Metropolitan Nat Bank v. Rogers

• Decision Date: 27 January 1893
• Parties: METROPOLITAN NAT. BANK OF PITTSBURG v. ROGERS et al.
• Court: U.S. Court of Appeals — Third Circuit

53 F. 776

METROPOLITAN NAT. BANK OF PITTSBURG v. ROGERS et al.

United States Court of Appeals, Third Circuit.

January 27, 1893

James Bredin and C. C. Dickey, for appellant.

Wm. L Chalfant, (D. D. Bruce, on the brief,) for appellees.

Before DALLAS, Circuit Judge, and WALES and BUFFINGTON, District Judges.

BUFFINGTON District Judge.

This is an appeal by the Metropolitan National Bank of Pittsburgh from a decree of the circuit court for the western district of Pennsylvania (47 F. 148) dismissing a bill filed by Reuben Miller, Jr., et al., assignees in bankruptcy of William Rogers and Thomas J. Burchfield, to set aside a conveyance of 10 acres of land made by the bankrupts to Mary Ann Rogers wife of said William Rogers.

The bill was filed 14th December, 1877, and alleged the plaintiffs were assignees in bankruptcy of said Rogers &amp Burchfield, who were the owners of the property in dispute; that by deed dated 8th July, 1872, they had conveyed the same to said Mary Ann Rogers; that no consideration, other than a nominal one, passed therefor; that a dwelling house and other improvements were soon built thereon at a cost of $15,000, and the same paid for by funds of Rogers & Burchfield charged to William Rogers; that at said times the firm was extensively engaged in the manufacture and sale of iron; 'that said business was hazardous, and one in which the said firm was necessarily obliged to incur large debts and run great risks; that said firm was in fact largely indebted at the date of said deed, and so continued until on or about the 1st day of November, A.D. 1875, when it became insolvent,' and filed a petition in bankruptcy; that on July 31, 1875, the bankrupts had executed a quitclaim deed to Mrs. Mary Ann Rogers for the same premises, for which no consideration passed; that the bankrupts had no returned said premises among their assets, but the same were retained and claimed by Mrs. Rogers. The bill then continues:

'That, as your orators are advised, the said deeds are wholly void as to creditors, and in fraud of their rights; and by reason of said deeds your orators have been unable to sell said real estate at anything like its value, whereby the creditors of said bankrupts have been hindered and delayed in the collection of their just claims.'

The bill prayed for cancellation of the deeds, delivery of the property, and an accounting.

The answer of William and Mary Ann Rogers, filed 28th May, 1878, alleged the cost of the improvements was but $13,600. That a consideration had passed for said premises other than that stated in the deed, which arose thus: By the original articles of partnership between Rogers & Burchfield, dated 18th August, 1866, it was agreed that--

'Said Rogers shall be general manager at the mills, and shall superintend the business in Armstrong county, and shall devote his time and attention exclusively to his duties. He is also to turn the rolls, (but not the rolls in the lathe;) and in consideration thereof he shall occupy, free of rent, the house connected with the works, now in his occupancy, and the field adjoining.'

That by a supplemental agreement dated August 18, 1873, it was stipulated:

'Said Rogers shall not hereafter occupy, free of rent, the house connected with the works lately in his occupancy. * * * In lieu of the privilege heretofore enjoyed by said Rogers, to occupy free of rent the house connected with the works, * * * the firm have agreed, and do hereby agree, to convey to the said Rogers, in fee, ten acres of ground off the back end of the David Leech farm, which the firm bought of Joseph G. Beale, which the said Rogers has already selected and staked off.'

The answer further set forth that the business was not more hazardous than any other manufacturing one; that, while the firm was considerably indebted at the date of the deed, it had large credits which, exclusive of real estate, were in excess of its liabilities; that both respondents believed the business was in a very flourishing and prosperous condition; that the quitclaim deed was only given to correct a supposed defect in the title; that during 1870, 1871, 1872, and 1873 the profits of the firm averaged $40,000 a year; that the amount drawn from the firm to build the house, viz. six thousand and some hundred dollars for two years, was not unreasonable or improper; that the making of the deed to Mrs. Rogers, and the building of the house thereon, was a reasonable provision by her husband for her, and in keeping with his circumstances at the time.

A replication was filed December 24, 1878, and an examiner appointed. On June 20, 1879, the assignees sold at public sale their title to the premises in dispute, to the Metropolitan Bank, for $1,200, making conveyance thereof 31st May, 1881. On petition of bank filed January 7, 1886, it was allowed to intervene, and file a supplemental bill, in which it set forth its interest in the controversy by reason of its said purchase.

On hearing, the court was of opinion that the bill disclosed no ground to sustain a decree against Mrs. Rogers, and the case might rest on that ground, on the authority of Warren v. Moody, 122 U.S. 132, 7 S.Ct. 1063, and Adams v. Collier, 122 U.S. 382, 7 S.Ct. 1208. Without doing so, however, the court passed upon the testimony, and found the merits of the case to be with Mrs. Rogers; that the real consideration was as set forth in the answer, and that Rogers had received the 10 acres in consideration of the surrender of the house which he was to have rent free; that by his request the deed was made to Mrs. Rogers; that, even with the coal, (which was, however, excluded from the conveyance,) the value of the land was only $50 per acre; that the house was begun early in 1873 under a contract which required its completion by April 1, 1874. The court further found, (we quote the words of the learned judge:)

'The entire transaction was entirely free from intentional fraud. There was no thought on the part of either William Robers or Thomas J. Burchfield to delay, hinder, or defraud their creditors, or to withdraw any property from their reach. Insolvency was not apprehended by them, either at the date of the deed conveying the land, or while the house was in course of erection. From first to last, all parties to the transaction acted in perfect good faith. * * * The firm indeed, had greatly prospered, and was a money-making concern. Apparently, it had a very large surplus of assets over and above its liabilities throughout the whole of the years of 1873 and 1874. Upon a careful consideration of all the evidence, I am satisfied that the insolvency which overtook the firm in the fall of 1875 was caused by the 'depreciation of values of property and losses of accounts' spoken of by Mr. Burchfield in his deposition,-- the ultimate results of the financial panic which had swept over the country. But, as we have seen, Mrs. Rogers' title to the land was perfected on August 2, 1872; and undoubtedly, at that time, the firm of Rogers & Burchfield was not only solvent, but in a highly prosperous condition, and possessed of ample means to discharge all its liabilities. The land conveyed to Mrs. Rogers was of the value of less...