Frazier v. Southern Loan & Trust Co.
Decision Date | 19 February 1900 |
Docket Number | 334. |
Citation | 99 F. 707 |
Parties | FRAZIER et al. v. SOUTHERN LOAN & TRUST CO. |
Court | U.S. Court of Appeals — Fourth Circuit |
James T. Morehead and R. R. King (King & Kimball, on the brief) for petitioners.
John N Wilson and E. K. Bryan (John Sprunt Hill, George Rountree, L M. Scott, McNeill & Bryan, and J. N. Wilborn, on the briefs) for respondents.
Before SIMONTON, Circuit Judge, and PAUL and BRAWLEY, District Judges.
This case is brought here on petition to superintend and revise certain orders of the district court for the Western district of North Carolina in the matter of D. W. C. Benbow, bankrupt. 96 F. 514. The questions of law to be considered by this court arise from the following facts, as they appear in the record:
On the 23d day of January, 1894, D. W. C. Benbow, the bankrupt, executed a deed of assignment to J. S. Cox, conveying to him, in trust for the benefit of said Benbow's creditors, all of his real and personal property. Very soon after the execution of the deed of assignment, a number of the creditors of said Benbow obtained judgments against him on their various claims, amounting in the aggregate to over $350,000. These judgments were docketed in the superior court of Guilford county, N.C., thus constituting liens on the real estate of said Benbow, the judgment debtor. In April, 1894, a number of the judgment creditors of said Benbow filed creditors' bills in the superior court of Guilford county, assailing the deed of assignment made to Cox as fraudulent and void, made for the purpose of obstructing, hindering, and delaying the creditors of said Benbow, asking that the same be declared void, and that they might secure a priority over other creditors having docketed judgment liens. At the May term of said court appointed W. H. Ragan receiver 'of all the property and estate, including choses in action, of the judgment debtor, D. W. C. Benbow, whether subject or not to be sold under execution, except the homestead and personal property exemption, and that such receiver be invested with all the powers of receivers in cases of proceedings supplemental to execution. ' The order appointing the receiver enjoined the judgment debtor, D. W. C. Benbow, and other defendants therein named, from transferring or disposing of the property of the judgment debtor, including certain notes designated as the 'Fisher' and 'Ross' notes, theretofore assigned by said D. W. C. Benbow. At the June term, 1899, of the superior court of Guilford county, the issue in each of the causes made by the creditors' bills being the same, they were consolidated. The issue was submitted to a jury, which rendered a verdict in favor of the plaintiffs, and the court thereupon entered a decree declaring said deed null and void, and that the plaintiffs in the several suits have priority of lien on the property described in the deed of assignment over all other creditors. It decreed that the property be sold to satisfy the liens thereon, fixing the terms of sale, and appointing C. P. Frazier commissioner to make the sale. Said Frazier, as commissioner, advertised the sale of the real estate for August 7, 1899. The bankrupt, D. W. C. Benbow, was adjudicated such on the 5th day of April, 1899, and received his discharge in bankruptcy on the 31st day of May, 1899. The Southern Loan & Trust Company was appointed trustee of the bankrupt's estate on the 20th day of April, 1899. On the 5th day of August, 1899, the said Southern Loan & Trust Company, trustee, filed a petition in the district court for the Western district of North Carolina, praying for an order directing the trustee to sell the real estate formerly belonging to the bankrupt, which had been decreed by the state court to be sold, and which had been advertised by the commissioner appointed by the state court to sell the same. Also for a restraining order enjoining Frazier, the commissioner of the state court, the bankrupt, and C. D. Benbow, who held by assignment several judgments against the bankrupt, the plaintiffs in the several bills in the state court under which the decree of sale had been entered, their agents and attorneys, from making the sale ordered by the state court, or from in any way interfering with or disposing of the property of the bankrupt. The petition alleged that the verdict of the jury in the state court finding that the deed of assignment from Benbow, the bankrupt, to Cox, January 23, 1894, was made for the purpose of hindering, delaying, and defrauding certain creditors of said Benbow, was allowed and procured by the absence of said Benbow as a witness, and by his connivance. That the bankrupt had previously procured the assignment to his son, Charles D. Benbow, the judgments of the plaintiffs in the several actions pending in the superior court of Guilford county to set aside the deed of assignment to Cox made