588
FEDERAL REPORTER.
claimants, occupy no, better position, whether they are bona firk holders or not, which question it is not necessary to decide here. Stanton v. Alabama & C. R. Co., 2 Woods, 506. But it is further contended that John Swann, the purchaser of the said railroad, and the present receiver or trustee for the property, long since the issue of said certificates. by previous receivers, contracted to pay said Stanton these identical certificates, and that he should be made to comply with his contract, and to pay these claimants for them. I think there are two answers to this proposition: (1) That such contract was a voluntary and personal undertaking of said Swann, not required by the order of this court, and with which the court has nothing to do in this case. It was a contract, too, to which these claimants were not parties. (2) That the proof shows that Swann has settled with Stanton for the certificates, and thereby complied with his private arrangement with him. If these claimants have been in any way damaged thereby, and have any legal rights in the premises, they have their recourse in a personal action against said Swann. That is a matter of which this court can take no cognizance in this proceeding, nor can the railroad property be liable for any such claim as is set up. It is further contended that Swann is estopped from contesting this claim by the contract referred to. I do not think that any question of estoppel" arises in this case, for reasons already stated herein, and Swann's connection with the contest of this claim is as the representative of the railroad company, and as receiver of its property by authority of this court. As to the doctrine of estoppel, see Brant v. Virginia, C. & 1. Co., 93 V. S. 326; De('Jl"y v. Gray, 5 Wall. 795; Pom. Eq. Jur. § 804, and note.
BATES and others
'V.
MCCONNEJ.L and another.
(Oircuit Oourt, D. Nebraska. August 2, 1887.)
1.
FRAUDULENT CONVEYANCES-HUSBAND AND WIFE-EvIDENCES OF DEBT.
A merchant who failed in 1884 started in business in 1872 with $12,000, loaned him by his wife. Her security was a note at five years, with interest at 10 per cent. On his failure, he conveyed considerable real estate to her in satisfaction of the debt. She claimed that the note had been twice renewed, with compound interest, viz., five and ten years from its date. The original note and one renewal note were, as produced by her, suspicious on their face. Held, that as between the wife and the creditors of the husband, the wife was entitled to be paid, out of the property deeded her, $12,000, with interest at ten per cent., and that all over and above that was to go to the satisfa({tion of the claims of the creditors. 1
2.
SAME-PURCHASE OF JUDGMENTS.
It is competent for attaching creditors of an insolvent merchant to sell their claims to his wife at half their value, she paying for them out of her own funds; but where the property attached is ample to pay the claims in full, lwd they are satisfied out of the proceeds of the property, and the trans-
lSee note at end of case.
BATES V. M'CONNELL.
589
action is a mere scheme of the husband to prevent part of his effects goinA' In satisfaction of his just debts, the wife will be held accountable as trustee for the other creditors, to the extent of the balance of the property not applied to the payment of the claims of the attaching creditors. 1
In Equity.
Bill to set aside conveyances as in fraud of creditors.
BREWER, J. Complainants are judgment creditors of John McConnelL He was a merchant doing business in Lincoln, Nebral;lka, from January, 1872, to December, 1884, at which time he failed. About two months prior to his failure he conveyed a large amount of real estate to his wife in payment of an alleged indebtedness. At the time of his failure he gave a chattel mortgage on his stock to a bank in Lincoln, which had a claim of about $20,000. The bank took possession of this stock under the mortgage; and proceeded to sell the same to satisfy its claim. Other creditors commenced attachment proceedings; seeking to obtain satisfaction of their claims outofthe stock of goods after the payment olthe mortgage note. This stock was ample for the payment of the mortgage, as well as the claims.of these attachment creditors. ,rJihose claims were placed in judgment, the Judgments assigned by the several creditors to Mrs. McConnell for 50 cents on the dollar, or thereabouts: These judgments were satisfied in full out of the proceeds of this stock of goods, so that one-half of the amount of these judgments really passed to Mrs. McConnell. Complainants have filed this creditors' bill, seeking to set aside the conveyances made to Mrs. McConnell as fraudulent, and also Ito charge her as trustee for their benefit of the amounts received by her in collection of those various judgments. Noticing the last matter first, I remark that unquestionably a Greditor having a valid claim may do what he pleases with it, all or any portion to the wife of the debtor; and, if such gift is made, the wife takes the property thus given free from the claim of any other creditor of her husband. So, if these several creditors had intended to give 0116half of their claims to Mrs. McConnell, the money she thus obtained would be hers free from any claim of complainants. Or if they elected to sell their claims for 50 cents on the dollar, or any other sum, to her, and she paid therefor out of her own moneys, she would hold thesejudgments, and the proceeds thereof, free from any claim of complainants. But it is also true that equity looks beyond the mere form of the transaction, at the real facts, and I have no doubt from the testimony that all this matter of an assignment of the judgments to Mrs. McConnell was a mere trick, and not a bona fide purchase by her. After his failure, Mr. McConnell offered to pay 50 cents on the dollar; sent statements to that effect to his various creditors. These, compHtinants, the largest creditors, would not accept; the others, having smaller claims, were willing. As all did not accept, that proposition seems to have fallen through, and this scheme of the assignment was substituted. But the whole thing was managed by McConnell. The creditors had expressed a willingnesd ISee note at end of case.
