Horner-Gaylord Co. v. Miller & Bennett

• Decision Date: 20 July 1906
• Citation: 147 F. 295
• Parties: HORNER-GAYLORD CO. et al. v. MILLER & BENNETT et al.
• Court: U.S. Court of Appeals — Fourth Circuit

147 F. 295

HORNER-GAYLORD CO. et al. v. MILLER & BENNETT et al.

United States District Court, N.D. West Virginia.

July 20, 1906

Douglass & Steptoe, Robert F. Kidd, and C. M. Bennett, for plaintiffs.

Davis &amp Davis, and L. H. Barnett, for defendants.

DAYTON District Judge.

On June 16, 1906, the Horner-Gaylord Company, a corporation, and others, creditors, filed their petition in involuntary bankruptcy against George Miller and Charles Bennett, partners trading as Miller & Bennett and also as George Miller & co., and on the same day they presented to this court their bill against said parties, Porter Bennett Samuel Bennett, Scott Bennett, William V. Miller, Lutitia Brannon, and Pearl Bennett, in which they allege themselves to be wholesale merchants and creditors of the said partnerships of Miller & Bennett and Miller & Co., setting forth the amounts due to each of them therefrom; that said George Miller and Charles Bennett had been engaged under the firm name of Miller & Bennett in the mercantile business at Tanner in Gilmer county, W.Va. and under the firm name of George Miller & Co. about three miles in the country from Tanner; that they bought on credit and petitioners' debts had been incurred for merchandise furnished by them to said firms; that said defendants George Miller and Charles Bennett were heavily indebted otherwise and wholly insolvent; that the stock of goods carried until about June 9, 1906, by them at the Tanner store was worth about $4,000, and at the other store about $1,800; that George Miller, until recently, owned shares of stock in the Tanner Gas Company of the value of $460, five shares of stock in the Glenville Banking & Trust Company, a tract of land on De Kalb run in said county incumbered, however, with most of the purchase money unpaid, and some lumber and cross-ties cut from said land; that on June 8, 1906, said George Miller and Charles Bennett, being pressed by creditors, made a pretended sale of the Tanner stock of goods to Samuel Bennett, the father, and Scott Bennett, the brother, of said Charles Bennett, who had full knowledge of their insolvency and fraudulent purpose, and for a fictitious consideration never paid; that since that date Samuel Bennett and Scott Bennett have been in possession and have been secreting, crating, and carrying away, under cover of darkness, large quantities of said goods to get them out of the reach of the creditors of said firm of Miller & Bennett, and if suffered to remain in possession all of said stock of goods will have disappeared; that on or about June 13, 1906, the said George Miller and Charles Bennett made a pretended sale of the other stock of goods held under the firm name of George Miller & Co. to William V. Miller, the brother of George Miller; that William V. Miller had no means with which to buy, that said sale was fictitious, fraudulent, and void, and that said William V. Miller is engaged in boxing up said goods, carrying them away to the home of his mother, and there secreting them in order to get them out of the reach of creditors; that said Miller & Bennett owned a lot of timber, saw logs, and ties which they had contracted to the Little Kanawha Log & Tie Company to be delivered in the Little Kanawha river, but which they refused to deliver themselves, but made a fraudulent and fictitious transfer of to Porter Bennett, another brother of said Charles Bennett, who had sold the same to said Little Kanawha Log & Tie Company for about $600 cash; that on the 13th of June, 1906, the said George Miller transferred to Lutitia Brannon a part of his stock in the Tanner Gas Company and on the same day conveyed the balance of said Gas Company stock held by him to Pearl Bennett; that Lutitia Brannon is the sweetheart and Pearl Bennett, the wife of Porter Bennett, is the sister-in-law of said George Miller, and said transfers were without valid consideration, fraudulent, and void; that these alleged bankrupts have thus disposed of substantially all their assets in a very few days; and Charles Bennett has remarked to third parties that 'it is a skin game and I might as well have as many of the hides as any one else. ' The bill then sets forth the filing of the petition in bankruptcy by the plaintiffs against said George Miller and Charles Bennett as individuals and partners, and prays that a special receiver be appointed to take possession of the stocks of goods aforesaid; that Samuel Bennett, Scott Bennett, William V. Miller, Porter Bennett, Lutitia Brannon, and Pearl Bennett be enjoined from selling or disposing of any of the property transferred to them and be required to turn such over to the special receiver; that such transfers be set aside as fraudulent and void, and all of said property be held and made liable for the debts of said George Miller and Charles Bennett, and said receiver hold the same, as well as any other property he may find of theirs, until the further order of this court. Upon the presentation of this bill on said June 16, 1906, the injunction prayed for was awarded and a special receiver appointed to take possession of said properties. Thereupon on June 25, 1906, the defendants Samuel Bennett, Scott Bennett, William V. Miller, Porter Bennett, Lutitia Brannon, and Pearl Bennett jointly served notice upon the plaintiffs that on July 3, 1906, they would move to vacate said injunction and discharge the receiver. On said 3d day of July, 1906, they did make such motion, filing, as of that day, their demurrers and answers, and the plaintiffs filed some 12 affidavits in opposition. It is not necessary to refer to these answers further than to say that they deny the fraud charged in the several transfers to them and assert the validity of such, for it is practically conceded that they, not having been filed until the very day of the motion to dissolve and discharge, can only be used, so far as such motions are concerned, in the nature of affidavits of good faith in the making thereof.

