ftDEBALBEPOBTER,
vol. 63.
icOllBidera,tf,ons; we thiblt it. obvkm. fthart there 1$, l1Qbasis tor the charge contained in the supplemental bill that "the decree was unQt the .issues in of the that the original decree :was 'drawn· iO' strict conformity. witb.theiiaUegations 'of, the original bill, and! 'that.itJgranted to the compt:atnnnt the fuUmeasure of relief wbi'Ohudes!.l'ed at that time tondbtaln. r It remains, to. be considered w:4etbeIt; upon the !!lUPplemental bU1; in the na.ture of a 1:)ilt of review to obtain a modification of a decree, can he which. discloses no facts pevtinenttQ the litigationand'oo the iSElues involved therein, except 8uchaswete well prior to the first decree. A leadibg case on thatrPoint is Pelldlet<m. v. Fay, 3 Paige, 204, where itWQS held !that bill;!:)ught to :be filed as lOon as the new matter sought tP'be insertf;d therei ll is discovereP, and that, i! ,a party proceeds to a decree after tb,e discovery of tb,e facts upon, Wihlch the new right or claim is founded" he will not be permitted: afterwards to file a supplf.\xuental bUI,in the nature of a bill· of teview, 'founded on such fact&The same .doctrine was raa:tlitmed.by: Chancellor: WalwortJ:l.'tn;r:Dias v.;¥erle, 4 Paige, 259, and was stated and applied on the circuit, by Judge Caldwell, in Henry v, tnsurance Co.,. 45 Fed. 299, 303. The rule of practice in ftpprovedby,t.he: leading text writers. Vide Story, Eq.PI. § 338a; 1 Hoff. Ch. Pl'. 398; 1 Barb. Ch. PI'. pp. 3u3, 364; Ch.P)". &1'1'. p. '1()81, note; ld.. p. 1524, note 2; and Fost. .Fed. Pl'. § lSS. .' . . Our conclusion is, that tbe question stated at the outset'of this o.pinion should be answered in the afIinnative. We are of the opinwn that the s1;lpplementaJ bill, so termed, should not have been entertained by c01;l:u4because it stated no facts or bearing .1JsP.<)u;the sought, Elx,<:ept such as were <well known, to the complaltlantat'tpe. date of tb,e entry of the original decree. We that the . supplemental pleading wholly to statefl. case entitled, the circuit court to modify its decree after had entered of record, and the ;term had lapsed. these views, the will be re'J:ersed,: and ;remlUlded to the. ciJ,'cuit· court, with directions to set 4lside the decree entered on; the lilvpplemental bill Qn the 22d day :of December, 1893, and, to dismiassaid bill at complainant's cost, but witboutprejudice to,the complainant's right to bring an action 'fl.t law to recover the value of the tract of land in controversy, if he shall so elect. .:l!AyDEN etaJ.v. WELLINGTON et aL (Clrcu!i1Courl of Appeals, Eighth Circuit. July 16; 1894.) No. 422;; AsSIGN'm!INT
Mills' Ann. ::it. Colo"if :1,69, 171. authoriZing genel'lll assignments tor the of WQ:vide that no SUch assignment by an insolvent,
ll'bn
BENEFIT OJ'
CON8TITUTES--EvIDENCB.
, HAYDEN V. WELLINGTON.
