DUBUQUE NAT. BANK '/I. WEF.D.
COVER v. CLAFLIN et at (Circuit Court, S. D. New York. July 3, 1893.)
CmCUIT COURTS-JURISDICTION-SUIT BY FOREIGN TRUSTEE.
Where, pursuant to 1 Rev. St. Ohio, § 6344, a conveyance In fraud of creditors has been declared void by an Ohio court, and a trustee appointed, to "proceed by due course of law to recover" the property, and administer it for the benefit of creditors, such trustee is vested With the right of property, and may maintain a suit to recover the same in a federal court for another state.
In Equity. Sp.it by John F. Cover, trustee, against John Olaflin and others. On demurrer to the complaint.. Demurrer overruled. Rush Taggart and D. D. Duncan, for plaintiff. S. F. Kneeland, for defendants.
in fraud of creditors may be declared void, and a trustee appointed,
WHEELER, District Judge.
By a statute of Ohio, conveyances
who "shall proceed by due course of law to recover" the property, and administer it for the benefit of creditors. 1 Rev. St. § 6344. The demurrer here raises the question whether such a trustee in Ohio can maintain a suit for the recovery of such property in this court. Such proceedings appear to vest the right to the property in the trustee. Conrad v. Pancost, 11 Ohio St. 685; v. Talmadge, 16 Ohio St. 438; Shorten v. Woodrow, 34 Ohio St. 648; Union Bank of Ohicago v. Kansas City Bank, 136 U. S. 223, 10 Sup. Ct. Rep. 1013. Having this right, the trustee could sue to enforce it anywhere that he could to enforce his own proper rights, the same as an assignee in bankruptcy could. Lathrop v. Drake, 91 U. S. 516; Claflin v. Houseman, 93 U. S. 130. Demurrer overruled.
DUBUQUE NAT. BANK v. WEED et at (Circuit Court, W. D. Wisconsin. June 4, 1892.) 1.
ASSIGNMENT FOR BENEFIT OF CREDITORS-WHAT CONSTITUTES.
A deed of a portion of a debtor's realty, and a bill of sale of a portion of his personalty, to the presidents of certain banks, taken With a defeasance back, showing that they were given as collateral security for promissory notes to the banks, do not constitute a voluntary assignment for the benefit of creditors With preferences, under the laws of Wisconsin, In tllat there is no creation of an active trust. Such conveyances constitute a mortgage on the properties, and the fact that the defeasance was on a separate paper Is immaterial.
Where mortgages were subsequently given to each of the banks on different portions of the same property, for convenience in securing each bank separately, the former conveyances were merged in the subsequent mortgages.
V .57 F. no.5-33
In Equity. Bill by the Dubuque National Bank against Alfred Weed & Co., Edwin Ellis, and Thomas Bardon to set aSide a. deed. mll dismissed. Pinney & Sanborn, for complainants. TOPJ,kins & for defendants.
BUNN, District Judge. This is an action brought to set aside a ,certain deed' of land made by the defendants A. Weed & Co. to the Edwin Ellis and' Thom'as Bardon, dated September 4, 1890, purporting to convey certain lands in Gogebic county, Mich., consisting· of, a saw;millsite known as the "Ramsey Sawmill," belonging to theJirmof .A.. Weed & Qo., and to have·tAe complainan.t subrogated in the place of the grantees named in said conveyance, to the extent of the complainant's claim against A:, Weed & Co. The leading facts, so far as necessary to state them f()or the propetl.' understanding of the case, awe these: The defendantls A. :Wee<F& Co., who were. a lumbering: firm doing business in the northpa.ttofWisconsin and in Micbigan, early in September, 1890, became' embarrassed, aind unable to pay their debts. They owned quite a large amount of property, real and personal, having a mill and a'logging ontfit and stock of logs, at Ramsey, and Mich.,. lUld another at Ashland, Wis., with logs, Jumbe'l.', shingles, andv8Ilious other property, amounting in value to $20,000 or $25,000, the property involved in this suit, about $17,500 of which was cash. Their principal home creditors were the First NatiorialBank,the Asbla:.tJ.d National Bank, and the Security Savings Bank,all' at the city, of Ashland, in this state. They owed these banks .about· $65,000 for cash advanced in the business of lumbering,and for whiCih notes had been given. To secure this large indebtedness, on September 4, 1890, the defendants A. Weed & Co. executed to the defendants Edwin Ellis, the president of the First National Bank, and who was also a directO'l' and stockholder in said bank, and one of the principal stockholders in the Security Savings Bank, and Thomas Bardon, who was president of, and a director and stockholder in, the Ashland National Bank, a warranty deed of the Ramsey mill site inMichigan, together with certain bills proRerty, consisting of logs, lumber, lath, shingles, of sale of logging outfit, horses, and cattle. At the same time, and as part of the same transaction, Ellis and Bardon gave back to A. Weed & Co. a defeasaIlce in writing, as follows:
"Know all by presents, that, the bill of sale eXe<luted this 4th day of September, A. D. 1890, by A. Weed & Co. to Tllomas Bardon and Edwin Ellis, on logs and lumber in Ashland county, apd the bill of sale by Alfred Weed and Paul Weed for logs, lumber, lath, and shingles, and horses, cattle, and loggihgoutfit,on same date, said property being in Gogebic county, Michigan, and -the deed heretO attached, executed on the same date, and between the same parties, on the sawmill property at Ramsey, Gogebic county, Michigan, on the S. E. lA, of the N. W. lA,sootion 13, town 47 north, range 46 west, N. E. 14 of S. W. 14 Sec. 13, town 47 north, of range 46 west, and the assignment of the mortgage from Bay Shore Lumber Company to A. Weed & Company of $12,000, are given as collateral securities for payment of
DUBUQUE NAT. BANK V. WEED.'
notes made or indorsed by said 'Weed & Cofupll.ny, and held by the First National Bank of the Ashland National Bank;· and the Security Bank, all of Ashland, Wis., to the amount of about $65,000. Witness our hands and seals the 4th day of September. A. D. 1890. [Signed] "Thomas Bardon. [Seal.] .IEdwinEllis. [Seal.] "'In presence of "Ida A. Forrest. "W. M. Tomklns."
