125 Wis. 465 | Wis. | 1905
Tbe following opinion was filed June 23, 1905:
On defendant’s appeal several errors are assigned, wbicb, so far as deemed necessary, will be considered in their order.
1. It is claimed that the court erred in overruling defendant’s demurrer to plaintiff’s complaint, because no demand was alleged, and, further, that the complaint does not sufficiently allege the necessity of bringing the action. Had the property covered by the chattel mortgages been in the possession of or under the control of defendant at the time action was brought by the trustee, so that it could have been surrendered upon demand, it would be necessary to consider and decide this question. There is very respectable authority to the effect that no demand is necessary before action by a trustee to recover property transferred in fraud of the bankrupt act,, upon the theory that, the whole transaction resulting in a preference being unlawful, no demand is necessary. Goldberg v. Harlan, 33 Ind. App. 465, 67 N. E. 707; Loveland, Bankruptcy, 609; Bull v. Houghton, 65 Cal. 422, 4 Pac. 529. But in the case before us it appears from the allegations of the-complaint that the mortgaged property had been converted before the commencement of the action and the proceeds applied upon the mortgage indebtedness of the defendant. The defendant, by such conversion, put it out of its power to restore-the property, and under such circumstances no demand was-necessary. Dunham v. Converse, 28 Wis. 306; Crampton v. Valido M. Co. 60 Vt. 291, 1 L. R. A. 120; Shuman v. Fleckenstein, 22 Fed. Cas. 54, No. 12,826.
Counsel for defendant further claims that the complaint is defective in not alleging that any creditor had filed a claim in the bankruptcy proceeding, or any fact showing that it was-necessary to recover the alleged preference, and Mueller v.
“If a bankrupt shall have given a preference within four months before tbe filing of a petition, or after tbe filing of tbe petition and before tbe adjudication, and tbe person receiving it, or to be benefited thereby, or bis agent, acting therein, shall have bad reasonable cause to believe that it was intended thereby to give a preference, it shall be voidable by tbe trustee and be may recover tbe property or its value from sucb person.” Subd. &, sec. 60, Bankr. Act July 1, 1898, cb. 641, 30 Stats, at Large, 662 [U. S. Comp. St. 1901, p. 3446].
No condition precedent to tbe right of tbe trustee to recover sucb property is found in tbe statute, as will be seen, and obviously courts cannot legitimately ingraft any upon it.
2. Concerning tbe second assignment of error but little need be said. Tbe president of defendant was called for examination as an adverse party by plaintiff. Objection was made by plaintiff to defendant’s right to cross-examine this witness, as be was called by plaintiff for cross-examination as an adverse party, and tbe objection sustained. We fail to see bow defendant was prejudiced by this ruling. It could have called and examined tbe witness, and be, being president of the bank, doubtless was not an unwilling or hostile witness. Therefore no reversible error was committed by tbe ruling.
3. Error is assigned upon tbe alleged ambiguity in and insufficiency of questions 4 and 5 of tbe special verdict, which deal witb tbe subject as to whether tbe Waters-Clark Lumber Company, in acquiring title to tbe property in question, acted for tbe bank witb tbe understanding tbat a portion of tbe pro
“It is not found that the lumber company was the agent of the defendant. If that were so, then it would result that the defendant really received the propery. The jury has found that the lumber company took title pursuant to an agreement between Young and the bank by which the lumber company was to account to the bank for a portion of the proceeds. The barde received the notes, and not the logs and lumber.”
This part of the opinion of the learned circuit judge can hardly be reconciled with the language to which it refers, since it in effect sets the verdict aside as to the two questions and substitutes in place thereof, as a fact shown to exist by the undisputed evidence, that the lumber company, without any other relation to the bank than an understanding with it that its interest in the logs and lumber should be recognized and satisfied out of the proceeds of such property, purchased
4. Error is assigned on the instruction to the effect that all the creditors belonged to one class. "Whether that is right or wrong does not seem to in any way concern the case. This action, as we have indicated, is simply one in trover to recover the value of property which, as is alleged, was, in fraud of the bankrupt act, wrongfully converted by defendant to its own use. "Whether there was one or more classes of creditors, and in what manner the property sought to be recovered would, if the suit were successful, be administered, did not vary in the slightest degree the legal rights of the plaintiff. If the property was obtained by the defendant in fraud of the bankrupt act, plaintiff was entitled to recover the same, and this is the only question involved.
