Vetterlein v. Barnes

• Decision Date: 09 January 1888
• Citation: 31 L.Ed. 400,124 U.S. 169,8 S.Ct. 441
• Parties: VETTERLEIN et al. v. BARNES. 1
• Court: U.S. Supreme Court

124 U.S. 169

8 S.Ct. 441

31 L.Ed. 400

VETTERLEIN et al. v. BARNES.¹

January 9, 1888.

In and prior to the year 1867, the firm of Vetterlein & Co. composed of Theodore H. Vetterlein, Bernhard T. Vetterlein, Theodore J. Vetterlein, and Charles A. Meurer, and doing business in Philadelphia—assisted one J. Kinsey Taylor by lending him money and acceptances. In the summer of that year, for the security of the firm, Taylor caused his life to be insured, the policies taken out by him being assigned to Theodore H. Vetterlein as security for Taylor's liability to the firm. In July, 1869, Meurer retired from the firm, Taylor's indebtedness to it being, at that time, nearly $50,000. In December, 1869, Theodore J. Vetterlein also left the firm. The remaining partners went on with the business, at the same place, under the same name, and with the same stock of merchandise, taken at valuation. On or about the eighteenth of July, 1870, the policies—which, under some arrangement, had been reduced in amount—were assigned by Theodore H. Vetterlein to Bernhard T. Vetterlein and Theodore J. Vetterlein, as trustees for the wife and children of the assignor.

In the district court of the United States for the Southern district of New York, sitting in bankruptcy, Theodore H. Vetterlein and Bernhard T. Vetterlein were adjudged bankrupts. The adjudication was made February 7, 1871, upon a petition of certain creditors of the bankrupts, filed December 28, 1870. Taylor died July 1, 1871. Due proof of his death was made by B. T. Vetterlein and T. J. Vetterlein, and they were proceeding to collect the insurance moneys, when the present suit was brought in the district court, August 10, 1871, by Barnes, assignee in bankruptcy of Theodore H. Vetterlein and Bernhard T. Vetterlein, against the bankrupts, Theodore J. Vetterlein, and the insurance [171]

J. D. McPherson, Calderon Carlisle, and T. Mitchell Tyng, for appellants.

Jas. K. Hill, Henry T. Wing, and Harrington Putnam, for appellee.

Mr. Justice HARLAN, after stating the facts in the foregoing language, delivered the opinion of the court.

1. The district court correctly held, upon the evidence, that at the time of the transfer by Theodore H. Vetterlein of the policies in question for the benefit of his wife and children, neither Meurer nor Theodore J. Vetterlein had any valuable pecuniary interest in the assets of the former firms, and that the firm of Vetterlein & Co., composed of Theodore H. Vetterlein and Bernhard T. Vetterlein, held the entire beneficial interest in the policies taken out to secure Taylor's debts. That interest passed to their assignee in bankruptcy.

2. Such transfer—which was within six months before the filing of the petition in bankruptcy—was made in contemplation of the insolvency of Theodore H. Vetterlein and Bernhard J. Vetterlein; and, according to the weight of evidence, the transferees, at that time, not only had reasonable cause to believe that Theodore H. Vetterlein was acting in contemplation of insolvency, but that such transfer was made with a view to prevent the moneys due on the policies from coming into the hands of an assignee in bankruptcy.

3. It is contended that the wife and children of Theodore H. Vetterlein were indispensable parties, and that it was error to proceed to a final decree without having them made defendants. The general rule, undoubtedly, is that all persons materially interested in the result of a suit ought to be made parties so that the court may 'finally determine the entire controversy, and do complete justice by adjudging all the rights involved in it.' Story v. Livingston, 13 Pet. 359, 375; Shields v. Barrow, 17 How. 130, 139. But in a suit brought against a trustee by a stranger, for the purpose of defeating the trust altogether, the beneficiaries are not necessary parties, if the trustee has such powers, or is under such obligations, with respect to the execution of the trust, that ...