Hardy v. Oregon Eilers Music House

195 P. 563 | Or. | 1921

McBRIDE, J.

Much of plaintiff’s brief is taken up with an argument attempting to show that the judge who tried this case had no right to pass upon the sufficiency of the complaint after the presiding judge had overruled a demurrer based upon the ground of insufficiency; and the confusion which might arise from the action of the judge of one department in overruling the decision of another department upon the same question and in the same case is particularly emphasized. Whether such a course is precluded as a matter of law or is merely a rule of comity between judges of different departments of the same court is a debatable question, but one which we are not here called upon to decide.

If the complaint does not state facts sufficient to constitute a cause of suit, this court upon appeal will not send the ease báck to be tried because the judge in the court below acted irregularly in so holding, in opposition to a previous holding to the contrary by the presiding judge who passed upon the demurrer. And, on the contrary, if the judge of the department before whom the case was heard erred in granting a nonsuit upon the ground that the complaint does not state facts sufficient to constitute a cause of suit against the defendant, this court will send the case back for trial.

1. The complaint, the. substance of which we have given, is somewhat discursive, containing many unnecessary allegations, and comes dangerously close to being a mere “fishing bill,” which courts will usually dismiss; but, taken as a whole, we think it appears therefrom that defendant is and has always been a mere dummy or substitute corporation and nothing more than an agent of the bankrupt; that its property and assets are and always have been legally, or at least equitably, the property of the bankrupt, and that such property is in danger of bfeing dissipated and fraudulently made away with, to the injury and depletion of the bankrupt’s estate and to the detriment of its creditors. If these facts can be clearly made to appear, and the evidence in that respect ought to be convincing and satisfactory, the court has the power and it is its duty to appoint a receiver and require a marshaling of such assets, to the same extent that it might do upon a creditor’s bill had not bankruptcy intervened. We base the right of the trustee in bankruptcy to bring such suit upon subdivision “e” of Section 70, Bankruptcy Act of 1898, which is as follows:

“The trustee may avoid any transfer by the bankrupt of his property which any creditor of such bankrupt might have avoided and may recover the property so transferred, or its value, from the person to whom it was transferred, unless he was a bona fide holder for value prior to the date of the adjudication. Such property may be recovered or its value collected from whoever may have received it, except a bona fide holder for value. For the purpose of such recovery any court of bankruptcy as hereinbefore defined, and any state court which would have had jurisdiction if bankruptcy had not intervened, shall have concurrent jurisdiction”: U. S. Comp. Stats., § 9654; 1 Fed. Stats. Ann. (2 ed.), p. 1150.

2. Taking the complaint by its four corners and rejecting many needless allegations, we find that it in effect alleges that the defendant corporation is in fact a mere agent of the bankrupt, having no assets of its own, but doing business upon the assets of the bankrupt and as a trustee of the bankrupt, that its pretended assets are in fact the assets of Eilers Music House, and that it is fraudulently disposing of and scattering them in such a way that they will be lost to the bankrupt estate. It is true that the term “fraud” or “fraudulently” is not used in the complaint, but it is not necessary that it should be, where the facts set forth show acts which are necessarily fraudulent. It may well be that the testimony of plaintiff’s first witness was not such as to indicate that plaintiff had a very strong case. However, we are not dealing with the testimony, but with the ruling of the court on the pleadings. The testimony was not completed, and we will not consider for any purpose that which had been received when the court declined to hear plaintiff further.

3. The fact that some proceeding had been attempted in the United States District Court to get an accounting as to these alleged assets is of no moment in this case. Whatever that proceeding was, it does not appear to have been a suit to marshal assets, and there is no plea here that there was a suit or any other proceeding against this defendant pending when the present suit was instituted. The action of the court below appears to have been based largely upon an unfortunate remark of counsel for plaintiff, who in response to a question by the court said, “This.is a suit to have a receiver appointed.” While this statement was partly true, it is evident from an inspection of the complaint and the relief therein prayed for that it was not the only object of the proceeding. It is evident that the intent of the suit was to uncover and compel defendant to disclose alleged assets of the bankrupt, and, when so disclosed, to place them in the hands of a receiver so that they might not be dissipated or misapplied.

4. While the complaint does not disclose a case which would have justified a court in appointing a receiver pendente lite; we are of the opinion that it does slate facts sufficient to enable plaintiff to invoke the aid of a court of equity in order to discover and marshal concealed assets of the bankrupt, and that the Circuit Court was in error in dismissing the suit. The decree will be reversed, and the cause remanded with directions to proceed with the hearing.

Reversed and Remanded With Directions.

Burnett, C. J., and Benson and Harris, JJ., concur.