Morrison v. Rieman

• Decision Date: 04 September 1917
• Docket Number: 2451.
• Parties: MORRISON v. RIEMAN.
• Court: U.S. Court of Appeals — Seventh Circuit

249 F. 97

MORRISON v. RIEMAN.

No. 2451.

United States Court of Appeals, Seventh Circuit.

September 4, 1917

Rehearing Denied December 20, 1917.

James R. Ward and Frank H. Culver, both of Chicago, Ill., for appellant.

James Rosenthal, of Chicago, Ill., for appellee.

Appeal from order adjudicating Morrison a bankrupt. Morrison's property consisted of real estate in Chicago valued at over $500,000. Rieman, having a claim in contract against Morrison, on March 22, 1916, recovered a judgment thereon in the municipal court of Chicago for $90,188.01, and execution on the judgment issued. By warranty deed of April 20, 1916 Morrison made absolute conveyance of all his real estate to James R. Ward, for a recited consideration of '$100,000 in hand paid and other consideration. ' Morrison and Ward testified that the consideration for the conveyance was the cancellation of all then existing indebtedness of Morrison to Ward, and the assumption and payment by Ward of all Morrison's then outstanding debts, except that to Rieman (to whom Morrison denied owing anything), and the undertaking by Ward to prosecute for Morrison appellate proceedings from the Rieman judgment, and secure requisite bond for staying collection of the judgment pending such determination of such proceedings. A writ of error was sued out in the Appellate Court of Illinois, and on June 7, 1916, a supersedeas bond in penal sum of $100,000, signed by Ward as surety, was approved by that court and filed, and supersedeas issued accordingly. The proceeding on error is still pending and undetermined. August 16, 1916, Rieman alone filed petition in bankruptcy alleging the indebtedness to him from Morrison to be $90,206.76, upon a contract, the debt being evidenced by a judgment for that amount, and alleging Morrison's insolvency, that his creditors were less than 12, and that he had committed acts of bankruptcy by conveyance of his property within four months by way of preference to certain creditors, to Rieman's detriment, and through such conveyance hindering, delaying, and defrauding his creditors other than those so preferred. Morrison filed his answer denying insolvency and the commission of the acts of bankruptcy charged, and asking for a jury trial of the issues. In his amended answer the demand for a jury trial was not renewed. On trial of the issues by a jury there was a verdict against Morrison, and November 15, 1916, he was adjudicated bankrupt.

At the time of the adjudication there was produced in court, and was thereafter filed for record, a deed from Ward reconveying to Morrison a piece of the said real estate, known as the Sebor street property. It was testified by Ward and Morrison that this piece had been inadvertently included in the deed to Ward; that such fact was discovered during the proceedings for obtaining the supersedeas; that the deed back to Morrison was executed and delivered to him on the day of its date, July 17, 1916; and that it remained in Morrison's possession unrecorded, Morrison continuing as theretofore to collect the income from that property. There was sharp contrariety of evidence as to the value of this piece, the testimony of the expert witnesses ranging from $130,000 to $41,000. After verdict, and before adjudication, petitioner by leave of court filed a verified amendment to his petition as follows: 'That whatever lien or security your petitioner has or had at the time of the filing of the petition herein by reason of his said judgment, or by virtue of the execution issued thereon, the said petitioner does hereby release and waive as to any estate which the said alleged bankrupt possessed or owned at the time of the filing of the original petition herein, and does hereby surrender any such security or lien to the estate of the said alleged bankrupt. This petitioner further hereby releases and surrenders whatever lien or security he has or may have on any property or estate of the said alleged bankrupt, or which may hereafter come into the estate or be recovered for the estate of the said alleged bankrupt.'

The assignment of errors challenges the finding of insolvency and of commission of acts of bankruptcy, the provability of Rieman's claim, and his right to be a petitioning creditor, and the propriety of certain remarks of the court made in the presence of the jury, and of certain parts of the court's charge to the jury.

Before BAKER, ALSCHULER, and EVANS, Circuit Judges.

ALSCHULER Circuit Judge (after stating the facts as above).

Respecting the errors alleged based on remarks by the court, and the charge to the jury, it appears that in appellant's original answer jury trial was demanded, but in his amended answer such demand was not renewed; and before the jury was called he moved the court for leave to withdraw his demand for a jury, and appellee joined in this request, which was denied by the court, and a jury was called notwithstanding. While the alleged bankrupt may demand a jury trial (Bankruptcy Act, Sec. 19), these facts amounted to a waiver of jury trial, and the calling of the jury thereafter was upon the court's own motion, just as would have been the case had the court called a jury without any demand therefor having ever been made. The verdict is therefore not of binding force, but is advisory to the court as in issues out of chancery (Carpenter v. Cudd, 174 F. 603, 98 C.C.A. 449, 20 Ann.Cas. 977; Oil Well Supply Co. v. Hall, 128 F. 875, 63 C.C.A.

343), and as in chancery this court will search the record to determine therefrom whether a proper order or decree has been entered, regardless of the jury's verdict, save only so far as the court may thereby be advised. In such case error is not predicable on the court's remarks or its charge to the jury.

On the question of Morrison's solvency, if it be assumed that the title of the Sebor street property was all the time in Morrison, it is apparent that it alone would not rescue him from the charge of insolvency as against Rieman's claim for over $90,000. The evidence of its value ranged from a maximum of $130,000 to a minimum of $41,000, with but little, if anything, in the evidence corroborative of the one more than of the other figure. The finding was thus warranted that the Sebor street property was not worth enough to meet the Rieman claim; and of course all his other property, which, as was testified, had been absolutely and irrevocably conveyed to Ward, could have no bearing on appellant's solvency.

Assuming that Rieman was properly a petitioning creditor, was the finding unwarranted that acts of bankruptcy were committed through the conveyance to Ward? Ward and Morrison both testified that by the conveyance Ward and all other creditors of Morrison, except Rieman, were paid or to be paid. The amount of such debts is not certain under the evidence. Ward claims it was about $100,000, but, whatever the amount, the payment through the conveyance was clearly preferential as against Rieman, thus constituting an act of bankruptcy by Morrison. The fact that Ward signed the supersedeas bond and secured its approval in part consideration of the conveyance to him cannot as against a petition in bankruptcy be regarded as a consideration, which, as between Morrison and Rieman would support the conveyance for the concededly large surplus in value of the property conveyed, over and above Morrison's debts so discharged or assumed. As to such surplus in value, the conclusion was warranted that the conveyance was in hindrance and delay of Rieman, and an act of bankruptcy. That Morrison and Ward may have believed Rieman's claim...