Long v. Farmers' State Bank

Decision Date25 June 1906
Docket Number2,381.
Citation147 F. 360
PartiesLONG v. FARMERS' STATE BANK.
CourtU.S. Court of Appeals — Eighth Circuit

E. D Perry (J. R. Plummer, W. A. Spurrier, and E.C. Mills, on the brief), for plaintiff in error.

William M. Jackson, for defendant in error.

PHILIPS District Judge.

The defendant in error has filed a motion to dismiss the writ of error on the ground that it does not bear the teste of the proper officers. While the writ runs in the name of the President of the United States, it is attested by 'the Honorable Smith McPherson, Judge of the District Court, and by 'Wm. C. McArthur, Clerk of the District Court. ' By the ninth section of the original judiciary act it was made the duty of the clerk of the Supreme Court to transmit to the clerks of the several courts the form of a writ of error as approved by two Justices of the Supreme Court. The form thus adopted prescribed that the writ should be issued in the name of the President of the United States and have the teste of the Chief Justice and the clerk of the Supreme Court. This was followed by the act of Congress approved May 8, 1792 (1 Stat. 278, c. 36, Sec. 9), now section 1004, Rev St. (U.S. Comp. St. 1901, p. 713), which prescribes that such writs of error may also be issued 'as well by the clerks of the Circuit Courts, under the seals thereof, as by the clerk of the Supreme Court. ' As this is the only statute applicable, it is uniformly ruled in the federal jurisdiction that writs of error must issue in the name of the President of the United States, attested by the Chief Justice of the Supreme Court and the clerk of the Circuit Court. Bondurant v. Watson, 103 U.S. 278, 26 L.Ed. 447; Ex parte Ralston, 119 U.S. 613, 615, 7 Sup.Ct. 317, 30 L.Ed 506; Cotter v. Alabama G.S.R. Co., 61 F. 747, 10 C.C.A. 35

Nothwithstanding the irregularity of the writ in question the motion should not prevail: (1) Because such defect is amendable under section 1005, Rev. St. U.S. (U.S. Comp. St. 1901, pg. 714). Texas & Pacific Railway Company v. Kirk, 111 U.S. 486, 4 Sup.Ct. 500, 28 L.Ed. 481; Miller v. Texas 153 U.S. 537, 14 Sup.Ct. 874, 38 L.Ed. 812; Cotter v. Alabama G.S.R. Co., supra. (2) Because the motion to dismiss comes too late. It was not filed until within two days of the time this cause was set down for hearing, and after the defendant in error had filed brief taking issue on the assignment of errors. In McDonogh v. Millaudon et al., 3 How. 693, 707, 11 L.Ed. 787, 794, Mr. Justice Catron, after advertising to the length of time the case had been in the Supreme Court before the motion to dismiss for a like infirmity in the writ of error, said:

'If errors had been assigned by the plaintiff here, and joined by the defendant, no motion to dismiss for such a cause could be heard; and as no formal errors are usually assigned in this court, and none were assigned in this cause, we think the delay to make the motion is equal to a joinder in error, even if the clerk of the Supreme Court of Louisiana had no authority to issue the writ,' etc.

The motion to dismiss is therefore denied.

Passing to the merits of the case, we find that the controversy grows out of the following state of facts: On the 31st day of December, 1903, Thomas F. Wells, doing a small mercantile business at Clearfield, Iowa, being indebted to the defendant in error, the Farmers' State Bank of said town, signed and delivered to said bank the following instrument of writing:

'For the purpose of securing financial assistance and credit of the Farmers' State Bank of Clearfield, Iowa, and as collateral security of overdraft and two promissory notes dated the 31st day of December, 1903, one for $700.00 and the other for $4,000.00 bearing 8 per cent. per annum interest from date and due in 6 months and 3 months, respectively, I agree with aforesaid bank to dispose of my stock of goods at earliest conveniences and pay to aforesaid bank the proceeds from such sale, sufficient to satisfy my indebtedness to it.
'I further agree to carry in the aggregate $7,000.00 insurance on aforesaid stock of goods in my possession in building on lot 3, block 14, original town of Clearfield, Iowa, as protection for aforesaid claims, and assign by these presents aforesaid amount of insurance to the Farmers' State Bank as collateral security for the aforesaid indebtedness, said insurance, or amount sufficient to liquidate my indebtedness to aforesaid bank, to be applied for this purpose in case of loss by fire.
'The aforesaid T. F. Wells hereby agrees not to accept settlement for loss for an amount less than sufficient to satisfy claim of the Farmers' State Bank without the approval of the latter; the aforesaid Farmers' State Bank granting the aforesaid T. F. Wells the right to settle with insurance companies in case of loss, as it agent.'