7
or one in contemplation of insolvency, shall'be 'valid, unless it Is for the benefit of all his eredltors in proportion to their cllljms. Helri, that a bill of sale of all one's property for the purpose of 'paying a portion' only of his debts, Including a debt due one who had attached such property, and not Intended by the debtor to be a general" assignment, would not be given effect as such, though in consideration thereof It was agreed that the attachment should be released, the attachment having been obtained In good faith, and not In pursuance of a secret agreement for Its suusequent release and the execution of the bill ,of sale, to enable the parties to evade the provisions of the assignment act. ',' "
theOircuit Court of the United States for the Distriet of Colorado.' ,', ' This was a bill by Charles H. Hayden and Harvey S.Hayden. eopartllerS as Hayden Bros., against Herbert D., WeHington, Earl Cranston, and tile Union National Bank (If Denvei., to establish a trust, and fo!' an accounting. The circuit court s,ustained a d,emurrer to and dismissed the bill. Complainants appl:'aled. ' In the circuit court this case was disposed of by a demurrer to the bUi of complaint. The bill was filed by the appellimts, Charles H. and, Harvey S. Hayden, composing the firm of Hayden Bros. The appellees demun-ed on the ground that the bill did not state facts sufficient to constitute a cause of action. The circuit court sustained the demurrer, and thereupon entered a decree dismissing the bill, whereupon the complainants below appealed. In substilllce, the bill disclosed the following facts, to wit: That In an action begun on January 21, 1803, by the firm of Hayden Bros. against Herbert D. 'Wellington, one of the appellees, the firm recovered a judgment against Wellingion on the 7th day of March, 1803, for $8,607, on which judgment and execution was issued, and was returned unsatisfied on the 6th uay of June, 1893; that in the fall of the year the Union National Bank had commenced a suit by attachment against said Wellington for the sum of $20,000. ,vhich the latter owed to the banl{, and that prior to October 13, 1892, all of tlJe property then owned by Wellington had been levied upon by the bank. and was, at the last-mentioned date. held under a writ of attachment to satisfy the bank's demand; that at or about the last-mentioned date other creditors of Wellington had sued out writs of attachment against him, and had caused the same to be levied upon his property. 'fhe bill aven-ed that, after these several levies in favor of the bank and other attaching creditors, all agreement had been entered into between 'Wellington and the bank, whereby the banl{ was to release its attachment, and 'Vellington was to convey the attached property to Earl M. Cranston, also dne of the appellees, to be by him sold and disposed of for the payment of the demands of the several at· taching creditors; that this agreement was subsequently carried into effect on or about the 13th day of October, 1892, and that the attached propeliy was transferred by Wellington to Cranston for the purpose and object last stated. The bill averred that the purpose of 'Vellington In entering into the aforesaid arrangement was to prevent the complainants, Hayden & Bros.. and other creditors who had not then brought suit, from levying attachments on the said property. and to prevent them from collecting their several debt/<. and to compel them to compromise the same on such terms as IVellingtou might propose. It was also alleged in the bill that the Union National Bank had agreed with 'Vellington that the attached property should be sold by Cranston for its benefit, and that, after its debt had been paid in full out of the proceeds of the sale of the attached property, it would assist 'Vellington to resume business. 1'he blll also charged that the property levied UpOIl and conveyed to Cranston, as agent or trustee for the bank, was worth largely more Wan the amount of the bank's demand; that Cranston had sold the property for the sole purpose of enabling the bank to realize what was due to it, but that he had not administered the trust fairly, and that he had sold the property conveyed to him for a small percentage of its actual value. The relief prayed for was that Cranston and the Union National Bank might be required to disclose what property had been conveyed
8
FEDERALREPO:ijTER,
to Cranston;, thll.t.tbe latter might 1:>e compelled to account for whatever had been reali2!'e<\, by, therefrom;. tb.atcranston might be adjudged to be a trustee for a.U,iO(, ,the Wel!JngtQn; anll· that he be compelled to the proceeds of the property conVeyed to him, ratably among all of Wellington's
Lucius M. (Henry T.· Rogers and Daniel B. Ellis, on the brief), for appellants. Robert J. Pitkin (Earl M. Cranston, William A. Moore, and O. P. Butler, on the brief), for appellees. Before OALDWELLand SANBORN, Circuit Judges, and THAY· ER, District Judge. TlIAYER, Oistrict Judge, after stating the case as above, de· liveredJhe opinion of the court. There are some allegations in" the. bill which are sufficient, no doubt, toshow that Wellington was actuated by a fraudulent pur· pose,aE\regards some of his creditor$, in making the alleged bill of of the Union National Bank; sale to (Jranston, as agent or but there are no allegations which tend to show that the bank either' h'll.d knowledge, of or participated in any such fraudulent design;', nor is it by the appellants that the bill can be maintained on the that it is a proceeding to cancel and annul a :conveyance which wascontl'ived by the parties thereto with anilltent to hinder, delay, or defraud creditors. The sole contention is that the ayerments contained in the bill of complaint are suffl.cie,nt to show that the "bill of sale or conveyance," as it is described in the complaint, was, in legal effect, a "general assignment for the benefit of creditors," within the meaning of the Colorado statute on that subject; and it is said that the purpose of the suit was to have it adjudged to be a general assignment, and that the demurrer should have been overruled,. and that Cranston should have been compelled to account for the proceeds of the assigned property precisely as if it had been in form a general assignment for the benefit of all of Wellington's creditors. The question to be considered, therefore, is whether this view is tenable.· The provisions found in the Colorado statute which are most material to the, discussion of the question in hand are sections 1 and 3 of an act passed in 1885, which are now sections 169 and 171 of Mills' Annotated Statutes of Colorado. They are as follows: "169. Any person may make a general assignment of all his property for the benefit of his creditors by deed duly acknowledged, Which, when filed for record in the oroce of the clerk and recorder of the county where the assignor resides,or if a non-resident, where his principal place of business is in this state, shall vest in the assignee the title to all the property, real and personal, of the assignor in trust for the use and beilefit of his creditors." "171. No' such deed of general assignment of property by an insolvent, or in contemplation of insolvency for the benefit of creditors, shall be valid, unless by its terms it be made for the benefit of all his creditors, in proportion to the amount of their respective claims."
