Joseph Hull v. Arthur Burr

• Decision Date: 22 June 1914
• Docket Number: No. 767,767
• Parties: JOSEPH HULL, the Prairie Pebble Phosphate Company, and the Savannah Trust Company, Appts., v. ARTHUR E. BURR, Frank L. Simpson, and J. Howard Edwards
• Court: U.S. Supreme Court

234 U.S. 712

34 S.Ct. 892

58 L.Ed. 1557

JOSEPH HULL, the Prairie Pebble Phosphate Company, and the Savannah Trust Company, Appts.,

v ARTHUR E. BURR, Frank L. Simpson, and J. Howard Edwards.

No. 767.

Argued March 3, 1914.

Decided June 22, 1914.

Messrs. George C. Bedell and H. Bisbee for appellants.

Messrs. Frank L. Simpson, E. R. Gunby, and James F. Glen for appellees.

Mr. Justice Pitney delivered the opinion of the court:

The appellants, Joseph Hull, the Prairie Pebble Phosphate Company (hereinafter referred to as the Prairie Company), and the Savannah Trust Company, brought this action in equity in the district court of the United States for the district of Massachusetts against appellees, Arthur E. Burr, Frank L. Simpson, and J. Howard Edwards, who are trustees in bankruptcy of the Port Tampa Phosphate Company, a corporation organized and existing under the laws of the state of Massachusetts. The bill was filed in August, 1912, and, defendants having demurred, an amended bill was filed, and it was stipulated that the demurrer should stand as a demurrer to the substituted bill. The district court entered a decree sustaining the demurrer and dismissing the bill (124 C. C. A. 135, 206 Fed. 1). The circuit court of appeals affirmed the decree (124 C. C. A. 138, 206 Fed. 4), and denied a petition for rehearing (207 Fed. 543).

