London & Lancashire Indem. Co. of America v. Endres

• Decision Date: 07 May 1923
• Docket Number: 6154.
• Citation: 290 F. 98
• Court: U.S. Court of Appeals — Eighth Circuit
• Parties: LONDON & LANCASHIRE INDEMNITY CO. OF AMERICA v. ENDRES et al. In re LEAVENWORTH BRIDGE CO.

290 F. 98

LONDON & LANCASHIRE INDEMNITY CO. OF AMERICA v. ENDRES et al.

In re LEAVENWORTH BRIDGE CO.

No. 6154.

United States Court of Appeals, Eighth Circuit.

May 7, 1923

Murat Boyle, of Kansas City, Mo. (Harold J. Pack, of Washington D.C., and William S. Hogsett, of Kansas City, Mo., on the brief), for appellant.

W. W Hooper, of Leavenworth, Kan., for appellees.

Before LEWIS, Circuit Judge, and BOOTH and JOHNSON, District Judges.

LEWIS Circuit Judge.

This is an appeal from an order of the Bankruptcy Court allowing a claim of appellant, but refusing to give it a preference in payment out of a fund of $30,843.45 that came to Endres Trustee of the bankrupt estate, under the Act of March 1 1921 (41 Stat. 1156, 1164). These are the facts:

In December, 1917, the Leavenworth Bridge Company, a co-partnership composed of A. Rohr and Joseph W. Young, contracted with army officers in charge at Fort Riley to construct a bridge over the Republican River at that place for the agreed consideration of $45,000.00. Appellant was surety on their bond as required by the Act of February 24, 1905, amending the Act of August 13, 1894 (28 Stat. 278, 33 Stat. 811; Comp. Stat. Sec. 6923), for performance of the contract, and obligated itself that the contractor would pay for labor and material used. The bridge was completed, but owing to increase in wages and price of material it cost about $76,000.00 to construct it. An appropriation was made by Congress, Act March 1, 1921, supra, to cover the difference. Three weeks after the Act was approved appellant brought suit in the Supreme Court of the District of Columbia against Young and Rohr, the Secretary of the Treasury and the Treasurer of the United States, to enjoin the latter from delivering to and paying, and the former from receiving a draft or warrant for the amount of the appropriation and to have a lien adjudged in its favor against the fund for $10,909.17 which it as surety had been compelled to pay on judgments rendered against it for material used in the bridge, and $366.64 expended by it in that litigation. The Secretary and Treasurer were served the day the suit was begun and a temporary restraining order issued. Young was served with copies of subpoena and complaint in Florida on March 25, and Rohr in Kansas on March 26, and on April 15 decree pro confesso was entered against them. On April 22, 1921, a preliminary injunction issued. Five days before that suit was instituted the co-partnership assigned all of the fund to Manufacturers' National Bank of Leavenworth, Kansas, for the benefit of all its creditors.

The Secretary and Treasurer answered the complaint on April 22, wherein they 'call attention to the absence of any allegation in the bill of complaint that either the United States or the defendants Joseph W. Young and A. Rohr, co-partners, doing business under the firm name and style of Leavenworth Bridge Company, have elected to make the sum alleged to be due from the United States payable in the District of Columbia to the defendants last aforesaid; and inasmuch as debts due from the United States have no situs in the District of Columbia, these defendants aver that this Honorable Court has no jurisdiction, power or authority to pass any order or decree herein which will protect the United States, in the absence of personal service upon the defendants Joseph W. Young and A. Rohr,' and they challenged jurisdiction as though they had moved to dismiss the bill. The Secretary and Treasurer doubtless relied on Wyman v. Halstead, 109 U.S. 654, 3 Sup.Ct. 417, 27 L.Ed. 1068; Houston v. Ormes, 252 U.S. 469, 40 Sup.Ct. 369, 64 L.Ed. 667, and cases there cited.

On April 8, 1921, the partnership and Rohr filed their petition in the Bankruptcy Court for the District of Kansas to be adjudged bankrupts, and they were so adjudicated on April 9, and April 22 Endres was elected and qualified as Trustee. On May 15 Captain Dick, the disbursing officer of the War Department stationed at Fort Riley, issued and delivered to Endres, as Trustee in Bankruptcy, a check for the full amount of the appropriation, drawn on the Treasurer of the United States, which was paid in due course.

Appearing specially on May 17 Endres and Rohr jointly filed motions to dissolve the temporary injunction and stay the cause, and assigned as reason therefor 'the bankruptcy of the Leavenworth Bridge Company and A. Rohr. ' On May 27 leave to withdraw the motions was granted. The reason assigned was a proper one for special appearance, it was not thereafter regarded by court and counsel as a general appearance, as will presently be seen, and we think it was not general; though we regard that as immaterial.

On June 11, 1921, the Secretary in a letter to the Judge who had issued the restraining order and preliminary injunction said he had just learned that the check had been issued and paid, and in explanation added:

'Appropriations made by Congress for the army are aggregated as 'Army Account of Advances,' and it is assumed that moneys which had been placed at the disposal of Captain Dick for disbursement from 'Army Account of Advances,' have been charged by him with the amount of his check issued to the Trustee in Bankruptcy for Leavenworth Bridge Co.'

No further action was taken against the Secretary and Treasurer. By inaction the cause was abandoned as to them. Nothing further appears to have been done in that suit until January 27, 1922, when appellant (plaintiff here) asked and obtained leave to amend its complaint. In the amendment it alleged the assignment of the fund to the Manufacturers' National Bank, the adjudication in bankruptcy on April 9, 1921, the appointment and qualification of Endres as Trustee and that it was necessary that they and Rohr be made parties defendant and asked that subpoenas issue. Pursuant thereto service was made on Endres and the Bank in Kansas on February 3, 1922 and on that service pro confesso was entered against them February 18, and final decree against them, Young and Rohr on March 23, 1922, wherein it is found, 'the plaintiff is entitled to, and has a prior equitable lien upon, and a first claim on the sum of $30,843.45, payable by the United States to Leavenworth Bridge Company * * *against the claims and demand of every kind, description or character of any of the said named defendants, against whom the decrees pro confesso were entered,' naming as said defendants the Manufacturers' National Bank, Rohr, Young and Endres as Trustee in Bankruptcy, and fixing the amount of appellant's claim at $11,275.81. Thereafter appellant presented its claim based on that decree to the Bankruptcy Court, and asked that it be allowed a preference in payment out of the $30,843.45, in accordance with the decree. The record in that cause was...