E.I. Du Pont de Nemours & Co., Inc. v. Cullen

• Decision Date: 14 May 1986
• Docket Number: No. 85-1983,85-1983
• Citation: 791 F.2d 5
• Parties: 14 Collier Bankr.Cas.2d 1219 E.I. DU PONT DE NEMOURS & CO., INC., Plaintiff, Appellant, v. John F. CULLEN, Trustee of Antinarelli Enterprises, Inc., Defendant, Appellee.
• Court: U.S. Court of Appeals — First Circuit

Page 5

791 F.2d 5

14 Collier Bankr.Cas.2d 1219

E.I. DU PONT DE NEMOURS & CO., INC., Plaintiff, Appellant, v. John F. CULLEN, Trustee of Antinarelli Enterprises, Inc.,

Defendant, Appellee.

No. 85-1983.

United States Court of Appeals, First Circuit.

Argued March 5, 1986.

Decided May 14, 1986.

Peter H. Sutton with whom Barry G. Braunstein and Riemer & Braunstein, were on brief, for plaintiff, appellant.

Carole Neville with whom Cullen & O'Connell, was on brief, for defendant, appellee.

Before COFFIN and BREYER, Circuit Judges, and MALETZ, ^* Senior Judge.

BREYER, Circuit Judge.

The appellant, E.I. du Pont de Nemours & Co., Inc., has been trying to collect about $50,000 that Antinarelli Enterprises owes it under a 1983 judgment in Massachusetts state court. In June 1984 du Pont brought a state court action, aimed at collecting the money. In that action, the state court appointed a receiver, who, in turn, seized cash and American Express drafts belonging to Antinarelli and transferred them to du Pont. Du Pont's satisfaction was short-lived, however, for a short time later Antinarelli went bankrupt, and the bankruptcy court set aside the transfer as a voidable preference. 11 U.S.C. Sec. 547(b). The appointment of the receiver and the transfer of funds both took place within the (crucial) ninety-day period before bankruptcy. 11 U.S.C. Sec. 547(b)(4)(A). Thus, the transfer was voidable--unless du Pont had somehow obtained a lien against the property more than 90 days before bankruptcy.

This is just what happened, says du Pont. It argues that its collection action is properly seen (at least in part) as either a statutory "action to reach and apply," Mass.Gen.Laws ch. 214, Sec. 3(7), or a nonstatutory "creditor's bill," see 21 Am.Jur.2d Creditors' Bills (1981); J. Nolan, 31 Massachusetts Practice: Equitable Remedies Sec. 388 (1975), or both. When a judgment creditor brings either sort of state law action, says du Pont, the filing of the complaint instantaneously creates a lien against the relevant property. See Rioux v. Cronin, 222 Mass. 131, 137-38, 109 N.E. 898, 901-02 (1915) (judgment creditor's mere filing of creditor's bill creates lien); J. Nolan, supra, Sec. 382, at 460-62 & n. 9 (judgment creditor's mere filing of statutory action to reach and apply also creates lien, but cf. Rioux, 222 Mass. at 139, 109 Neither the bankruptcy court nor the district court accepted du Pont's arguments. Both courts found the transfer voidable, and held in favor of Antinarelli's bankruptcy trustee. Du Pont appeals to us. But we conclude that the lower courts were right.

N.E. at 902); see also L. Reed, 6 Massachusetts Practice: Equity Pleading and Practice Sec. 473, at 556 n. 10 (1952); id. at 166 (Supp.1973). And, in this case the filing of the complaint in the state court action took place more than 90 days before Antinarelli went bankrupt.

We assume, at least for the sake of argument, that du Pont is correct about the legal consequences that flow from bringing a statutory "reach and apply" action or a nonstatutory "creditor's bill." That is to say, we assume that filing such an action creates a lien under Massachusetts law, apparently because the action is an equitable analogue to a levy of execution at law. See Rioux, 222 Mass. at 137-38, 109 N.E. at 902. We do not agree with du Pont, however, that its state court action can be viewed as either a statutory "action to reach and apply" or a nonstatutory "creditor's bill"; rather, it is a different legal animal, namely, a statutory action to appoint a receiver, Mass.Gen.Laws ch. 156B, Secs. 104, 105.

