Boonville Nat. Bank v. Blakey

• Decision Date: 09 April 1901
• Docket Number: 748,745,749.
• Citation: 107 F. 891
• Parties: BOONVILLE NAT. BANK OF BOONVILLE, IND., v. BLAKEY. BLAKEY v. BOONVILLE NAT. BANK OF BOONVILLE, IND. PEOPLE'S BANK OF BOONVILLE, IND., v. BLAKEY.
• Court: U.S. Court of Appeals — Seventh Circuit

107 F. 891

BOONVILLE NAT. BANK OF BOONVILLE, IND., v. BLAKEY. BLAKEY v. BOONVILLE NAT. BANK OF BOONVILLE, IND. PEOPLE'S BANK OF BOONVILLE, IND., v. BLAKEY.

Nos. 745, 748, 749.

United States Court of Appeals, Seventh Circuit.

April 9, 1901

Azro Dyer, for banks.

John E Iglehart, for receiver.

On February 2, 1899, an involuntary petition was filed in the court below, sitting in bankruptcy, by three creditors of Marion Folsom, to procure his adjudication as a bankrupt. These creditors represented about $1,650 of a total indebtedness exceeding $28,000. On February 28th of that year Folsom was adjudged a bankrupt, and March 30th was appointed as the day for the first meeting of creditors and the selection of a trustee. On March 7th the petitioning creditors presented to the court their petition for the appointment of a receiver based upon three grounds. (1) That the bankrupt's affairs and accounts were in disorder, and he was unable to give an accurate list of his creditors; that it was necessary, for an orderly administration of the affairs of the estate with proper notice to creditors, that some person immediately take the books and accounts and prepare a correct statement thereof, with a list of creditors, without delay. (2) That the bankrupt left certain real estate requiring immediate care and attention. (3) That the bankrupt, within four months of the filing of the petition and of the adjudication, sold his entire stock of goods for about the sum of $10,000, and used the proceeds in payment of pre-existing debts under circumstances which made the same preferences under the bankrupt act; that all of such sums still belong to and should be a part of the estate, and should be recovered back by a trustee or receiver; that to preserve the evidence of the transactions of the transfers and to make immediate preparation for the recovery of the estate and the taking of all necessary steps thereto, and for the preservation of the estate, some person should be immediately appointed and authorized to take such steps. Thereupon, on that day, the court, 'believing it to be for the best interests of the trust that a receiver be appointed to take charge of the property and affairs of said bankrupt until a trustee shall have been elected and qualified, and until the further order of this court in this behalf,' appointed William M Blakey receiver, to have charge and control of the property, rights, choses in action, and assets of every kind belonging to the bankrupt or his estate, and empowered the receiver to prosecute all necessary suits, to collect all sums of money or property belonging to the bankrupt or his estate, to set aside any preferences to creditors, and to intervene in any action in which the property of the bankrupt may be involved. The order further directed that all persons indebted to or having property of the bankrupt pay and deliver the same forthwith to the receiver, and enjoined all persons from in any manner interfering with the property or estate of the bankrupt. The order further authorized the receiver to employ counsel as he amy deem necessary, whose compensation should be subject to the order of the court. On the 29th of March the receiver filed in the district court his bill in equity against the Boonville National Bank, the People's Bank of Boonville, Herbert E. Hoggatt, Thomas White, William Leslie, John G. Shyrock, William M. Strain, Charles M. Hammond, Truman P. Tillman, Marion Folsom, the bankrupt, and Laura Folsom his wife, and Frank H. Hatfield, charging that on January 23, 1899, the bankrupt sold his stock of goods to one McClary and one Perigo for $9,740.08, and received from the purchasers that sum; that Folsom had delivered certain choses in action upon sale or for collection to Hammond and Tillman, who thereupon joined Folsom in a note for $2,000, which was discounted and the proceeds received by Folsom, with the purpose to use the amount in payment of debts; that if this transaction be valid, and Hammond and Tillman are entitled to hold the securities assigned, there will be a surplus for which they should account. But it is charged that Hammond and Tillman, at the time they took the security, had reasonable cause to believe that Folsom was obtaining the money with intent to cheat, hinder, and delay his creditors and to use it to prefer creditors, and that therefore the choses in action belonged to the estate; that Folsom owed the Boonville National Bank over $6,400, represented by notes secured by indorsements which were not then due; that he owed the People's Bank $1,038, not then due; that he owed Hoggatt over $4,000, White over $4,000, Leslie $500, Shyrock $1,000, Strain $400, and Laura Folsom $5,000; that he then paid substantially all of these debts, except that of Laura Folsom, with intent to give a preference to such creditors, each of whom at the time had reasonable cause to believe that Folsom was insolvent and that a preference was thereby designed; that certain real estate conveyed by Hatfield to Laura Folsom by deed recorded in January, 1899, but purporting to be executed in February, 1897, was in fact purchased and paid for by Marion Folsom, and a deed therefor delivered to him, but it was not recorded, and was thereafter destroyed, and the recorded deed to Laura Folsom substituted; all with a view to hinder, delay, and defraud the creditors of Marion Folsom. The two banks separately demurred to the bill upon the ground of multifariousness. The demurrers being overruled, they answered to the merits, and the cause, after reference to and report by the master, proceeded to hearing and decree. On June 2, 1900, the court adjudged that the complainant recover of the Boonville National Bank $6,413.25, of the People's Bank $1,038, and that as to Hoggatt, White, Leslie, Shyrock, Strain, Hammond, Tillman, Laura Folsom, and Hatfield the bill be dismissed. Each of the two banks assigned for error that the court erred in confirming the report of the master that the complainant is entitled to recover the amount paid to the bank by the bankrupt, and that under the evidence and facts the bill should have been dismissed for want of equity. The banks severally appealed, but more than 10 days after the entry of the decree. The receiver assigned error, with respect to the decree against each of the banks, that the court improperly refused to allow interest upon the sum adjudged, and also assigned error for dismissal of the bill as to Laura Folsom, Hoggatt, Leslie, and Shyrock, and appealed from the decree. In each of the appeals by the banks a motion is made to dismiss upon the ground that the appeal was not timely.

Before WOODS, JENKINS, and GROSSCUP, Circuit Judges.

JENKINS Circuit Judge, after the foregoing statement of the case, .

The motions to dismiss are without merit and must be overruled. They proceed upon the theory that from all decrees or orders affecting the bankrupt's estate an appeal must be taken within ten days, under section 25 of the bankrupt act. This is an erroneous view. That section, limiting the time for appeal to ten days, has application only to decrees or orders in the bankruptcy proceedings, and to the three particular cases mentioned in the section. In the case at bar the claims were by the estate against strangers to the estate, asserted in independent proceedings. The section has no reference to independent suits to assert title to money or property as assets of the bankrupt against strangers to the proceedings. Such independent suits with respect to appeals come under the provision of the act creating circuit courts of appeals with respect to the period of limitation for an appeal. Steele v. Buel (C.C.A) 104 F. 968. The appeals here were therefore timely.

The objection that the district court had not jurisdiction to entertain the bill cannot be upheld. It was ruled in Bardes v. Bank, 178 U.S. 524, 20 Sup.Ct. 1000, 44 L.Ed. 1175, that the district court can be consent of the defendant, but not otherwise, entertain jurisdiction over suits brought by trustees in bankruptcy to set aside fraudulent transfers by the bankrupt to third parties before...