Dokken v. Page

• Decision Date: 30 July 1906
• Docket Number: 2,399.
• Citation: 147 F. 438
• Parties: DOKKEN v. PAGE.
• Court: U.S. Court of Appeals — Eighth Circuit

147 F. 438

DOKKEN v. PAGE.

No. 2,399.

United States Court of Appeals, Eighth Circuit.

July 30, 1906

John Burke (Burke & Middaugh, on the brief), for appellant.

Fred B Dodge (Clarence A. Webber, on the brief) for appellees.

Before VAN DEVANTER and ADAMS, Circuit Judges, and PHILIPS, District judge.

PHILIPS District Judge.

On the 13th day of May, 1905, Abraham Z. Tveten was adjudged a bankrupt in an involuntary proceeding in the United States District Court for the District of North Dakota. Upon the appointment of a receiver of the estate of the bankrupt under order of court, he took possession of a lot of goods transferred and delivered by the bankrupt on or about the 19th day of April, 1905, to Nils Dokken. Thereafter on the 24th day of June, 1905, a stipulation was entered into between the petitioning creditors in bankruptcy and E. B Page, trustee in bankruptcy, and said Nils Dokken, the claimed purchaser of said goods from the bankrupt, that said Dokken should file in the above-named court 'his complaint and intervention setting forth all the claims of the said Nils Dokken to said stock of goods by the 1st day of July, 1905', and that answer thereto should be filed on or before the 1st day of July 1905; and that the cause should be set down for trial at the July term of said court. Thereafter on the 26th day of June, 1905, said Dokken filed his complaint of intervention, claiming that on the 18th day of April 1905, he purchased of the bankrupt the stock of goods in question, paying therefor the sum of $2,800, for a present and fair consideration at the time; that he was ignorant of the insolvency of said Tveten, and did not have knowledge of any facts to put him upon inquiry as to the financial condition or insolvency of said Tveten; that the purchase was made in good faith, etc.; that the goods were turned over to the receiver in bankruptcy on the 4th day of May, 1905, in compliance with the order of court to that effect; and prayed judgment for the return of the goods or their value, alleged to be the sum of $3,000, Answer was filed, taking issue on the validity of the claim asserted, and, on trial of the issues to the court, the complaint was dismissed, from which action of the court the said Dokken has appealed.

The first error assigned is to the action of the court in refusing appellant's request for a trial by jury. This is a misconception of the functions of a court of bankruptcy in respect of the situation of this suit. The goods in question had been surrendered by appellant to the receiver in bankruptcy under order of the court. They were thereafter in custodia legis, held by the court for the purpose of administration and distribution, pari passu, among the creditors. The proper method which the appellant should pursue to assert his claim thereto was the one adopted by the petition of intervention in the court of bankruptcy, invested with equitable jurisdiction to determine whether or not the asserted claim was superior in right to that of the general creditors. The petition presented by appellant was in conformity to the stipulation that he should intervene, and it is styled 'Complaint in intervention,' and the petition begins as follows: 'Comes now Nils Dokken and for his complaint in intervention,' etc. It is essentially a proceeding in equity, triable to the court without the intervention of a jury. Barton v. Barbour, 104 U.S. 126, 134, 26 L.Ed. 672; Bardes v. Hawarden Bank, 178 U.S. 524, 20 Sup.Ct. 1000, 44 L.Ed. 1175; Dodge v. Norlin, 133 F. 363, 66 C.C.A. 425; Swarts v. Siegel et al., 117 F. 13, 16, 54 C.C.A. 399; In re Rochford, 124 F. 187, 59 C.C.A. 388, 393.

The claim of the intervener is a palpable fraud on the bankrupt act. It is full time that speculating purchasers from insolvent debtors should know that under the bankrupt act they cannot stop their ears and shut their eyes lest they may hear or see that such a merchant as Tveten was selling out his entire stock of goods in order to defeat his creditors in the collection of their just claims. Such speculators on chance seem to think that they can escape the statute by studiously and cunningly placing themselves in a position to half satisfy conscience by saying:

'I did not know the vendor was bankrupt. He did not so inform me; and I did not ask him. I did not know about his creditors, as I did not examine the books. I did not take an inventory of the goods or carefully examine them, as I had a general knowledge of their character, and did not look further'-- and the like.

Under the bankrupt act such a purchaser, within the four months' limitation, is presumptively a purchaser with knowledge. To protect his purchase the burden rests upon him to show satisfactorily that he was purchaser in good faith; that he paid a present, fair consideration for the property; and that he did not know or have reason to believe that the vendor was insolvent.

The pronouncement of the Supreme Court in Walbrun v Babbitt, 16 Wall. 577, 21 L.Ed. 489, as to what will constitute an innocent purchaser within the meaning of the bankrupt act, as applied to the facts of the case at bar, has ever since been the recognized rule of law, and has been repeatedly followed on the circuits under the present bankrupt act. That was the case of a...