In re Richardson's Estate

Decision Date04 December 1923
Docket Number346.
Citation294 F. 349
PartiesIn re RICHARDSON'S ESTATE.
CourtU.S. District Court — Northern District of Texas

Frank L. Snodgrass and J. B. Dibrell, Jr., both of Coleman, Tex and W. A. Anderson, of San Angelo, Tex., for trustee.

Wright & Harris and Hill & Hill, all of San Angelo, Tex. (W. A Wright and J. W. Hill, both of San Angelo, Tex., of counsel) for state receiver.

ATWELL District Judge.

On February 10, 1922, 15 creditors of George Richardson filed a joint petition against him in the state district court of Tom Green county, Tex. The aggregate of their claims was $116,177.90. They were all unsecured contract creditors except one, whose claim was $45,000, secured by a lien on several tracts of land, aggregating 5,120 acres.

The petition alleged that Richardson was solvent and that 'the properties in his hands and owned by him are sufficient in quantity, value, and amount to pay all of his creditors of every nature and description, and thereafter leave to said defendant property of the value of over $200,000, if handled through a receiver;' that 'it is necessary for the preservation of said properties that said receivership be granted to preserve properties under the allegations made in this petition;' that 'unless a receiver be appointed the creditors of the estate of said defendant may suffer irreparable injury and said property will not bring its just and reasonable value, and said live stock will not be looked after and cared for, so as to realize the just and fair value of the same;' that Richardson was possessed of real estate of the approximate value of $543,000, of personal property of the approximate value of $333,206.67, or total assets of $876,206.67; that he owed $668,556.58; that there was an equity, therefore, for him of $208,650, and that the estate could be administered by the court through its receiver, and there would be a surplus left for the defendant of $200,000; that on that date he owed $7,000 interest, and to the state of Texas $1,390.68 and $17,920; that two judgments had been secured against him, one for $945.53, and one for $14,171.83; that these five items demanded immediate attention, and that, if they were not settled and arranged, a large part of the property would be sacrificed, and a large block of the indebtedness, having accelerated maturity, would likewise become due and payable.

The petitioners prayed 'for judgment against the defendant, for foreclosure of the mortgage liens therein alleged, and that upon hearing the court appoint a receiver, conferring upon him such powers as the court in its discretion may find necessary and proper. ' There was an exhibit to the petition, setting out in particularity the defendant's property. The only part against which there was any lien in favor of either one of the plaintiffs was the 5,120 acres.

On February 10, 1922, the same date that the petition was filed, the defendant filed a waiver of service and agreed to enter his appearance at the next term of the court. On the same date, February 10, 1922, the defendant answered as follows:

'This defendant is the owner of all the property as therein set out (in the application for a receiver), but this defendant avers that the reasonable value of same is in excess of the values therein stated, to a large amount, said excess being not less than $100,000 in reasonable fair value of said property. (2) That his liabilities as therein set out are substantially correct in the aggregate. (3) That there is no valid and sufficient ground for the appointment of a receiver in fact, and he asks the court to hear evidence on the grounds set out in said petition, and deny the said application, and this he is ready to verify, and prays judgment of the court that he go hence with his costs.'

On the same day the court entered an order appointing N. S. Rives receiver. In this order the court found:

'That the estate of George Richardson is a solvent estate, and that it has assets that in the court's judgment are good and sufficient to pay all the debts of the said George Richardson of every nature and description, and leave a balance for the said George Richardson in excess of $200,000, according to a fair valuation, can be realized upon the assets and property of the said George Richardson.'

(2) 'The court finds that a receiver is necessary for the purpose of having the property of the said George Richardson realize its fair and just values, pay off and satisfy all of the creditors of the said George Richardson, and preserve his said estate from waste, destruction, loss, and injury, which, because of the present temporary financial conditions existing in this country would, if this receivership is not granted, result in great loss to the estate of the said George Richardson and to the injury and loss of his creditors.'

The court then set out in the said order a list of the properties belonging to the said Richardson. The salary of the receiver was fixed at $5,000 per annum.