A few days after thesp. conveyances were made, on September 10, 1890, the banks, not being satisfied with the manner of the security taken by Bardon and Ellis, had mortgages executed in form directly to the several banks to secure the same indebtedness. Among these was one executed to the First National Bank of AsWand upon the same real estate, to secure the indebtedness to that bank, amounting to about $51,000. The contention of the complainant is that the transaction of September 4, 1890, constituted a voluntary assignment of a portion of the defendants' property to Bardon and Ellis as trustees for the benefit of creditOTs, and that, as it gave a preference to these creditors, and was not, in other respects, in compliance with the statutes of Wiscons'in relating to voluntary assignments, the conveyances were void as to creditors. It is further contended that, though void as to creditors, the deed, as between the parties, conveyed the title to the land to Bardon and Ellis; and the complain· ant seeks to have their title set aside, and to be subrogated in their place, to the extent of the compla'inant's claim, which is $5,000 and interest. It is claimed by the complainant that the mortgage on the same property, of September 10, 1890, though otherwise admitted to be valid, is in fact void, because the property had already been conveyed to Bardon and Ellis, as trustees, on September. 4th, and, there being no reconveyance of the land, there was no title in A. Weed & Co., on the 10th, upon which the mortgage of that date could operate. It must, I th'ink, be confessed that the reasoning by which. the complainant is to be put in the place of Bardon and Ellis in respect to their title under the first conveyance is not altogether inartificial in character. Still, the contention may perhaps be supported, if the complainant's main proposition be correct, that the conveyance of September 4th Was void as to creditors, as being in violation of the statutes relating to voluntary assign. ments. But, in the judgment of the court, this contention cannot be maintained. There was no attempt to make a voluntary assignment of the debtors' property to trustees for the benefit of creditors. The essence of the transaction of September 4th was a mortgage upon a particular portion of the defendants' real estate, and mortgages upon certain of the personal property, to secure the debts of certain creditors, which it is admitted were bona fide, and already existing and secured by promissory notes. Bardon and Ellis were not active trustees, and the conveyance with a defeasance back, showing that it was given as colla,teral security, was a mortgage, to all intents, the same as though it had been in any other form.
Thee'ircumsta,nee of tb,e defeasance being upon a. separate paper was quite immaterial. In' many states that is the most common form pf a mortgage. .· 'rile conveyances no doubt made in form to Bll.T<1on and Ellis be,causethey' We'l'e the presidents and repre· of. these, banks, whose debts the defendants wished to secure, and the real parties in interest were the three Lanks, in proportion to the amount of their several claims. Except for convenience in securing each bank separately, there was no need to: change the securitJ. At time it was competent for the parties to do so, and the mortgages taken severally to the banks on September 10th took the place, as was intended, of the mortgages given on the 4th. There was no transfer of title by the deed of September 4th, which required a reconveyance in order to change the form of the security, as would perhaps be the case where an absolute deed is given, not intended as a mortgage. And the giving of the 'new mortgages in a new form on September 10th -the real estate mortgage to one, and chattel mortgages to the others-merged in that transaction that of September 4tJh. The original transfer of September 4th, so far as I can judge, had all the qualities and reql1'isltes of a mortgage, while it lacked some of the :rna,terial characteristics of a voluntary assignment, especially in that there was no creation of an active trust, which is recognized as necessary in all the adjudged cases in this state in order to stamp the trati,saction with the charactel' of a statutory assignment for the benefit of creditors. It was' mortgage of particular property to secure' particular creditors, which has ever been held allowable under oUr law. See Ingram v. Osborn, 70 Wi:s.l84, 35 N. W. Rep. 304; Cribb v. Hibbard, Spencer, Bartlett & Co., 77 Wis. 199, 46 N. W.Rep. 168. The late$t case is Michelstetter v. Weiner, 82 Wis. 29S,52 N. W. Rep, 435. See, also, Wisconsin Cent. Ry. Co. v. River Land 00., 71 Wis. 94, 36 N. W. Rep. 837; Hoyt v. Fass,6.4 Wis. 279, 25 N.W. Rep. 45; Schriber v. Le Clair, 66 Wis. 579, 29 N. W. Rep. 570, 889. There will be a decree dismissing the complainant's bill of complaint, with costs.
LEWIS v. SHAW et al. (Circuit Court, D. Washington, W. D. July 17,1893.)
Where an entry on public land is allowed at the land office, and payment for the land is received, the entry is prima facie valid; and proceedings by the commissioner of the general land office and the secretary cd the interior to cancel the entry fo,r misrepresentations of the entryman, without notice to a bona tide purchaser from the entryman, are void.
OF ENTRy-RIGHTS OF BONA FIDE PURCHASERS.
In Equity. Bill by Charles Lewis, alleging equitable ownership of 128 acres of land, ,situated in Pierce county, state of Washington, for a decree establishing his title to said land, and to have the