5. Error is assigned because of the refusal to direct a ver•dict for defendant and in denying defendant’s motion to correct the special verdict and for judgment in favor of defendant. A vigorous argument is made by counsel for defendant against the right of the trustee to maintain this action in the state court, relying mainly upon two Wisconsin cases. Brigham v. Claflin, 31 Wis. 607, and Bromley v. Goodrich, 40 Wis. 131. These cases were decided under the bankrupt act of 1867, which was quite different from the law under which the present case was brought; and it appears that one of the reasons given for denying the right of the state court to take jurisdiction was that the federal courts had exclusive jurisdiction in such cases, and that conflicts of interest might arise. Under the bankrupt act of 1898 the supreme court of the United States in Bardes v. Hawarden Bank, 178 U. S. 524, 20 Sup. Ct. 1000, held that the United States courts had no jurisdiction over suits similar to the one before us unless by consent of the proposed defendant; and that in the absence of express prohibition the state courts lose none of their juris
“In tbe first place, it must be obvious that tbe assertion of a state jurisdiction in such causes will greatly tend to protract and multiply suits in respect to tbe bankrupt’s estate, and will inevitably be a most fruitful source of conflict and collision between tbe state and federal tribunals. Tbe object and policy of tbe bankrupt law manifestly are to collect and distribute tbe property of tbe bankrupt among bis creditors as promptly as practicable ;■ and these ends can be much more readily accomplished by tbe United States courts — which have plenary jurisdiction in these matters — than by tribunals acting by different modes, and deriving their powers from other sources.”
No such consequences could result from tbe bankrupt act of 1898. On tbe contrary, tbe contention of counsel for defendant would put tbe trustee in tbe anomalous position of being unable to administer bis trust because no court was open to him. Tbe bankrupt act of 1898 clearly contemplates that suits similar to tbe one before us may be brought in state courts, and cannot in tbe United States courts. Tbis court has declined to follow tbe doctrine of Brigham v. Claflin, 31 Wis. 607, and has, in effect, held that actions like the instant case may be maintained in tbe state courts. Binder v. McDonald, 106 Wis. 332, 82 N. W. 156; Mueller v. Bruss, 112 Wis. 406, 88 N. W. 229. State courts therefore should take jurisdiction, and tbe action was properly brought. Claflin v. Houseman, 93 U. S. 130; Mueller v. Bruss, supra; Bardes v. Hawarden Bank, 178 U. S. 524, 20 Sup. Ct. 1000; Lyon v. Clark, 124 Mich. 100, 82 N. W. 1058, 83 N. W. 694; French v. R. P. Smith & Sons Co. 81 Minn. 341, 84 N. W. 44; Perkins v. McCauley, 98 Fed. 286; Huntington v. Attrill, 146 U. S. 657, 13 Sup. Ct. 224; Whitman v. Oxford
It is further claimed by counsel for defendant that the property for the value of which this suit was brought had never been sold or received by the defendant, and therefore the action cannot be maintained; that the defendant received notes, not property. It was established on the trial, without any room for reasonable controversy, that what the bank got was its mortgage interest, obtained in fraud of the bankrupt act, and its interest by reason of certain lien claims, and a small amount in addition, as we have before indicated. The notes were but mere instruments by means of which its interest in the property was transferred to its possession in tho form of money. To all intents and purposes it received the logs and lumber to the extent of its interest therein as effectually as any chattel mortgagee obtains his interest in the subject covered thereby when a purchaser thereof subject to the mortgage values the mortgage interest and delivers it to the mortgagee in money. The act of carving out an interest in the property and transferring it by means of the mortgage, and the enforcement thereof in fraud of the bankrupt act, was, to all intents and purposes, a wrongful conversion of the property to that extent. The complaint was in trover, which was proper under the circumstances. The difficulty at several points in this case is in the fact before mentioned that the mere instrument by means of which an interest in the property was transferred to defendant has been treated as the property defendant obtained.
