Putnam v. Timothy Dry-Goods & Carpet Co.

• Decision Date: 16 January 1897
• Citation: 79 F. 454
• Court: U.S. District Court — Eastern District of Tennessee
• Parties: PUTNAM et al. v. TIMOTHY DRY-GOODS & CARPET CO. et al.

79 F. 454

PUTNAM et al. v. TIMOTHY DRY-GOODS & CARPET CO. et al.

United States Circuit Court, E.D. Tennessee.

January 16, 1897

Pritchard & Sizer and Andrews & Andrews, for plaintiffs.

R. P Woodard, for defendants.

This was a suit in equity, brought by Putnam, Hooker & Co. and others against Timothy Dry-Goods & Carpet Company, and others, to enforce the execution of an assignment for creditors executed by the Timothy Dry-Goods & Carpet Company to E. A. Metz, in which there was a motion to remove the trustee.

CLARK District Judge.

The bill is brought in this case primarily for the purpose of enforcing due and proper execution of the trust assignment. It is well settled, of course, that any creditor secured by the assignment, and a beneficiary thereunder, may maintain such a bill. The first question which presents itself is that of jurisdiction of the case. This question relates to federal as distinguished from state jurisdiction, and not to equitable as distinguished from legal jurisdiction. The objection to jurisdiction of this court is based upon two grounds, namely the want of jurisdictional amount, and the lack of proper citizenship. As the bill is brought to administer a trust fund, and on behalf of all creditors, I think the cases fully establish the proposition that the fund to be administered determines the question of jurisdiction; and, besides, one of these complainants claims an amount which exceeds the jurisdictional limit. The question which gave me most trouble on first reading the bill was that of citizenship, and this difficulty did not grow out of the case, so far as the parties actually named on the record are concerned. The court was disposed to think that the plaintiff could not maintain the bill without making the other creditors parties, either plaintiff or defendant, so far as their names were actually known to him; and these names a copy of the assignment, which is made an exhibit to the bill, distinctly sets forth. The difficulty which thus suggested itself seems to be met by the principle of the case of Hotel Co. v. Wade, 97 U.S. 13, and other cases, both state and federal, which need not be here referred to. I am satisfied that, as the case is presented, the court has jurisdiction.

It remains then to determine whether or not a case for equitable relief is presented under the bill. It may be of service at this point to restate certain propositions which are not fully established and no longer open to question. Speaking broadly, the whole subject of trust, including trust assignments for the benefit of creditors, and the proper execution of such trust, with directions and instructions to trustees in regard to their duties, is an original and familiar head of equity jurisdiction. It has been repeatedly decided that either the assignee, or a creditor under the assignment, may make application to a court of chancery either to restrain the assignee from acts which would constitute mismanagement or waste, and to have such orders and decrees as will cause a due and legal execution of the trust, or the assignee may himself, in case of doubt or difficulty, apply to the court for instructions and directions in the execution of his trust. Such bill may be maintained not only when the trust is not being properly executed, but whenever there is danger of a loss or waste to the trust fund. When such bill is brought by a creditor under the assignment, the rule only requires that it shall be brought against the assignee, and that it shall be brought on behalf of all other creditors who choose to come in on the usual terms. These and other propositions relating to the subject will be found fully stated and sustained by the following authorities: Weir v. Tannehill, 2 Yerg. 57; Shyer v. Lockhard, 2 Tenn.Ch. 365; Burrill, Assignm. Sec. 419; 2 Perry, Trusts, 595, 817; 1 Am. & Eng.Enc.Law; 2 Story, Eq.Jur. 1287.

I may first dispose of the motion to remove the present assignee E. A. Metz. The grounds of objection to Mr. Metz are, so far as they are material to be now noticed: (1) That he declines to bring suit to collect certain alleged stock subscriptions due to the Timothy Dry-Goods Company; (2) that he has failed and refused to make a proper inventory of the stock of goods, in that he refused to mark the invoice price of the goods, or sufficiently describe the lot and character of the different items of the stock; (3) that there is a debt of $5,000 purporting to be due George Metz, a brother of E. A. Metz, and secured by the assignment, and that $7,500 of stock in a real-estate and building association was transferred to E. A. Metz, as trustee for his brother, to secure this $5,000. The bill questions the validity of this debt of $5,000. This $5,000 is due by note, which appears to have been given by the corporation upon his retirement therefrom, and presumably for his stock therein; and the point is made that this is a transaction that the corporation could not make,--in a word, that it was ultra vires. In regard to the failure of the assignee, Metz, to institute suit for any supposed stock subscription, it is only necessary to say I am clearly of the opinion that upon proper legal advice he should do so, as he could maintain no such suit in the present condition of things. A question of that kind could not be raised except in a bill to wind up the corporation. The failure of Metz to furnish a fuller inventory may be due to overcaution on his part, in the apprehension that the goods might be put at a figure higher than could be realized from them in a sale, and a question of liability for the difference be made. The force of this fact of failure to make satisfactory...