The amended bill, besides showing diversity of citizenship, avers in substance as follows: That prior to the transactions in question, Stewart and Meminger were the owners in fee simple of a tract of land in polk county, Florida, containing 440 acres, together with certain buildings and personal property situate upon it; that on May 22, 1905, in consummation of a prior contract, they conveyed all their right, title, and interest in the property to Hull by deed duly recorded, which vested in him a good legal title in fee simple to the real estate, with full title to the personal property and the right to possession as against all persons, 'and his recorded paper title to all the said properties was perfect;' that before the delivery of the deed by Stewart and Meminger to Hull the Port Tampa Company claimed to own some equitable interest in the property, under a contract between it and Stewart and Meminger, which interest Hull purchased for a full consideration, and before the delivery of said deed to Hull the Port Tampa Company adopted and placed upon its records a resolution reciting its agreement to sell the property to Hull, and authorizing and directing Stewart and Meminger to make a deed to him; that soon after the delivery of the deed Hull took possession; that on June 7, 1907, he executed and delivered to the Prairie Company a deed of conveyance of all his right, title, and interest in said properties for the consideration of about $37,000, which deed was shortly afterwards recorded, and the Prairie Company took actual and peaceable possession of the property, and has continued to hold it until the present time, having made valuable improvements upon it; that afterwards, and prior to March 26, 1908, the Prairie Company executed and delivered to the Trust Company a deed of trust conveying its right, title, and interest in said properties, together with other properties, to secure the payment of bonds amounting to about $1,800,000, and the deed of trust was duly recorded; that it came to the knowledge of Hull that certain creditors of the Port Tampa Company had asserted that the company owned some interest in said properties, and on the 28th of November, 1905, he commenced an action of ejectment against that company in the United States circuit court for the southern district of Florida being the district in which the property was situate; that the company was served with process therein on December 6, 1905, and such further proceedings were had that on March 13, 1906, upon the verdict of a jury, a judgment was rendered adjudging that Hull was entitled to recover from the Port Tampa Company the fee-simple title and right of possession of the lands in question. The bill sets up that on November 8, 1905, a petition in bank- ruptcy was filed against the Port Tampa Company 'in this court of bankruptcy' [the district court of the United States for the district of Massachusetts]; that a subpoena was issued thereon returnable on the 20th day of the same month, and returned served, and that on the return day an appearance was entered for the company by one J. H. Robinson. Copies of the creditor's petition, the subpoena, and the appearance are appended to the bill as an exhibit. The bill alleges that defendants assert that by virtue of a decree in bankrupty made in said district court on November 27, 1905, adjudging the Port Tampa Company bankrupt, they are the owners of an equitable interest or estate in the said lands and other properties, and that the defendant Burr was, on December 27, 1905, appointed sole trustee in bankruptcy of the company; that he resigned as such trustee on March 12, 1909, and on the same day his resignation was accepted, and Burr, Simpson, and Edwards were appointed trustees in his place; and that defendants claim that by the adjudication in bankruptcy and their appointment the title to an interest or estate in said lands became vested in them as such trustees; that on or about March 26, 1908, and before he resigned as trustee, Burr brought a suit by bill in equity in the circuit court in and for Polk county, Florida, against complainants, to establish such interest or estate, but there has been no trial of this suit on the merits, nor had the same been brought to final issues of fact and law before Burr's resignation; that on January 9, 1912, the defendants filed in said state court a supplemental bill of complaint, wherein they averred that said suit was brought by Burr as trustee in bankruptcy, and that Burr resigned as such trustee on March 12, 1909, and prayed that they might be substituted as complainants in his place; that the present complainants filed an answer to the said supplemental bill, but that the issues have not been tried, and no decree has been rendered mak- ing the defendants as trustees complainants in said suit. The present bill then proceeds to attack the proceedings and adjudication in bankruptcy, and the title of the defendants as trustees, as fraudulent and void upon various grounds, which may be summarized as follows: That the Port Tampa Company's principal place of business was not in Massachusetts, as alleged in the petition, and that it had no business except in Florida; that it was not insolvent, and did not commit the act of bankruptcy alleged, or any act of bankruptcy; that the petitioning creditors were directors of the company, and knew the company was solvent and had committed no act of bankruptcy; that the jurisdictional facts were falsely and fraudulently averred, being fabricated for the purpose of pretending to state a cause within the jurisdiction of the court; that the petitioning creditors controlled both sides of the litigation through their ownership of a majority of the company's stock; that Robinson, who entered the appearance in behalf of the Port Tampa Company, was not in fact authorized to appear for or represent the company; and that the petition was fraudulently made to appear as an involuntary petition by creditors, whereas in truth and in legal effect it was a voluntary petition on the part of the company and its officers and directors. It is also alleged that the appointment of defendants as trustees in the place of Burr on March 12, 1909, was invalid, because no judge or referee appointed them, their claim being that in fact they were appointed trustees at a meeting of creditors, whereas complainants allege that the pretended call by the referee for the meeting of creditors was issued at a time when there was no vacancy in the office of trustee; that ten days' notice of the meeting was not given by mail to all the creditors, as required by law; that the only creditor who attended the meeting was one Wills, a director of the company, and that there were ten other creditors who had proven claims; that Wills did not own a bona fide provable claim to the amount of one half of the claims that had been proven; and that the appointment of defendants as trustees was made by Wills alone. Complainants insist that there was no power or jurisdiction in any creditor or creditors to appoint defendants as trustees on March 12, 1909, because at that time there was no vacancy in the office of trustee, since Burr had not then resigned and his resignation had not been accepted by the court. The bill further avers that in their answer to the supplemental bill in the equity suit in the circuit court of Polk county, Florida, the present complainants set up the defense of 'want of jurisdiction of the said court of bankruptcy to render any decree of adjudication, and that such alleged decree was void on the face of the said proceedings;' that this part of the answer was excepted to and the exceptions sustained by the order of the Polk county circuit court; that on appeal, the Florida supreme court affirmed this order on July 3, 1912, ruling that all such defendses were collateral attacks upon the bankruptcy proceedings, which were not permissible, the ruling being expressed in the following words: 'The assaults made upon the bankruptcy proceedings in the Federal court of Massachusetts by the answer of the appellants to the supplemental bill of the appellees in the particulars wherein said answer was excepted to by the appellees is simply a collateral attack upon the judgments, orders, and proceedings in said bankruptcy court that is not permissible either by way of defense to the supplemental bill or to the original bill as amended;' that by reason of the said judgment of the Florida courts the present complainants cannot, by way of defense to the bills of complaint in those courts, 'have and obtain that speedy, adequate, and...