590
to taka 50 cents. They were paid 50 cents, and the. purchase in the of Mrs. McConnell was simply a transaction of his own, for the purpose of giving to his wifE! the proceeds ,0£ goods which should in good faith have gone to his own creditors. The testimony of Mrs. McConnell show&.thatitwas. not an effort of hers to speculate on:thesejudgments. She acted simply as Mr. McConnell and his lawyers advised. So, although the f'0I'lll of the transaction was a purchase ofthe.judgments by Mrs. McConnell, and though the ,law as' gifts and saleeby creditors be aaI have above stated, yeLL think, looking at 'the rea,! transaction, it must be sQ.judged a mere scheml'llof Mr. McConnell to prevent' part of his property going in satisfaction of his just debts. This the law will not tolerate, and she must.becharged as trustee for the amount thus. reiol' the benefit of complainants; .Alil.. tothe conveyances of property, prior to the failure, to Mrs. Meiq sa,tisfaction of an alleged debt, I remark this: It is undoubted that when .Mr. McConnel1wentinto business, in 1872, he started with a.llto.ck of from sixteen to 'eighteen thousand dollars, twelve thousand: dollars Of which was paid by Mrs. McConnell with land which was her separa.te prqperty. She, testifies that she took a Mte for that $12,000, runningfiv.e years, with interest at 10 per cent., payable annually. At the lend of five, years, 'nothing having been paid, the interest was compl1ted; and:a new note takenJor the amount !ben due, to-wit, $19,.325, also running nve years, with like interest. An.d at the end of that jive years, nothing having been paid', a third note was taken in like manner due. She produces the first two notes, and I must for the confess that those notes almost destroy my faith in her testimony. They :were made' apail't, one at Cleveland, Ohio. and the other in Lincoln, JS'e:bra§ka. They are written upon pieces of legal cap paper, ,which are taken from the .same sheet. The iQ;k is the same, the writing alike. Both are dated Lincoln, Nebraska. In bath the last figure: of the date bas been cbanged. The first was Jeyidently,fI,$.firat wdtten, "December16, 1870,"and the 16" and, sUbsequeutlycbanged to "1871" and "1876," respectively" whichwfls given by Mrs. McConnell for the OOOwasiJ;l Pecemher, 1871, and Mr. McConnell commenced business in .Ja.nuary, .187·2", ,Outside of the testimony of experts, a careful personal e:x:an:;li.Dll.ti(ml.tmds me. very strongly.to believe that both notes were written '3tthe sametime, of course,l;luch s fact makes very seriously against .the truth of ber'telltimony.. I do no.t doubt that she paid $12,000 in the .first instal;1(le.)...Thatds shown by otber and satisfactory testimony. Of course"hel'bUJ;lba,nq:thl;'n owed her that amount; butwbat I do doubt, .isber testitn.ony·that that debt waS, by tbe mutual understanding of the parties,keptaliye as a. debt; al;1d,w.ith interest; compounded ann,ually .at 10,pell,c.el;1t.:, Seitz v. U. S. .580. Yet, notwithstanding tliie'verygflllYiIfJ,dpubtstbat I ha.ve,·tam constrained to hold that she is ,entitled to paprote41ted.as a creditor on that claim to the extent. of $12,000; and 10 per cent. simple interest to date, as well as for the otber items of indebtedness testified to by her. A computation in this man-
ROGERS'll. RIESSNER.
591
ner, instead of compounding the' interest annually, shows that she has received property of too great value for her debt. The excess she should be held responsible for. OlementB v. Moore,6 Wall. 312. The deoree, therefore, will be that she holdS the moneys received'Rs the proceeds of said judgments in trust for the complainants, and that she pay the same -over in 60 days, or that execution issue therefor. If parties cannot agree upon the amount, the clerk is to compute it from the testimony., With reference to the other property, she will be adjudged as holding it as trustee-Pirst, for the 'paymentof her own indebtedness compU'tedas above indicated; and, second, to the payment of the balance due Mmplaimints; and the decree will be that it be sold by a master of !hili -court, and the proceeds applied,' first, to the paiment of her debt,lUld the balance to complainants. . . 