Chadbourn v. Coe

• Decision Date: 04 May 1891
• Citation: 45 F. 822
• Parties: CHADBOURN et al. v. COE et al.
• Court: U.S. District Court — District of Minnesota

45 F. 822

CHADBOURN et al. v. COE et al.

United States Circuit Court, D. Minnesota, Third Division.

May 4, 1891

In September, 1889, Reuben W. Chadbourn, now deceased, filed his bill in equity in this court against Orlen P. Whitcomb and James N. Coe. After the death of Reuben W. Chadbourn the action was revived in the name of the complainants herein. The said Reuben W. Chadbourn was at the time of the filing of the bill, and the present complainants now are, residents and citizens of the state of Wisconsin. The defendant Coe is a resident and citizen of the state of Minnesota, and the said Orlen P. Whitcomb is a resident and citizen of the state of Colorado. Whitcomb filed a plea in abatement, alleging that he was at the time of the filing of said bill, and now is, a citizen of the state of Colorado, and alleging that this court had no jurisdiction over his person or the subject-matter. Said plea has been sustained by this court and Whitcomb is out of the case.

The bill alleges that Orlen P. Whitcomb is indebted to the complainants in a sum exceeding $5,000, exclusive of costs and that the debt is evidenced by Whitcomb's three promissory notes. No judgment has been obtained against Whitcomb. It is alleged that Whitcomb is insolvent, and has been so since 1875; that since about 1883 he has been a resident and citizen of the state of Colorado, and absent from the state of Minnesota; that complainants cannot procure a judgment against him in any action at law in the courts of the state of Minnesota, or in the United States circuit court of said state of Minnesota, to collect said notes; that jurisdiction cannot be had by the service of process on Whitcomb in any action at law in said courts to collect said notes or to procure a judgment thereon; that Whitcomb has no property in the state of Colorado, where he resides, or in the state of Wisconsin, where the complainants reside, or in any other state or territory, as complainants are informed and believe out of which the complainants can collect their debt, except the property described in the bill, which property, both personal and real, the complainants allege Whitcomb transferred to defendant Coe with intent to hinder and delay and defraud his creditors; that complainants are without remedy at law to collect the debt; that the property so transferred to Coe was of the value of several thousand dollars in excess of the incumbrances thereon; that the property was taken by Coe with intent to delay and defraud the creditors of said Whitcomb, and especially the complainants; that Coe paid no consideration for the property at the time of the conveyance, except a nominal amount of one dollar, and that he executed at the time of the conveyance of the property a certain secret trust agreement to Whitcomb, a copy of which is set forth in the bill; that the purpose of the transfer to Coe was to prevent the complainants and other creditors from collecting debts, and to enable the said Whitcomb to manage, control, dispose of, and handle said property for his own use and benefit, free from claims of creditors, and particularly from these complainants; and that Whitcomb has, until about the year 1887, received the proceeds and crops from the real estate, and has sold a portion of the real estate; and that said trust agreement was never recorded. Said trust agreement, omitting the description of the property, is as follows:

'Know all men by these presents that I, James N. Coe, of the city of Rochester, in the county of Olmsted and state of Minnesota, for and in consideration of the conveyance to me by Orlen P. Whitcomb of said city of Rochester of the following described real estate situated in the county of Olmsted and state of Minnesota, and known and designated as follows, to-wit,* * * do hereby covenant and, agree, for myself and my heirs to and with the said Whitcomb, his heirs and assigns, to hold said premises in trust for the said Whitcomb for the following purposes, viz.: To convey said real estate, or any part or portion thereof, to such person or persons, and for such prices, as the said Whitcomb shall direct; and I hereby agree to make all such conveyances on request, and out of the proceeds of the sale of and for said real estate to pay to the creditors of said Whitcomb such proportion thereof as he shall direct, and to account to and with the said Whitcomb on demand, for and on account of all moneys or securities received on said sales, less any taxes or expenses incurred in the premises; and I further covenant that I will not convey said real estate, or any part thereof, except as requested by said Whitcomb; and in consideration of the premises and one dollar to me in hand paid by said Whitcomb, the receipt whereof is hereby acknowledged, I hereby covenant and agree for myself and my heirs to and with the said Whitcomb, his heirs and assigns, to convey upon demand to said Whitcomb, his heirs or assigns, by good and sufficient deed, all of the real estate hereinbefore compelled to set up his defense, if he has one. This court has no being paid the expense of executing said deed, and upon being paid all taxes and expenses, if any, incurred in the premises.'

There is also an agreement set forth in the bill by which Orlen P. Whitcomb transfers to said defendant Coe his personal property, consisting of stock, farm implements, etc., with power of attorney to manage, control, sell, exchange, or dispose of the property as directed by said Whitcomb, and to account to the said Whitcomb therefor. This agreement was not recorded; and it is alleged that the deeds of conveyance to Coe and the agreement were made and accepted with intent to delay, hinder, and defraud Whitcomb's creditors, especially the complainants, and to cover up and secrete the real and personal property of Whitcomb, and to prevent the creditors of Whitcomb from applying the same upon their debts. The defendant Coe demurs to said bill upon three grounds, as follows:

'(1) That said bill of complaint does not, since the allowance of the said plea of the said Orlen P. Whitcomb, state or set forth such a case as doth, or ought to, entitle the complainants to the relief thereby sought and prayed for from or against this defendant. (2) That the said Orlen P. Whitcomb having been by the order of this court dismissed out of this suit, and no adjudication having been obtained against him that he is in any way indebted to the said complainant, no relief can be had against this defendant to discover or appropriate property in this defendant's hands to the payment of any supposed claim against the said Orlen P. Whitcomb. (3) That the said Orlen P. Whitcomb, in the said bill of complaint named, is by the complainants' own showing a proper and necessary party to any suit which may be brought against this defendant in this court, touching any of the pretended matters of equity charged in said bill.'

Davis, Kellogg & Severance, for plaintiffs.

Charles C. Willson, for defendants.

THOMAS J., (after stating the facts as above.)

This demurrer was argued before Judge NELSON and myself at the January term of this court, and taken under advisement. After a careful consideration of complainants citing: Freeman v. Sedwick, 6 Gill, 28; Bolt v. Orders, 3 many others, I have come to the conclusion that this demurrer must be sustained. I am unable to see how this case can be determined according to equitable principles without the presence of the said Whitcomb. It is his debt which is sought to be collected. He has not had his day in court, and he cannot be brought in in this action, and compelled to set up his defense, if he has one. This court has no jurisdiction over him. He is alleged to be insolvent, and it is alleged that he has disposed of his property to the defendant Coe, both personal and real, with intent to hinder and delay his creditors, and that the agreement between him and Coe alleged and set forth in the bill, is a secret trust or device, adopted in aid or furtherance of the scheme to defraud the creditors. All these are important matters, in which said Whitcomb is directly interested. They are important to the defendant Coe. Whitcomb could not and would not be bound by the decree. His interests are so intimately connected with the interests of the parties to the suit now before the court that I think he must be held to be an indispensable party to the complete determination of the controversy. The conveyances and agreements are fair upon their faces; and the fact that they were not recorded, though a circumstance that would or might be taken into consideration in determining the question of fraud if all the parties were before the court, does not show fraud. In other words, taking the transaction between Whitcomb and Coe as disclosed by the bill, independently of a purpose or intent to defraud, which must be established by the complainants, the court could not find that the transfer was made or received by either with a fraudulent...