112 F. 501 | 6th Cir. | 1901
having made the foregoing statement of the cases, delivered the opinion of the court. *
The preliminary question which we have to determine upon these appeals is whether, upon the evidence before him, the referee, and the judge, in reviewing his determination, reached conclusions which he was justified in finding in regard to the facts; and upon this point we have no hesitation in saying that, in our opinion, the findings of the-referee are amply sustained by the proofs exhibited by the record. We find no resting place for a doubt that a scheme such as is above-set forth was formed by the persons named as parties thereto for surreptitiously taking out of the assets of the insolvent debtor, for a wholly inadequate consideration, a goodly share thereof, paying the-appellants arid two other favored creditors one-half of their claims,, and turning the surplus over to the debtor;. and that this programme was substantially carried out- as planned. The controlling question of
It is contended for the appellants that the Jefferson circuit court had jurisdiction of the goods and authority to order them sold, and that whatever was done in the exercise of that authority must be held valid by the bankruptcy court, which has since taken possession of the fund which represents the proceeds of the sale. We do not doubt that the general proposition thus advanced is sound. But there are some important considerations which prevent its application here. The proceedings taken to obtain the order from the court were tainted with the fraud of the parties. The court itself was imposed upon by misrepresentation of the quantity and value of the goods. The interest of the creditors other than those conspiring in the agreement was not represented. ' It was not an adversary proceeding. The order was procured upon the petition of the assignee, who had become the instrument of the appellants in effecting the unlawful purpose they intended. Moreover, the doings of the parties after obtaining the order were never brought to the attention of the court, and the propriety and validity thereof were never adjudged. Even if the order of sale had been free from taint, enough remains in what was subsequently done under cover of it to bring into condemnation the sale and the ultimate disposition of the goods by the appellants. It is true that these preferences did not proceed from’ the insolvent in the usual manner. The property had been assigned by it for the benefit of
The other barrier which the appellants interpose is that the trustee, having received the fund which had been brought into the state court,, including the $15,000 paid at the sale of the goods, and still retaining the same, has ratified the sale, and cannot be heard to complain of it. But we do not think that consequence necessarily follows. The trustee had the right, if he should elfect to do so, to treat the sale as void, and pursue the appellants for the value of the goods in an action in trover, the goods themselves having been scattered beyond recovery. And it is not shown that he has done anything which precludes his exercise of that privilege, or that the appellants have been prejudiced by delay. Was he bound, as a condition to his election to-treat the sale as void, to restore the money which had been paid at the sale? Some of the earlier precedents and many dicta of judges-’ upon the subject of rescission would seem to favor' the conclusion that he was. This was upon a somewhat technical interpretation of the rule that the parties should be put in statu quo. And doubtless there are many instances in which nothing less than a literal compliance with the rule would meet the requirements of justice. But there is a growing tendency in modern decisions to consider the special facts of the case, and inquire whether the restoration of the purchase money is indispensable, or whether all the rights to which the other party is justly entitled may be protected without the purchase price being tendered back, and, when this is seen to be practicable, to dispense with it as an unnecessary formality. 2 Mechem, Sales Pers. Prop. § 919, and the following cases there cited: Ladd v. Moore, 3 Sandf. 589; Warner v. Vallily, 13 R. I. 483; Crossen v. Murphy, 31 Or. 114, 49 Pac. 858; Poor v. Woodburn, 25 Yt. 234. See, also, Pierce v. Wood, 3 Fost. 519. The cases now under consideration seem to show that the conditions are such that the modification of the rule just adverted to has a fitting application. The goods converted were of much' greater value than the sum which the trustee has received of the moneys of the appellants. His damages -for the conversion may properly be diminished by the sum already in his hands. If he should have already restored the money, and should get judgment for the entire value, he would take back a sum'
It may be that a more complete statement of the grounds of the objection by the trustee 'would have been better suited to the trial of the controversy. But the appellants seem to have understood the nature of the issue, and to have adapted their course to it. If more ample specifications were required by them, no’ doubt the court would have ordered them.
We think, however, that the order of the referee should have specified the sums which the respective appellants should be required to restore- to the estate in order to entitle them to an allowance of their claims. The order will be affirmed, with a modification that there be incorporated in it the sums which the appellants, respectively, are required to restore before allowance of their claims. This may be ascertained upon the testimony which formed the basis of the order appealed from.
The appellants must pay the costs of their appeals.