Campbell v. Calcasieu Nat. Bank

• Decision Date: 17 May 1926
• Docket Number: No. 4745.,4745.
• Citation: 12 F.2d 981
• Parties: CAMPBELL v. CALCASIEU NAT. BANK OF SOUTHWEST LOUISIANA et al.
• Court: U.S. Court of Appeals — Fifth Circuit

12 F.2d 981 (1926)

CAMPBELL v. CALCASIEU NAT. BANK OF SOUTHWEST LOUISIANA et al.

No. 4745.

Circuit Court of Appeals, Fifth Circuit.

May 17, 1926.

James Oliver Modisette, of Jennings, La. (Modisette & Adams, of Jennings, La., on the brief), for appellant.

Charles A. McCoy and Leland H. Moss, both of Lake Charles, La. (J. H. Heinen, of Jennings, La., and McCoy & Moss, of Lake Charles, La., on the brief), for appellees.

Before WALKER, BRYAN, and FOSTER, Circuit Judges.

WALKER, Circuit Judge.

On January 24, 1922, Alfred S. Campbell executed to his father, Alfred Campbell, the appellant, a mortgage on land to secure a debt of $8,600 and interest. In a suit brought in a Louisiana state court on November 17, 1922, by the appellee, Calcasieu National Bank, the payee in a note made by Alfred S. Campbell for $4,500, with interest, against the appellant and Alfred S. Campbell, a judgment or decree was rendered on February 23, 1923, whereby said mortgage was "decreed to be null and void, as having been given in fraud of creditors, and attempting to confer upon the said Alfred Campbell, mortgagee, an undue preference over the other creditors of Alfred S. Campbell, mortgagor, having been given when the said Alfred S. Campbell was, to the knowledge of both the mortgagor and mortgagee, insolvent, and that the property described in said mortgage be and it is hereby decreed subject to seizure and sale by the plaintiff according to law, and the proceeds derived therefrom be applied to the extinguishment of this judgment in preference to any privilege in favor of Alfred Campbell, mortgagee." That decree was affirmed by the Supreme Court of Louisiana. Calcasieu National Bank v. Campbell, 155 La. 378, 99 So. 337.

On a voluntary petition filed by Alfred S. Campbell on March 5, 1923, he was adjudged bankrupt on the same day. After the appellant had presented and procured the allowance of his mortgage claim in the sum of $8,600, the appellee by an intervening petition filed in the bankruptcy proceeding, to which appellant alone was made a defendant, sought the setting aside of the order allowing appellant's claim in the sum of $8,600, with interest and attorney's fees, as a secured claim, and the recognition of the appellee's rights as a mortgagee in the sum of $4,500, with interest and attorney's fees. The referee made an order to the effect that the appellee had a privilege, and should be paid by preference over the appellant from the proceeds of the sale of the mortgaged property, and that the proceeds, if any, after paying the cost and judgment in favor of the appellee, be paid to the appellant. The court confirmed that order. The appeal is from the decree to that effect.

To support the decree appealed from, the theory was advanced that the appellee, to the extent of the debt owing to it by the bankrupt, was substituted or subrogated to the position of the appellant as mortgagee, and was entitled to enforce the mortgage as if it had been made to itself. Evidently such a theory finds no support in the provision of law giving a creditor a remedy in the case of an invalid transfer by his debtor of property to another creditor; and it is equally evident that neither of the state courts which sustained appellee's attack on the bankrupt's mortgage to the appellant acted on any such theory. The right asserted and maintained in the above-mentioned suit in the state court is the one provided for by article 1977 of the Civil Code of Louisiana, which reads as follows:

"Fraudulent Contracts as to Complaining Creditors Only. — The judgment in this action, if maintained, shall be that the contract be avoided as to its effects on the complaining creditors, and that all the property or money taken from the original debtor's estate, by virtue thereof, or the value of such property to the amount of the debt, be applied to the payment of the plaintiff."

The just-quoted provision is explicit in giving to the complaining creditor the right to avoid the attacked transfer as to its effects on the former, and in making the voidably transferred property subject to be applied as the debtor's property to the payment of the debt to the complaining creditor as if the attacked transfer had not been made or attempted. By its plain terms the judgment rendered in the suit in the State court annulled and avoided as to the appellee the mortgage of the bankrupt to the appellant and decreed the mortgaged property to be subject to seizure and sale to satisfy the bankrupt's debt to the appellee. The opinion rendered by the Supreme Court of Louisiana in affirming that judgment, in harmony with other decisions of that court, unequivocally recognized that the effect of the affirmed judgment...