Warmath v. O'Daniel

• Decision Date: 20 February 1908
• Docket Number: 1,733.
• Citation: 159 F. 87
• Parties: WARMATH v. O'DANIEL et al.
• Court: U.S. Court of Appeals — Sixth Circuit

159 F. 87

WARMATH v. O'DANIEL et al.

No. 1,733.

United States Court of Appeals, Sixth Circuit.

February 20, 1908

The trustees in bankruptcy of Powell filed a bill in equity in the District Court, where the proceedings were pending, for the purpose of recovering the sum of $1,061.87, that being the value of certain household furniture and fittings which were sold and transferred by the bankrupt within four months preceding the filing of the petition to the appellant Warmath, for the purpose of paying a debt which the bankrupt owed him. The bill alleged that at the time of the transfer Powell knew he was insolvent and unable to pay his creditors in full, and made the sale, transfer, and payment with the intent to prefer Warmath and to defraud his other creditors and further alleged that Warmath had reasonable cause to believe and know that Powell was insolvent, and that the transfer, etc., was made with the intention of giving him an unlawful preference over other creditors. The prayer was that the court adjudge that Warmath had obtained an unlawful preference through the said sale and transfer, and that he became liable to the complainants for the value of the property, stated to be the sum of $1,061.87, and that they be allowed a recovery therefor. The defendant appeared and demurred to the bill, and assigned grounds therefor, the first of which was that: 'The bill on its face shows no grounds for equitable relief and the equity side of this court has no jurisdiction of the matters complained of in the bill, and if complainants have any rights of action in this court it is purely of a legal cognizance. ' The other grounds of demurrer need not, for the present purpose, to be stated. The court overruled the demurrer, and gave leave to answer. The defendant thereupon filed an answer denying the material allegations of the bill. Proofs were taken, and upon the pleadings and proofs the court made a finding and directed as follows: 'In this cause I am of the opinion that the allegations of the plaintiffs' petition are fully sustained by the proof, and the relief prayed for therein should be granted. I, therefore, direct that a decree be entered, holding that at the time of the sale of the furniture by the bankrupt to Warmath that the bankrupt was insolvent, and that both he and the defendant, Warmath, knew the fact, and that the sale was made for the purpose of giving Warmath a preference as a creditor. A decree will be entered against Warmath for the amount sued for, together with interest thereon from the day of the sale, and against the defendant for the cost. ' Thereupon a decree was entered, stating the facts found and ordering and adjudging as follows: 'It is therefore ordered and adjudged and decreed that the plaintiffs, Henry O'Daniel and J. A Alford as trustees in bankruptcy of the said A. L. Powell, bankrupt, have and recover of and from the said defendant, Jno. G. Warmath, the sum of $1,061.87, with $95.56 interest thereon, in all $1,157.43, and all costs; for which let execution issue. ' The trial was had before the judge. The evidence was given by the oral examination of witnesses and by depositions. Objections were made and were allowed or overruled. A bill of exceptions was tendered by the defendant and allowed and signed by the District Judge. An appeal to this court was then taken by the defendant.

T. E. Harwood, for appellant.

W. R. Landrum, for appellees.

Before SEVERENS and RICHARDS, Circuit Judges, and COCHRAN, District judge.

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

This is a plenary suit of a kind of which the District Court has jurisdiction under the amendment of the Bankrupt Act of July 1, 1898, c. 541, Secs. 60a, 60b, 30 Stat. 562 (U.S. Comp. St. 1901, p. 3445), enacted Feb. 5, 1903, c. 487, Sec. 13, 32 Stat. 799 (U.S. Comp. St. Supp. 1907, p. 1031).

The question on this appeal which arises on the first two of the assignments of error is whether the court below was right in overruling the appellant's contention on his demurrer that the suit was not properly brought in equity for the reason that there was a plain, adequate, and complete remedy by an action at law. The objection was taken at the threshold, and the question is not embarrassed by the laches of the defendant in raising it.

We think the court should have sustained the demurrer. The judgment sought was for a definite sum of money, precisely that which the court by its decree awarded to the complainants. And the whole sum was recoverable, if any of it was; for the assets of the estate would not come near the amount of the debts. There was no contingency in the liability, or apportionment of the burden among several defendants to be made by the judgment. The response of the court to the demand of the complainants was simply an allowance or refusal of it. Nor was there any embarrassment in the procedure. The evidence produced would be, and was in this case, as completely available in an action at law as in a court of equity. No injunction was sought or required. The issue was one which a jury could readily understand and decide under proper instructions from the court in respect to the law. It is suggested that the court must first set aside the transfer before it could proceed to judgment, and that it is the peculiar province of a court of equity to set aside unlawful transfers. This is an ingenious, but unsubstantial figment. No distinct or formal preliminary action was required or contemplated by the statute. If the defendant had obtained part of the estate which should have come to all the creditors, proof of that fact would entitle the trustees to recover it. Perhaps there may be cases where a declaration of the court may be necessary to completely fulfill all requirements, as where the transfer has been accomplished by a deed or other solemn instrument which may be made matter of record, or is a muniment of title the existence of which would indicate ownership and the right to sell and convey or mortgage, or do such other things with it as belong to ownership. But in the present case nothing is stated in the bill which makes such a proceeding necessary, nor indeed is anything more required than in any ordinary action at law where the plaintiff is always bound to establish the facts which create the liability, whereupon, and without more, the court gives judgment for the sum he is entitled to recover. And that was what occurred in the present instance. There was no preliminary declaration that this transfer be set aside. The suggestion made would be the adoption of a devise for evading the statute forbidding a resort to a court of equity.

The right of a...