remove the obstruction of the legal title in the directors, and to subject the property to the payment of his debt, without first issuing an execution on the judgment, and having a return of bo>w: and the removal of the cause into a federal court of Missouri, by the directol's and the corporation, on the ground of their non-residence, does not deprive him of this right.
SAME-BIlEACH OF TRUST.
During the pendency of the original suit in the federal court of Kansas, a contract was entered into between the directors and stockholders of the corporation, by which the land in question was to be sold, and the proceeds first applied to the liqui· dation of the debts of the corporation. Hdd, that the failure of the directors to make the sale, and to so apply the proceeds, was a breach of their trust, and was sufficient to confer jurisdiction on a court of equity to reach the land as an equitable asset of the corporation, for the benefit of one of its creditors.
Since the object of the suit is to fix the trust on the land in the hands of the directors, and to subject it t.o Jilluility for the creditor's debt, jurisdiction over the corporatiou, which is a non-resident, may be obtained by publication, under Rev. St. Mo. § 2022, which prOVides that in suits which have for their immediate object the enforcement or establishment of any lawful right, claim, or demand to or against any real property within the jurisdiction of the court, an order by publication may be made.
4. FUAUDULENT CONVEYANCES-WHAT AIlE.
Rev. St. Mo. § 571, which gives an attaching creditor an action at law to set aside a" fraudulent" conveyance of property, does not apply where the legal title of land was in good faith taken for the use and benefit of the debtor, with a resulting trust in favor of its creditors.
JUDGMENT AGAINST COIlPORATION-EFFECT ON DIRECToHs.
A judgment in persontl,m against a corporatiou, obtained in a federal court of a sister state, is conclusive on the merits in the cOurts of every other state when made the basis of an action; and the directors and managers of the corporation are as bound by the judgment as, tire corporation itself.
is a bill in equity. Itssuhstantialavermentsareas follows: The com plainant 'is a corporation under the laws of Kansas and Missouri, and the Anglo-American Payking & Provision Company is a business carromtion of the slate ot Illinois, and the other, respondents, Robert D., John, George, Anderson, William, and Alexander,Fowler, are also citizens of,