Jones v. Coates

• Decision Date: 29 April 1912
• Docket Number: 3,613.
• Citation: 196 F. 860
• Parties: JONES v. COATES.
• Court: U.S. Court of Appeals — Eighth Circuit

196 F. 860

JONES v. COATES.

No. 3,613.

United States Court of Appeals, Eighth Circuit.

April 29, 1912

Wilbur S. Jenks and Ernest S. Ellis (Frank W. Yale, on the brief) for plaintiff in error.

John I Williamson (J. C. Petherbridge, on the brief), for defendant in error.

Before SANBORN, HOOK, and ADAMS, Circuit Judges.

ADAMS Circuit Judge.

On November 30, 1909, Coates, the defendant in error, filed a petition in bankruptcy against Jones, the plaintiff in error in which he averred that he was a creditor of Jones, who had less than twelve creditors in all, and that within four months before that date Jones had committed an act of bankruptcy in this:

'That he did, while insolvent, assign and transfer to one W. S. Fallis, one of his creditors, certain claims and judgments due the said William H. Jones upon insurance policies and against certain insurance companies, with an intent to prefer said W. S. Fallis over his other creditors; that the claims due said Jones upon the insurance policies so assigned by him amount to about the sum of twenty thousand dollars ($20,000) which constituted nearly all of the assets of the said William H. Jones.'

No further additional or different act of bankruptcy was charged. Upon issue duly joined the cause was tried to a jury who found for the petitioning creditors and adjudication in bankruptcy followed. This writ of error challenges that adjudication.

The transactions out of which the present controversy came had their beginning in 1908, when Jones purchased three separate stocks of merchandise located in different towns of Kansas and agreed as a part consideration therefor to pay Coates' mercantile indebtedness. With the assistance of the house of Smith-McCord-Townsend Dry Goods Company, those debts were all paid and the latter house opened an account with and sold to Jones a bill of goods amounting to some $7,000. Jones afterwards became indebted to the First National Bank of Ottawa for money borrowed, in the sum of about $5,000, and to W. S. Fallis in the sum of about $4,883, and to some other creditors in small amounts. In the meantime Jones, who had assembled his three separate stocks of goods at Ottawa where he carried on business for a while, sustained a loss of his entire stock by fire. This was in November, 1908. Ten insurance companies had insured his goods in the aggregate sum of $19,500. One company settled soon after the fire and paid $2,000, the amount of its liability. The others declined to pay and suits were instituted by Jones on their several contracts of insurance. While these suits were pending or after they had gone to judgment in Jones' favor, he on October 25, 1909, executed and delivered to one W. S. Fallis a paper writing in words and figures as follows:

'For value received I hereby sell and assign to W. S. Fallis the judgments rendered in my favor and against the following named insurance companies in the district court of Franklin county, Kansas, namely: The Westchester Fire Insurance Company, the Prussian National Insurance Company, the Concordia Fire Insurance Company, the Fireman's Fund Insurance Company, the Williamsburg City Insurance Company, the Mercantile Fire & Marine Insurance Company. And I also sell and assign to said W. S. Fallis all my right, title and interest in and to the policies of insurance and my causes of action against the following insurance companies-- the Home Insurance Company of New York, the Germania Fire Insurance Company, the Queen Insurance Company of America, the Michigan Commercial Insurance Company. These assignments are made to evidence previous assignment and verbal understanding and in consideration of moneys loaned by said W. S. Fallis and liabilities incurred by him on my behalf, and in consideration that said Fallis shall use all due means to collect such judgments and prosecute the said causes of action against the above named insurance companies and out of the proceeds pay the certain indebtedness of this assignee to the First National Bank of Ottawa, Kansas, amounting to $5030.00 approximately, and interest; also my certain indebtedness to the Smith-McCord-Townsend Dry Goods Company, including indebtedness to their representative John S. Campbell, amounting to approximately $7000.00 and interest. Signed this 25 day of October, 1909.

W. H. Jones.'

This document constituted the main evidence on which the petitioning creditor relied to establish the alleged act of bankruptcy.

The debtor's contention was that the actual transfer evidenced by that writing was made in May, 1909, more than four months before the petition was filed, and therefore did not constitute an act of bankruptcy within the meaning of section 3, subs. 2 and 5b, of the Bankruptcy Act.

After the reception of the writing in evidence, the debtor's counsel by way of cross-examination interrogated Jones, who had been called as a witness by the petitioning creditor, with a view of showing that the actual transaction, detailed in the writing, occurred in May or June, 1909, and that the writing itself was given only to evidence a prior verbal pledge or transfer of the property therein mentioned.

After objection had been made to this line of inquiry and after the court had repeatedly expressed his opinion that the written instrument controlled, counsel for the bankrupt made an oral offer of proof which was excluded by the court and exception duly preserved. Later by permission of the court this offer was put in writing and certified by the court to be the offer which had been so excluded. It was as follows:

'The respondent, William H. Jones, now offers to prove by the witness on the stand and by other competent testimony: That on, to wit, the . . . day of May, 1909, and more than four months prior to the filing of the petition herein he, William H. Jones, then residing at Ottawa, Kan., did then and there at Ottawa, Kan., in consideration of moneys then advanced to him as a loan by W. S. Fallis, also residing at Ottawa, Kan., and then and there being did then and there orally assign, pledge, and deliver to said W. S. Fallis, as collateral security for the money then so loaned by him and other moneys to be advanced, all of the policies of insurance mentioned and referred to in the petition filed herein and mentioned and described by the witness now on the stand, together with the judgment which had theretofore been rendered in his favor by the district court of Franklin county, Kan., against the American Central Insurance Company upon the policy issued in his favor by said company; and did then and there pledge and deliver to said Fallis all his books, papers, records, proofs of loss, correspondence, and documents relating to said causes of action against said insurance companies, and said policies, books, papers, records, etc., have from that date been and still are in the possession and under the control of said Fallis. That in said contract of pledge it was agreed that said Fallis should collect the money due from said insurance companies respectively upon said policies, and causes of action either in his name or in the name of said Jones, as he might elect, and from the proceeds should first pay the certain indebtedness of William H. Jones to the First National Bank of Ottawa, Kan., and the certain indebtedness of William H. Jones to Smith-McCord-Townsend Dry Goods Company pro rata as collected, and then apply the balance collected upon the indebtedness of William H. Jones to said Fallis. And respondent further offers to show by the witness on the stand and other competent testimony that this contract of pledge above mentioned is the assignment and verbal understanding referred to in the written document or instrument introduced in evidence, bearing date October 25, 1909, and that instrument dated October 25, 1909, was not intended to convey any further or different interest or right either legal or equitable from Jones to Fallis than had already been conveyed and passed to said Fallis, under and by virtue of the pledge aforesaid, and in connection with the offers above mentioned.'

There are some minor questions raised by the assignment of errors, but the vital and decisive question is whether the court erred in excluding the evidence offered by Jones to show the verbal pledge.

That independent of the Bankruptcy Act or other statutes, there can be a verbal pledge of insurance policies or other chose in action is conceded. The manual delivery of them to a pledgee with full power of control over them and with the intention of passing the equitable right to them is efficacious to that end even if the legal title remains in the pledgor. Williams v. Norton, 3 Kan. 295; ...