Maxwell v. McDaniels

• Decision Date: 06 December 1910
• Docket Number: 1,008.
• Citation: 184 F. 311
• Parties: MAXWELL et al. v. McDANIELS et al.
• Court: U.S. Court of Appeals — Fourth Circuit

184 F. 311

MAXWELL et al. v. McDANIELS et al.

No. 1,008.

United States Court of Appeals, Fourth Circuit.

December 6, 1910

W. B Maxwell, B. M. Hoover, D. H. Hill Arnold, and Samuel T Spears, for appellants.

J. P Scott, A. M. Cunningham, and A. R. Stallings, for appellees.

Before PRITCHARD, Circuit Judge, and McDOWELL and ROSE, District judges.

ROSE District Judge.

There are 21 assignments of error. We find it unnecessary to consider any of them except the first which denies that the court below had any right to entertain the cause. It may be assumed that the allegations of the bill of complaint as to diversity of citizenship and as to the amount in controversy are prima facie sufficient to sustain the jurisdiction of the court below as a court of the United States. Does the bill allege anything which can invoke its jurisdiction as a court of equity?

In his bill of complaint the complainant says that some three years before three of the defendants, Gillaspie, Jenkins, and Harr were engaged in building and equipping the Gassaway Hotel in Elkins, W.Va. In so doing they became indebted to many people, the complainant among the number. He lent them $10,000 for which they gave him their promissory note payable one year after date. At the time the bill was filed this note was overdue and unpaid. After he lent his money the complainant went to Arkansas, and when he came back he found that his debtors had mortgaged the hotel, and that suits had been brought against them in the state courts upon debts incurred in connection with the hotel enterprise. Judgments recovered in these suits he says, will be made liens upon the hotel property. He nowhere says that he has any lien upon that property or upon any of it. His complaint is that others have or shortly will have and that he has not. He seems to think that those facts give him a right to have all suits against his debtors enjoined, and the hotel property placed in the hands of receivers appointed by a court of equity. He goes on to say that Jenkins and Harr some time before had conveyed their interest in the hotel property to Gillaspie and the latter's wife. He charges that the conveyance to Mrs. Gillaspie was in fraud of creditors. The bill further alleges that suits have been and will be instituted against Gillaspie and that his estate will be largely wasted in litigation. It says that Gillaspie cannot realize upon his investments because of the stringency of the money market. It charges that the Gillaspies had made a lease of the hotel to the defendant Woodford. It is said that this lease which had about three months yet to run was to the disadvantage of both Gillaspie and the creditors, because the rent agreed to be paid was less than it should have been, and because Woodford had not paid what he agreed to pay. The bill uses many more words in telling its story than we have employed in summarizing its allegations, but the substance of them has been stated. The bill prays that the conveyance to Mrs. Gillaspie of a third interest in the hotel property shall be set aside as fraudulent. It asks for the appointment of temporary receivers to take charge, manage, control, and conduct the hotel; that all suits against Gillaspie, Jenkins and Harr upon debts contracted in erecting the hotel or which in any wise involve such property be enjoined, and that the plaintiffs therein be inhibited from further prosecuting them or from instituting any new suits; that the complainant's claim be declared a lien upon the hotel property, that all liens and their relative priorities be ascertained, and if the property cannot be rented for a sum sufficient to pay them all off within five years, that it shall be sold. Upon this bill of complaint receivers were appointed December 5, 1907. They took possession of the hotel property at once, and have held such possession ever since. Within four months after the filing of the bill in this cause, creditors of Gillaspie instituted proceedings in bankruptcy against him. As a result he was on April 3, 1909, adjudicated a bankrupt.

As already stated, the bill of complaint referred to a conveyance from Jenkins and Harr to the Gillaspies, for the purpose and apparently for the sole purpose of asking that in so far as it purported to convey a third interest to Mrs. Gillaspie it should be set aside as in fraud of creditors. In this connection the complainant made the deed a part of his bill, describing it as 'Plaintiff's Exhibit Deed No. 2.' The record shows that their exhibit in point of fact was not filed with the bill. The receivers were appointed December 5, 1907. The exhibits were not brought into the clerk's office until December 14, 1907.

This deed shows that Jenkins and Harr conveyed their two-thirds interest in the hotel property to the Gillaspies in consideration of $6,000 to be paid September 1, 1907, and of $6,000 to be paid September 1, 1908, and of an agreement by the Gillaspies to assume and pay all the bonded and deed of trust debts against the hotel property, all notes outstanding executed by Jenkins, Harr, and Gillaspie for money borrowed by them used in the construction, purchase of material, the payment of labor and furniture and fixtures of said hotel, and all debts due for labor, material, furniture, and fixtures of every kind, character, and description used in the construction of said hotel or for furniture therein located. It was further covenanted and agreed that the grantors retain a vendor's lien upon the property conveyed to secure the payment of the considerations upon which the conveyance was made. On July 28, 1910, the court below-- that is to say, the Circuit Court in the equity cause--decreed that all debts ascertained by the referee in bankruptcy against the Hotel Gassaway property or any debts which may hereafter be proved before said referee within the time prescribed by the bankruptcy act and which are secured by the vendor's lien reserved by Jenkins and Harr in their conveyance to the Gillaspies are decreed as liens upon the hotel property. The decree then ascertains the precise amount due the holders of a first mortgage on the hotel, and declares such sum to be a first lien thereon. It deals in the same way with a second mortgage, and then directs that, unless the debts thus far ascertained by the referee, the names of the creditors having such claims and the amount thereof being set forth, are not paid within 30 days, the property shall be sold by the special receivers and the trustee in bankruptcy who were appointed special commissioners to make such sale. It is from this decree that the pending appeal has been taken. The appellees have moved to dismiss alleging that the decree assailed is not final. This motion must be denied. The decree orders a judicial sale of all the property involved in the litigation. Under this decree the title will pass beyond the control of the court. It fixes the time and place of sale. Such a decree is so far final that it is appealable. 2 Street's Federal Equity Procedure, 1938; First National Bank v. Shedd, 121 U.S. 74, 7 Sup.Ct. 807, 30 L.Ed. 877; 2 Foster's Federal Practice, Sec. 318.

We pass to the consideration of the jurisdiction of the court below as a court of equity to entertain the bill of...