Though not affirmatively shown, it may be inferred that at that time Wells had taken out on his stock of goods fire insurance to the amount of about $7,000. It does not appear that the bank thereafter extended any further credit to Wells. The actual possession of the insurance policies remained thereafter with Wells. On June 22, 1904, the entire stock of goods so insured was destroyed by fire, whereby said Wells was rendered insolvent. On the 28th day of June, 1904, he compromised his claim of loss against the insurance company at $5,075, which sum he collected and paid over to said bank in liquidation of his indebtedness to it. Within four months thereafter, to wit, October 13, 1904, three petitions in involuntary bankruptcy was filed against Wells in the United States District Court for the Southern District of Iowa. Pending these petitions in involuntary bankruptcy he filed a voluntary petition, on which he was adjudged a bankrupt October 28, 1904. After the election and qualification of the plaintiff in error as trustee in bankruptcy he instituted suit against said bank to recover the sum so paid to it by the insolvent, on the ground of it being a voidable preference under the bankrupt act. On the assumption that the alleged assignment took effect and became operative on the 13th day of December, 1903, the District Court directed the jury to return a verdict for the bank, which being done the court dismissed the petition. To reverse this action of the court the plaintiff prosecutes this writ of error.

The first question to be considered is, what is the legal import of the alleged contract between Wells and the bank? Reduced to its practical sense it is this: Wells agreed to carry $7,000 insurance on the stock of goods as a protection of the claim of the bank against him, 'and assign by these presents the aforesaid amount of insurance to the Farmers' State Bank as collateral security for the aforesaid indebtedness. ' It does not purport to assign the policies of insurance, but agrees to assign an amount as collateral security sufficient to liquidate the indebtedness to the bank, 'to be applied for this purpose in case of loss by fire. ' By the last paragraph it was clearly contemplated by the parties that Wells should retain possession of the policy, and in case of loss he should make the proofs, settle with and collect from the insurance company, and pay over so much of the amount collected as would be sufficient to liquidate the debt to the bank, with authority to compromise with the insurance company, but at a sum not less than the amount of the bank's claim against him. Clearly this did not constitute an assignment of the policies in praesenti. This contract was no more than the personal agreement or undertaking of Wells that he would keep the property insured, and in case of loss he would collect and pay over to the bank sufficient to liquidate the debt. The contract conveyed nothing. At most it was but an executory agreement to create a lien upon a fund to arise in case of loss and collection made from the insurance company, when for the first time an equitable lien on the fund would attach. In other words, its effect was a direction to pay in case of loss. Such an agreement, while enforceable inter partes, was not binding upon either the insurer or those claiming an interest under the insured without notice of such lien. Ellis et al. v. Kreutzinger et al., 27 Mo. 311, loc. cit. 314, 72 Am.Dec. 270.

In Christmas v. Russell, 14 Wall. 69, 84, 20 L.Ed. 762, 764, Mr. Justice Swayne, speaking for the court, said:

'An agreement to pay out of a particular fund, however, clear in its terms, is not an equitable assignment. A covenant in the most solemn form has no greater effect. The phraseology employed is not material provided the intent to transfer is manifested. Such an intent and its execution are indispensable.

The assignor must not retain any control over the fund, any authority to collect, or any power of revocation. If he do, it is fatal to the claim of the assignee. The transfer must be of such a character that the fund holder can safely pay, and is compellable to do so, though forbidden by the assignor. Where the transfer is of the character described, the fund holder is bound from the time of notice.'

In the later case of Trist v. Child, 21 Wall. 441, 22 L.Ed. 623, the court expressed this same principle as follows:

'It is well
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