The sole questions therefore arise on demurrer, and counsel earnestly and learnedly argue that two grounds are apparent why the bill cannot be maintained: First, because it is multifarious; and, second because this court is without jurisdiction at the suit of the plaintiffs (as creditors) to declare the several transfers fraudulent and void and grant the relief prayed for.

The first objection can be speedily disposed of. It is always to be remembered that the determination of the question of whether a bill is multifarious is one largely within the sound discretion of the court, and dependent to a very considerable degree upon the particular facts of each case. United States v. American Bell Telephone Co., 128 U.S. 315, 9 Sup.Ct. 90, 32 L.Ed. 450; Walker v. Powers, 104 U.S. 245, 26 L.Ed. 729; Brown v. Guaranty & Trust Co., 128 U.S. 403, 9 Sup.Ct. 127, 32 L.Ed. 468; South Penn Oil Co. v. Calf Creek Oil & Gas Co. (C.C.) 140 F. 516; Shafer v. O'brien, 31 W.Va. 601, 8 S.E. 298.

In Brown v. Guaranty & Trust Co., supra, it is held: 'It is not indispensable that all the parties to a suit in equity should have an interest in all the matters contained in the suit. It will be sufficient, in order to avoid the objection of multifariousness, if each party has an interest in some material matters in the suit, and they are connected with the others.'

In the case here the essential basis of the suit is the right, if any exists, to subject certain property to the payment of the debts of the alleged bankrupts, as their property and not that of others. It is one subject-matter, and it is immaterial how many different claimants may arise for it as a whole or to parts of it. The several interests of each can well be determined in the one controversy.

The second objection presents a far more difficult and perplexing question. Counsel for defendants have very clearly and in apt terms expressed the contention, as follows:

'Where property of the bankrupt passed out of the possession of the bankrupt, before the adjudication of bankruptcy, and is held by a third person under an adverse claim, a court of bankruptcy will not entertain a proceeding of a summary character for the purpose of compelling the delivery of the possession of such property by such third person to the officials of the bankruptcy court. The only remedy in such cases is by a plenary suit by the trustee to determine the validity of such adverse claims, which plenary suit may be brought either in the United States District Court or in any appropriate state court.'

In short it is insisted that the suit can only be brought after the adjudication in bankruptcy, which alone can give jurisdiction to the bankrupt court of the subject-matter, and by the trustee in whom the property vests and as a property right, and not by the creditors who can only have the right to share in the proceeds of such property after the trustee holding the legal title to it has sold it.

On the other hand, it is as earnestly insisted by learned counsel for plaintiffs that the District Court of the United States sitting as a court of bankruptcy has jurisdiction, upon petition of creditors ancillary to their petition in bankruptcy, to appoint receivers of the estates of bankrupts and restrain adverse claimants of the property from disposing of the same, insisting that such jurisdiction is given by clause 3 of section 2, of Act of July 1, 1898, c. 541, 30 Stat. 545 (U.S. Comp. St. 1901, p. 3421) which authorizes such court 'to appoint receivers or the marshals, upon application of parties in interest, in case the courts shall find it absolutely necessary for the preservation of estates, to take charge of the property of bankrupts after the filing of the petition and until it is dismissed or the trustee qualified.'

The old...