In re Kavanaugh

• Decision Date: 05 March 1900
• Citation: 99 F. 928
• Parties: In re KAVANAUGH.
• Court: U.S. District Court — District of Kentucky

99 F. 928

In re KAVANAUGH.

United States District Court, D. Kentucky.

March 5, 1900

Maurice Galvin, for trustee in bankruptcy.

William McD. Shaw, for receiver.

EVANS District Judge.

On July 15, 1898, Robert Howe, a judgment creditor of the bankrupt instituted an action in equity in the Kenton circuit court wherein he sought to have a bill of sale from the bankrupt to his wife, dated August 25, 1897, set aside as fraudulent and void; and, second, to have the mortgage from the bankrupt to Kloak Bros., dated May 31, 1898, adjudged to come within the provisions of what was formerly well known in Kentucky as the 'Act of 1856,' and now embraced in sections 1910 to 1917, inclusive of the Kentucky Statutes, so that it would operate as a general assignment of all the debtor's property for the equal benefit of all his then existing creditors, upon the ground that the mortgage was made in contemplation of insolvency, and with the design to prefer Kloak Bros., to the exclusion, in whole or in part, of his other creditors. This litigation progressed until, on the 10th and 13th days of January and the 2d day of February 1900, such judgments and amended judgments were rendered by the Kenton circuit court as completely gave the relief prayed for in the suit as to both the bill of sale and the mortgage. In order to carry this judgment into effect, George M. Kiefer was appointed the court's receiver to take possession of the property involved in the litigation, with a view to its distribution, and he did so. On the 16th day of January, 1900, Kavanaugh, on his own voluntary petition was adjudged a bankrupt by this court, and on February 7, 1900, W. H. Miller was elected his trustee, and qualified as such. Claiming that the action of the Kenton circuit court was void upon the one hand, or had been superseded by the proceedings in bankruptcy upon the other, the trustee filed a petition asking this court to direct the receiver (Kiefer) to deliver to him, as trustee herein, all the property now in the receiver's possession belonging to, or which had belonged to, the bankrupt, including all money and book accounts made and created while the receiver was conducting the business described in the petition. The referee entered orders accordingly, and the court is asked to review his action.

We can perceive no ground for supposing that the judgment of the state court was void other than as it might be affected by section 67 of the bankrupt act of July 1, 1898. The bill of sale and the mortgage attacked in the suit of Howe were both executed before the bankrupt law went into operation, and the adjudication in this case was in no wise based upon either of these writings. Had such been the case, different considerations would then apply; for there is a very plain and manifest distinction between the case before us and one where the transfers were themselves the basis of the adjudication in bankruptcy. In that event, if this court when those transfers were held to be void under the law, did not secure possession of the assets involved, the whole bankruptcy proceeding would be futile, and instead of the bankruptcy act being the supreme law of the land, federal, are equally bound, it would be a farce. Here, however, different principles apply. Long before the adjudication the state court had been appealed to for certain relief, which it was entirely competent to give, and, after protracted or long-delayed litigation, that court granted that relief, and based...