'i NOTE. CoNVEYANCE FROM RUSBANJ) TO WIPE. ' Aconveyanee to e: wife, in -payment or a debt to her by her husband, is nota voluntary conveyance, nor fraudulent with BJlect to his ot:ber creditors. Gibson v. Bennett. (Me.).9 Atl. Rep. 72i; Heath .v. 810,' ilum, (Pa.) Id. 259; Lyon v. Zitllmer, note, 30 Fed. Rep. 401'; Dice v. Irvin; (Ind.) 11 N. E.! Rep. 488; Popendick v. Frobenius. (Mich.) 3aN.W.Rep. 887; Iowa City :Banlt .v. Weber. (Iowa,) a3 N. W, Rep..606; .German-American S.lJminary v. Saenger, ,(Mich.) Id. 301; Brickley v. Walker, (Wis.) 32 N. W. Rep. 773; Chapman v. Summerfield, {Kan.) 14 Pac. Rep. 230; Miller v.Krueger,·(Kan.) 13 Pac. Bep.' 644.' Where there is. no evidene:e. of. apy previous llgreement for the repayment of the 'money, the wife will be held to have no legal claim against the husband therefor,.l'nd will not be permitted to appropriate his property, nominally in payment therefor, to the IlxclusioJl of his creilitora. Jacksonv. Beach, (N. J.) 9 Atl. Rep. 380 ; RanBon v. Manley, (Iowa,) 33N. W. Rep. 357; Wake v. Griffin, (Neb.) 2 N. W. Rep. As to the burden of proof in conLroveraies between·a. married woman and itol'l! of her husband, see Brickley v. Walker. (Wis.) 32 N. W. Rep. 773, and note; Burt v. Timmons, (W. Va.) 2 S. E. Rep. 780. As to fraudulent conveyances between husband and wife, see Foster v. Knowles, (N· .T.) 7 At!. Rep. 295; Milholland (Md.) 2 At!. Rep. 831, and note; Knight v. Kidder, (Me.) 1 AU. Rep. 142. and note; Platt v. Schreyer, 25 Fed. Rep. 87, and note; Frank v. Humphrey, (Ill.) 12 N. E. Rep. 720; Hooserv. Hunt, (Wis.) 26 N. W. Rep. 442; Farmer!,!' Nat., Bank v. Warner, (Iowa,l·ld.47; (Va.) 2 S. E. Rep. 33; Webb v; Ingham, (W. Va.p S. E. Rep. 816. ."
ROGERS 'I/o RIESSNER
and another. l887.)
(Oircuit Oourt,B. D. New York. ' July
EQUITY-CRoss·BILL-LEAVET() SERVE. After a decree had been rendered in a cause on proofs taken, thll defendants' obtain'ed an order from another judge allowing them to serve a crossbiU, . Afterwards a motion by 'complainant to set aside this order was seJit for hearing to the jl1dge who granted it, and returned by him to the judge' who mftde the' ,decree, when it appeared ·that the 'order was signed on formal proofs only, without knowledge of any hearing in the cause; the petition for leave to serve the cross-bill merely disclosing that an answer to the original bill had been ·served.. Held, that the motion to set aside the order might be cons,dered as amotion by defendants for leave to serve a cross·bill, and, as this involved the taking of. additional testimony, the application was'too late, and the order giVing leave to serve the cross-biU should be set aside.
592
FEDEItAL REPORTER.
In Equity. On motion to set aside order allowing service of crossbill. Oeo. a.Lay, for complainant., Turner, Lee&: McClure, for defendants. This is a motion to set aside an order made by Judge defendants to serve a cross-bill. The motion, coming on for heardngbefore'Judge WHEELER, was by him sent to Judge BROWN, who imlprsed this memorandum on: the papers: . "The order was signed on a formlll statement only, without knowledge of 8IDY hearing in tbe cause. The propriety of the application.depends so largely upon the which were determined at the hearing that this motion should come before Judge WHEELER, wbo is familiar with the merits of the case. . "A.B." In view of the first clause of this memorandum, and of the fact that the petition for leave to serve .cross-bill sets forth the fact that an answer to the original bill has been served, but does not disclose the fact that the case ha4been heard proofs taken, and a decree rendered, the present application may be considered as a motion by defendants for leave to'se:rve R. cross-bill. Inasmuch as the defendants propose to take additional testimony under thisoross-billwhen served, the application isrnadet<>:(l'1l\te.· Field v. Schieffelin, 7 Johns. Gh. 255; White v. BuJtnd, 2 Paige, 164. The order giving leave to serve the cross-bill should therefore' be set aside. accordingly·. LACOMBE, J. BROWN. allowing
on
LAZENSKY
'/J.
SUPREME LoDGE KNIGHTS OF HONOR.
(Circuit Court, 8. D. NeU! York. July 25,1887.)
1. _
MUTUAL BENEFIT INSURANCE STANDING.
ACTION ON CERTIFICATE -
EVIDENCE
Oll'
In an action by the beneficiary upon a certificate issued to a member of a benevolent society. a condition of which was that the member should' be in good standing at the time of his death, held, that proof of a recognition of such membership by the defendant up to within a short time of the death of the member,'inconnectfon with the presumption that all persons follow such laws. rules. and regulations as they are under, was sufficient evidence of the good standing of the member to maintain the action.
2,
,SAME-NoN-PA.YMENT
.
T4e laws of th,e society provided that members should pay their assessments within 30 days after notice, and the society's record showed a suspension before the of that time. There being no other evidence, held, that suc4suspension afforded no proof of the non-payment of an assessment, nor of any default of the member.
8.
SAllIE-ApPLICATION FOR REINSTA.TEMENT.
There beingno evidence of the non-payment of 'an assessment, the member could not be held to be in default by reason of having made no application fo1' reinstatement, under rules wholly applicable to suspension for the nonpayment of dues, fines, or assessments.