The transcript from the state district court, showing the proceedings in that court from said date to the 8th day of November, 1923, covers 600 pages and shows many interventions by creditors, the qualification of the receiver, his bond, his application to issue receiver's certificates, the payment of said certificates, petitions for the sale of personal property, and for the sale of some real estate, confirmations of such sales, the resignation of the first receiver, the appointment of M. B. Pulliam, the present receiver, his qualification, reports of both receivers of receipts and expenditures, and motion by the defendant to stay proceedings and to dismiss the same, and the court's refusal so to do and judgment thereon, and many other formal orders. It also contains a motion of the trustee in bankruptcy, Logan, advising the court of the adjudication of the said George Richardson, bankrupt, by the United States District Court for the Northern District of Texas, at the San Angelo Division, in cause No. 346, bankruptcy, on June 23, 1923.

On that date the defendant in the original suit filed a voluntary petition in bankruptcy and was adjudged a bankrupt. The transcript contains the order of the presiding judge on the motion of the trustee, as follows:

'On this day came on to be heard the motion of T. R. Logan, trustee in bankruptcy, of the estate of George Richardson, bankrupt, calling the court's attention to the adjudication in bankruptcy and appointment of trustee, and for order directing the receiver to deliver the property in the hands of the receiver of this court to said trustee in bankruptcy, and to stay futher proceedings herein; and the plaintiffs and receiver and the several interveners in this cause having filed answers thereto denying the right of the trustee in bankruptcy to the possession and administration of said properties, and the court having heard and considered said motion and answers, and the evidence thereon, and the argument of counsel, finds the facts and law are with the receiver and the plaintiffs and interveners on said motion. It is therefore ordered, adjudged, and decreed by the court that the motion of the said T. R. Logan, trustee in bankruptcy, of the estate of George Richardson, be and is hereby in all things overruled and denied, and all costs incurred by said motion is taxed against said trustee, to which judgment of the court said trustee in bankruptcy in open court excepts.'

That neither the application of the defendant to the district court to stay proceedings nor the motion of the trustee were pursued further and each became a final judgment. On November 17, 1923, the trustee filed in this court his petition for a summary order and injunction to require Pulliam to turn over to him the George Richardson estate. On the same date this court ordered the issuance of a notice to said Pulliam to appear and show cause, if any he had, why he should not be required to do as the trustee prayed.

In the application for said order the trustee declared that the appointment of the receiver by the state court was void; that it was accomplished through collusion of Richardson and his creditors; that the proceeding was for the purpose of preventing the bankruptcy courts of the United States from acquiring jurisdiction over his estate; that the said Receiver Pulliam is in possession of a large amount of money and of approximately 50,000 acres of land belonging to the estate of the said bankrupt, and that the state court is making orders appropriating the assets of said estate and will make other and additional orders for that purpose; that such proceedings are illegal, and are not authorized by the United States bankruptcy statutes; that no judgments of any kind have ever been rendered in said cause; that the proceeding in the state court is a usurpation of the exclusive functions and jurisdiction of the federal court that the state court has excluded, by its order made within four months of the filing of the petition in bankruptcy, creditors of said estate whose claims as such have been allowed by the referee in bankruptcy; that approximately $15,000 in claims have been filed in the bankrupt proceedings, and that the same have been regularly and legally established; that the receiver in the state court proceedings is performing an administrative function, and not a judicial function, in carrying on the business of a private solvent debtor; that such appointment is not within any jurisdiction conferred upon the said court by the statutes of Texas; that, if this court should hold that the state proceeding was not an action by simple contract creditors against a solvent person, then and in that event the proceeding was an attempted insolvency and bankruptcy proceeding in a state...

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    ...nullity — an act entirely outside the jurisdiction of the court making the appointment — the collateral attack is upheld. In re Richardson's Estate (D. C.) 294 F. 349; State v. Superior Court of Marion County, 195 Ind. 174, 144 N. E. 747. See, also, Scarritt Estate Co. v. Johnson, 303 Mo. 6......
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    ...difficulty of all, namely, that the subject-matter is not one within the province of the court." Citing cases. In re Richardson's Estate, D. C., 294 F. 349 at page 358. "In its most favorable aspect the plaintiff's case comes under no recognized head of equity jurisdiction. Indeed, we take ......
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