January 23, 1894, and that thus the bankrupt had practically secured to himself the entire proceeds of the property decreed by the state court to be sold for the satisfaction of the judgments. The petition further avers that on the appointment of the trustee title to all the property of the bankrupt was by law vested in the trustee, and that no title could pass by the decree of the superior court of Guilford county, as the trustee in bankruptcy was not a party to the proceedings in the state court, and that the effects of the bankrupt should be administered by the bankrupt court. It further alleges that a sale under the decree of the state court 'will result in a sacrifice of the property at small and inadequate prices, and will immediately endanger the creditors of said bankrupt not embraced in said several suits. ' That it would give the bankrupt and the assignee of the judgments a great and undue advantage over other creditors of said bankrupt, as a sale so effected might not be attacked or defeated successfully after a sale made, and the only recourse left to the creditors of the bankrupt would be a contest over the proceeds of the sale, which, under the privileges given by the order of the sale in the state court, would be nothing more than the costs of the sale should the assignee of the judgments, C. D. Benbow, become the purchaser.
Upon the filing of this petition, the district judge issued a restraining order as follows:
'It is, upon motion, ordered and adjudged that an order issue commanding C. P. Frazier, commissioner, Chas. D. Benbow, assignee, D. W. C. Benbow, their agents and attorneys, to refrain from selling or offering to sell any of the estate or effects, real or personal, of the bankrupt, D. W. C. Benbow, under the decree of the superior court of Guilford county, made at June term, 1899, in the several suits mentioned in the petition and affidavit, as advertised by the said commissioners, until the further order of this court; and it is further ordered that the said C. P. Frazier, commissioner, Chas. D. Benbow, assignee, and D. W. C. Benbow, appear before me on the 22d day of August, 1899, at Hendersonville, and show cause, if any they have, why an injunction should not be granted.'
To this rule, Frazier, the commissioner of the state court, filed his answer, briefly reciting his appointment as such commissioner by the state court; that he is advised that the district court will not enjoin him from performing his duty as directed by the state court; that, had he not been restrained from selling the property on the 7th of August, it would have brought a full, fair, and reasonable price; that the state court will fully protect the rights of all persons interested in the property. The bankrupt, D. W. C. Benbow, and C. D. Benbow, the assignee of the judgments in the state court, filed their separate answers under oath to the rule. They deny that the verdict of the jury in the state court, finding the deed of assignment from D. W. C. Benbow, January 23, 1894, to have been made with intent to hinder, delay, and defraud the creditors of said Benbow, and the decree entered in pursuance thereof, were procured by the consent and connivance of either of them. They deny that the judgments assigned to C. D. Benbow were purchased with the money of D. W. C. Benbow, the bankrupt, or were assigned for or are held for his benefit. They aver that, as the judgment liens in the state court existed years before there was a bankrupt act, and that, as the creditors' bills were filed four years before its passage, the court of bankruptcy cannot interfere by injunction with the proceedings in the state court, and that its decree cannot be attacked in the bankrupt court. After the temporary restraining order had been granted by the district judge, the trustee, on the 17th and on the 19th of August, 1899, notified the bankrupt to deliver to it all of his deeds and other muniments of title to the lands directed to be sold by the decree of the state court, and certain shares of mining and railroad stocks, bonds, contracts, etc., and other personal property of the bankrupt. In compliance with these demands the bankrupt delivered the deeds and other muniments of title in his possession. As to the personal property, the bankrupt stated that it was under the control of the receiver appointed by the state court, and that he was restrained from transferring or interfering in any way with the same.
In the record is an uncompleted examination of the bankrupt before the referee, taken after the entry of the temporary restraining order. Its further taking was adjourned by consent until September 28, 1899, for cross-examination. On the 8th of September the district court entered the order brought here for review. Several ex parte affidavits were also filed as to the proceedings in the state court at the June term, 1899, when a decree for...
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