Carothers v. Weaver

• Decision Date: 23 January 1930
• Docket Number: 6 Div. 401.
• Citation: 220 Ala. 584,127 So. 151
• Parties: CAROTHERS v. WEAVER ET AL.
• Court: Alabama Supreme Court

127 So. 151

220 Ala. 584

CAROTHERS v. WEAVER ET AL.

6 Div. 401.

Supreme Court of Alabama

January 23, 1930

Rehearing Denied March 20, 1930.

Appeal from Circuit Court, Cullman County; James E. Horton, Judge.

Creditor's bill by R. M. Weaver and others against William Carothers Nellie Carothers, Esther Carothers, L. O. Mussett, and L Leigeber. From a decree overruling a demurrer to the bill defendant Nellie Carothers alone appeals.

Affirmed.

W. E. James, of Cullman, and A. J. Harris, of Decatur, for appellant.

J. M. Kilpatrick and F. E. St. John, both of Cullman, and S. A. Lynne, of Decatur, for appellees.

ANDERSON C.J.

The bill in this case was filed by certain creditors of the respondent William Carothers seeking to set aside certain conveyances made by said Carothers for the purpose of delaying, defeating, and defrauding his creditors. More than a year after the bill was filed the trustee of said Carothers was brought in as a joint complainant, and, as stated in brief of appellant's counsel: "The principal proposition raised on the appeal is the decree of the Court overruling the grounds of demurrer *** which very clearly raised the proposition that the creditors of William Carothers and his trustee in bankruptcy, J. M. Kilpatrick, could not jointly prosecute the bill as complainants to set aside the alleged fraudulent conveyances by William Carothers, the bankrupt"-or as argued in the brief: "By bankruptcy the individual action of the creditors is arrested, and the title to the property of the bankrupt, including that conveyed in fraud of creditors, is vested in his trustee, who acts for the creditors in avoiding the transfer."

This is a sound statement of the law under ordinary circumstances where all creditors had no lien at the time of the bankruptcy or which was thereby dissolved because acquired within four months of the bankruptcy, but does not apply to the rights of creditors who have prior liens not dissolved by the bankruptcy. When a creditor files his bill in equity and acquires a lien on specific assets and diligently prosecutes his suit to final judgment, he acquires a lien on the property of the bankrupt which is superior to the title of the trustee, and the courts have no right to enjoin him from enforcing his lien. Metcalf v. Barker, 187 U.S. 165, 23 S.Ct. 67, 47 L.Ed. 122. Or when a creditor files a bill in a state court to set aside a conveyance made by a person, who, during the pendency of the action and years after its commencement, is adjudged a bankrupt, and to apply the proceeds of the property affected towards the payment of the debt, the state court acquires such a complete jurisdiction and control over the bankrupt that jurisdiction is not divested by proceedings in bankruptcy, and it is the duty of the state court to proceed to final decree notwithstanding the adjudication in bankruptcy, under the rule that the court which first acquires rightful jurisdiction over the subject-matter should not be interfered with. Pickens v. Roy, 187 U.S. 177, 23 S.Ct. 78, 47 L.Ed. 128. True, the appellant does not seek to restrain the proceeding in the state court, but contends, in effect, that the creditors should be eliminated as parties complainant and that the trustee should be substituted as sole complainant. We cannot assent to this contention, and think that the creditors can proceed in their own name to prosecute their cause to a final decree and subject the proceeds of the fraudulent sale to the satisfaction of their lien, and, if a residue is left, it should go to the trustee for the benefit of creditors without a lien. Blair v. Brailey (C. C. A.) 221 F. 1; Gilbert's Collier on Bankruptcy (1927 Ed.) p. 1042. It would therefore seem that the creditor with a lien and the trustee would both have a joint or common interest in setting aside the conveyances primarily for the enforcement of the lien, and secondarily to subject the surplus to the benefit of the simple or common creditors.

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