This conclusion is fairly obvious once one examines du Pont's complaint in the state court action. We recognize that no one has formally placed the complaint in the record of this case. Yet, we see no reason to continue playing Hamlet without the prince. Nor do we believe it desirable to treat the complaint like Hamlet's father's ghost--exerting an unseen yet controlling influence from the limbo of the appendix to the trustee's district court brief. A copy of the complaint is in that appendix; neither party disputes its authenticity; and we have adequate legal power to take judicial notice of it. See, e.g., Green v. Warden, U.S. Penitentiary, 699 F.2d 364, 369 (7th Cir.), cert. denied, 461 U.S. 960, 103 S.Ct. 2436, 77 L.Ed.2d 1321 (1983); Ives Laboratories, Inc. v. Darby Drug Co., 638 F.2d 538, 544 n. 8 (2d Cir.1981), rev'd on other grounds sub nom. Inwood Laboratories, Inc. v. Ives Laboratories, Inc., 456 U.S. 844, 102 S.Ct. 2182, 72 L.Ed.2d 606 (1982); St. Louis Baptist Temple, Inc. v. FDIC, 605 F.2d 1169, 1172 (10th Cir.1979) ("[F]ederal courts, in appropriate circumstances, may take notice of proceedings in other courts, both within and without the federal judicial system, if those proceedings have a direct relation to matters at issue."); In re Phillips, 593 F.2d 356 (8th Cir.1979) (per curiam); United States ex rel. Geisler v. Walters, 510 F.2d 887, 890 n. 4 (3d Cir.1975); cf. Senior Loiza Corp. v. Vento Development Corp., 760 F.2d 20, 25-26 & n. 8 (1st Cir.1985).

The complaint tracks, virtually line by line, the statutory requirements for an action to appoint a receiver. The complaint (which we reprint in an Appendix) basically alleges:

1) The defendant is a corporation.

2) The plaintiff recovered judgment against the defendant.

3) Execution was delivered to a deputy sheriff, who made a demand upon the defendant to pay the amount due, plus officer's fees.

4) The defendant neglected for 30 days to comply with the demand.

5) A receiver should be appointed.

6) The receiver should be authorized:

a) to take charge of "the defendant's estate, property due the defendant";

b) to collect the debts, obligations or property due the defendant;

c) to prosecute and defend suits in the name of the defendant;

d) to do all other acts which may be necessary or desirable for a final settlement of the affairs or business of the defendant.

7) The plaintiff seeks such other relief as seems just and equitable.

The relevant statutes on receivership state:

If a judgment has been recovered [allegation 2] against a corporation [allegation 1] and it has neglected for thirty days [allegation 4] after demand made on execution [allegation 3] to pay the amount due with the officer's fees, ... one or more receivers may be appointed [allegation 5] with the [following] powers and duties....

[The court may] appoint one or more receivers to take charge of [the corporation's] estate and effects [allegation 6(a) ] and to collect the debts and property due and belonging to it [allegation 6(b) ], with power to prosecute and defend suits in its name or otherwise [allegation 6(c) ], to appoint agents under them and to do all other acts which might be done by such corporation, if in being, which may be necessary for the final settlement of its unfinished business [allegation 6(d) ].

Mass.Gen.Laws. ch. 156B, Secs. 105, 104. The degree of correspondence could hardly be closer. We do not see how the general additional request for "other just and equitable relief" (allegation 7) could make a significant difference.

At the same time, the complaint leaves out at least one item that the commentators say is an essential element of both a statutory "action to reach and apply" and a nonstatutory "creditor's bill," namely, a specific description of the property that is to be reached. 21 Am.Jur.2d Creditors' Bills Sec. 75, at 60 ("The property to be reached by a creditor's bill must be described with certainty...."); J. Nolan, supra, Sec. 382, at 462 ("It is elementary that the property to be reached and applied must be sufficiently described in the complaint."). If (at least sometimes) the filing of a complaint creates a lien even before others have notice, it is understandable why the commentators might think a specific description of the relevant property is important; a vague description might seem to impress a lien upon assets whose value substantially exceeds the underlying debt. For these reasons, du Pont's state court collection action cannot be characterized as du Pont now wishes.

Du Pont makes three additional arguments. First, it says the parties "stipulated" in the bankruptcy court that the state court collection action was an action to reach and apply. At oral argument, however, counsel was unable to find any such stipulation in the record; nor have we been able to do so.

Second, du Pont says the bankruptcy court "found" that the state court action was an action to reach and apply. As we read its opinion, however, we believe the court was assuming this...