It will be observed that this statute contemplates voluntary action on the part of an insolvent debtor. It does not compel him to relinquish the possession or control of his property to an as·
HAYDEN ·11. WELI.INGTON.
9
signee or trustee for the benefit of his creditors, when he becomes unable to pay his debts. The act gives him permission to make a transfer of that nature, with certain prescribed formalities, aud it provides for the due administration of his estate when it has been thus assigned. It declares, in substance, that such deed of assignment shall be invalid unless it is made for the benefit of all of the debtor's creditors. In this latter clause, declaring the invalidity of the conveyance, the reference is manifestly to an instruexecuted in the mode and manner prescribed by section 169, and intended by the assignor to be administered under the assignment act. This statute differs materially from laws which have been enacted in some other states on the subject of assignments, which declare; in effect, either that "all voluntary assignments or transfers of property for the benefit of creditors shall be void unless made for the common benefit of all creditors," or that "no general assignment by an insolvent person for the benefit of creditors shall be valid unless made for the benefit of all creditors," or that "every provision in any assignment hereafter made, providing for the payment of one debt in preference to another, shall be void," or that "every voluntary assignment of property by a debtor for his creditors shall be for the benefit of all of the creditors of the debtor." Statutes of the latter nature differ so essentially from the one now it, question, and are to such extent indicative of a different public policy, that decisions made thereunder are of little value in con· struing the Colorado statute. More weight, we think, ought to be given to decisions of the supreme court of Colorado, which foreshadow the construction that the act in question will probably· receive in that state. In the case of Campbell v. Iron Co., 9 Colo. 60, 10 Pac. 248, the court was called upon to construe a previous statute of Colorado on the subject of assignments that contained provisions very similar to those found in the existing law which is above quoted. With reference thereto, the court said: "The general rule Is that statutes in derogation of the common law· are to be strictly construed. Certainly, a proper regard for this rule forbids the enlargement of a statute by construction so as to include common-law principles not clearly within its language and spirit. * * * Experience demonstrates the extreme danger of interfering by legislation with the debtor's jus dispOnendi so long as he retains dominion over his property, and a careful and skillful attempt by statutes to guard all the equitable rights of creditors might result in untold disaster to the business world. Accordingly, legislative bodies-our own included-have exercised extreme caution in dealing with the subject of assignments, and have left untouched many of the principles relating thereto which prevailed at common law."
See, also, the observations made with reference to the same subject in May v. Tenney, 148 U. S. 60, 69, 13 Sup. Ct. 491. If we adopt the rule of strict construction thus announced, in the interpretation of the statute in question, so as to make it applicable only to those transfers of property which are clearly within the spirit as well as within the letter of the assignment act, then we think that no difficulty will be experienced in reaching the conclusion that the bill of sale involved in the present suit was not ren. dered invalid by the provisions of the Colorado statute, although
. vol,.
63.
to tranilfer. all· of, to a third party ,forrthe dlurpose ofpayi.ng,a·pol)tiononly of his debts. It apthe allegations ot! the bill of· complaint that',the debtor d.ld no1dntend the :assignmentact, or to take advaJ;l,ta/Je ,of: any of its provisions.. MoreQver, it i.s not charged, nor 'tIt that the attachment wiit was sued out by the bank in of a secret agreement between it and its, debtor, by Vjir:tue pt. which the writ was to be suqsequently releal'!ed,aud a executed, so as to enable the parties by that device bill of tOevadwtheprovisions of,the assignment act. The bill; Elhows that the creditor, for whose benefit the bill of sale to made a valid lien, in good faith, and in , ,t:lle·mQdftlIH'ovided by law,'upon all of the assigned property, before was and it·hlafair inference. from the bill that the parties agreed upon 'a CJ.lsml(iJMJ"of 'the attachment suit, anQ. the execution of the bill for the purpgse. of preventing a possible the by. a ,judidal' sale. As the bill does not aver.thatl,tbe attachment, (WM , sued out by the; preferred creditor in pUi'I:IVanee of any s'!1ch sllcret al'l)allgewent between the debtor and is lastindicated,it is fah' to preElume t1].at,the agreer:elease the: attachment lien,andto substitute a bill of sale hltQ in,perfect g.pqd ,faith, ,jn the belief that the could PY,that meaps. be sold to' much better advantllgEk . ' ..' .'u .. . In ..Qf the SEt considel(ations, we. ,are unaNe· to hold that the bill ofS!l\e,executed by theorlnsolvent debtor was invalid, and we are equally 'Q.Jl.lible to give it effectJRs a deed of general assignment, according.tQ,the, prayer of We ,think the assignment act in was not to depl'ivean insolvent debtor of that dominiqri (over his to have been exercised in the present case, and tllat it would be unwise to give it such by its sueffect. . i\.s .the bank had secured a lawful perior diligence before the: bill of sale in its favor was executed, no creditor of Wellington was prejudiced by the conveyance. That IIlade the disposition of the proceeds of the attachedpr0J?El:rty which the,cl;lw would have made if the attachment suit had been regnlarly prosecuted to final judgment. At common law the tlebtor bad an. undoubted. right to enter into such an arrangement .With his creditor as appears to have been made in the present instance, and we kn.ow of .no sufficient reason why thl" assignment. act should receive a construction which will interdict such arrangements in future, if they are entered into in good. faith, and are not conceived with !Lview of evading the provisions of the assignment law. Oertain 'it' is that the transaction in· question was not expressly prohibited 'by ,the assignment act, and was not opposed to the :policy of any other: statute of the state ofOolorado. In conclusion it wilLnotbe out of place to observe that, as the Colorado statute invalidates a deed of general aSsignment by an insolvent debtor, unless it is made for the (If' all of his creditors, no reason is perceived, if the appellants are right in their
PENNSYLVANIA STEEIlCO. 'D. J. E. 'POT'l'S SALT & LUMBER CO.
11
tention, why they did not have an adequi!t¢:remedy at law to reach the assigned property at the time this proceeding was instituted. In May v. Tenney, supra, it was· held that in Colorado a general transfer of property by a debtor for the benefit of a preferred creditor does not, if found to be in violation of the policy of the state as expressed in its legisl,ation, become a general assignment for the benefit of all creditors without preference, but is entirely void. According to that view of the case, it follows that, if the bill of sale to Cranston was within the provisions of the assignment act, it was a void instrument, and in that event the property conveyed was subject to attachment in Cranston's hands, and he might have been compelled to account for the proceeds thereof by garnishment process. But, be this as it may, our conclusion is that the bill of complaint did not show that the conveyance to Cranston was within the purview of the assignment act, and, so holding, the decree of the circuit courUs affirmed.
PBNNSYLVANIA STEEL CO. v.J. E. POTTS SALT & LUMBER (Circuit.Cqurt of Appeais, Sixth Circuit. No. 196. MECHANICS' LIENS-CONSTRUCTION OF RAILROAD.
cu. et lU.
July 3, 1894.) ,
Acts .Mich. p. 293, § 1, giving one who builds any house, building, machinery, wharf, or structure a lien thereon, an,d on the lot or piece of land, not exceeding a quarter section, or, if in an incorporatecl not exceeding the lot on which the improvement is made, does not give a lien for the materials l1sed in the construction of a railroad.
Appeal from the Circuit Court for the Eastern Di'strict of Michigan. Suit by the Pennsylvania Steel Company against J. E. Potts Salt. & Lumber Company and others to enforce a lien. Decree for defendants. Oomplainant ·appeals. Affirmed. The J. E. Potts, Salt & Lumber Company was a corporation organized under the laws of Michigan for the purpose, among others, of carrying on a lumber and logging busiQ.c:ss in that state. Incident to such business, it owned or was interested in extensive tracts of land in the counties of Oscoda, losco, Alcona, and Ogemaw, on which it carried on its operations. 'For the pur" pose of facilitating the getting out of the timber from the WOodS to.a convenient place for manufacture and shipment, it caused to be organized the Potts Logging Railway Company, under the train railway act, being No. 148 of the Laws of Michigan of 1855, and that company built a railroad ftom Au Sable to Pottsi a distance of 37 miles, and from thence constructed spurs of track in various directions into the different locations from which the logs were to be taken. These spurs were in the main temporary constructions, and were taken up and moved to other locations when the special pose had been subserved or the exigencies of the business required. The' entire property of the railway company in fact and in substance belonged to the Salt & Lumber Company, but, while the principal purpose and business of the railway company was to act as an auxiliary of the Salt & Lumber Company, it yet engaged in the carriage of mails and passengers in the ordinary modes of railway business. In August, 1890, the complainant, the Pennsylvania Steel under a contract with the. Salt & Lumber Company, furnished WO tons of steel rails, together with t'l1eir fasteD.1n'gti,· for the use of the IJbgging Railway Company, and to be laid on its roadbed.