It is further claimed by defendant that there is no evidence sufficient to support the finding that defendant had reasonable cause to believe that Toung intended by the sale to enable the bank to obtain a greater percentage of its debt than other creditors of the same class would be able to obtain, and we are earnestly asked by counsel to carefully consider the evidence upon this subject. Quite a lengthy argument is
It is claimed, however, by counsel for defendant that, unless the enforcement of the mortgages would operate to give defendant a greater percentage of its debt than other creditors of the same class would receive, the mortgages did not amount to a conveyance of property — or, in other words, a preference — within the meaning of the bankrupt act. We do not so understand the law. The federal statute renders void any preference given under the circumstances specified therein, and, as we have seen, gives the trustee in bankruptcy the right to recover any property, or its value, conveyed in violation of such act. Manifestly, if a creditor receives security for the payment of his claim, and that is followed within four months by the commencement of proceedings in bankruptcy against or on the part of the debtor, the intention of
The further point is made that prior to the commencement of this action plaintiff ratified the sale by Young to the Waters-Clark Lumber Company, which, by this action, it is sought to avoid, in that July 7, 1902, he began an action against such company on the theory that there was such a sale; that the property was of the value of $35,000; that the company agreed to pay certain liens on the property, and that, after taking account' thereof, there was a balance due Young; that the action was grounded on implied contract, and precluded subsequent action sounding in tort to recover the subject of the sale. True, one cannot pursue inconsistent remedies to obtain redress for a single wrong. He cannot bring replevin or trover upon the theory that the property involved is his, and subsequently sue upon contract as if the title to the property had passed from him or beyond his reach. Fuller-Warren Co. v. Harter, 110 Wis. 80, 85 N. W. 698; Smeesters v. Schroeder, 123 Wis. 116, 101 N. W. 363; Rowell v. Smith, 123 Wis. 510, 102 N. W. 1. But we fail to see how this doctrine applies here. Counsel for defendant seems to have misconceived the character of the action commenced by plaintiff against the Waters-Clark Lumber Company. As we read the complaint, a copy of which is found in the record, the cause of action set forth therein is similar to the one here. It is in trover to recover the value of property wrongfully converted. The lumber company is there charged with having, as agent for the defendant here, in fraud of the bankrupt law, obtained possession of the prop
6. It is further assigned as error that the judgment is excessive. The court fixed the amount by taking the aggregate of the two notes and the $700 paid for nonlien time checks held by the bank, aggregating $6,660.99, and deducting therefrom $406, amount of nonlien time checks taken by defendant between February 20th and March 29th, leaving the balance of $6,254.99, for which amount, with interest and costs, judgment was rendered. Counsel for defendant concedes that the $406 should not have been deducted, but contends that, because there was included, in one of ‘the notes making up the aggregate of $6,660.99, $413 overpayment on the purchase price of the logs by the Waters-Clark Lumbet Company, the difference between the $413 and $406 makes the judgment to that extent excessive in the sum of $7. But there is evidence that the amount of this so-called overpayment on purchase price was in fact only $377.05. It is quite clear from the record that the $406 should not have been deducted from the $700, amount of nonlien time checks held by defendant February 20, 1902, but should have been deducted from $1,106, the amount of nonlien 'time cheeks held by defendant March 29, 1902. The amount of the overpayment on purchase price of logs, however, should have been deducted, and hence the error-s do not substantially affect the judgment. It is claimed by counsel for plaintiff that, even though the lumber company paid $413, or any amount, more than the purchase price of the logs by mistake or otherwise, and that the amount was included in the judgment, it cannot be considered. This
Some other points presented in the brief of counsel for defendant do not strike us as being sufficiently significant to warrant consideration in this opinion, though it should be said that all points presented by counsel have, as it is believed, been fully considered by the court. The amount of the judgment, as we view the matter, is substantially the equivalent of the property which defendant secured by its mortgages. That is all the property, as appears from the record, which it obtained in fraud of the bankrupt act.
■ Motions for judgment on the verdict were made in plaintiff’s behalf, the amounts claimed ranging from upwards of $24,000 down to $6,660.99. On his appeal he complains of the denial of such motions and seeks to obtain an 'increase in the judgment awarded. What has been said seems to effectually dispose of all questions presented in that regard. The money paid to defendant on the lien claims was for actual interests in.the property paramount to the rights of the plaintiff. We use the term “lien claims” in preference to the term “lienable claims.” Under our statute, as construed by this court, such claims are actual interests in the property to which they relate, subject to be defeated by failure to perform certain conditions subsequent made by statute necessary to the preservation and enforcement of the lien. The term “lienable claim” suggests mere right to obtain an interest in specific property instead of an. interest in prcesenti therein.
By the Court. — The judgment is affirmed on both appeals.
Both parties moved for a rehearing.
The motions were denied October 3, 1905.