A bill seeking to impress a trust upon personal property
belonging to a bankrupt's estate, upon the theory that it was
procured by means of moneys of which the plaintiff was defrauded by
the bankrupt, must trace such moneys by adequate averments into the
specific property sought to be affected.
Claimants seeking priority of payment from a bankrupt's estate
upon the ground that moneys obtained from them fraudulently by the
bankrupt went into his business and swelled the estate must go to
the bankruptcy court in which the estate is being administered;
such claims are not adjudicable in suits for the recovery of the
bankrupt's property in other jurisdictions.
219 F. 721 affirmed.
The cases are stated in the opinion.
Page 242 U. S. 427
MR. JUSTICE McREYNOLDS delivered the opinion of the Court.
NUMBER 98
Knight, Yancey, & Company were duly adjudged bankrupts in
the District Court, Northern District of Alabama, April 21, 1910. A
few days later, in conjunction with a firm creditor, the receivers
brought suit in the United States Circuit Court, Fifth Circuit,
Southern District of Alabama, against Latham & Company, a
French partnership, Frederick Leyland Steamship Company, Limited,
Louisville & Nashville Railroad Company, and others, seeking to
recover 4,200 bales of cotton about to be exported from Mobile,
upon the ground that, while insolvent, the bankrupts had
transferred it to Latham & Company in payment of prior
indebtedness and with intent to prefer them. After being taken into
possession by the United States marshal, by order of court, the
cotton was released, May 14, 1910, to Latham & Company, who
executed a bond conditioned:
"Now therefore if the obligors herein shall have forthcoming and
deliver within sixty days from date of any final decree of this
Court said cotton to the proper officer of the court, or shall pay
and satisfy such decree as may be rendered in the premises, then
this obligation shall be null and void, otherwise to
Page 242 U. S. 428
remain in full force and effect."
Later the trustee in bankruptcy was substituted as
complainant.
July 1, 1910, Knauth, Nachod, & Kuhne filed in the cause a
so-called cross-bill, subsequently amended, which on motion was
dismissed both for want of equity upon its face and because the
court lacked jurisdiction to entertain it. The circuit court of
appeals affirmed this action.
The amended cross-bill is a mass of prolix and vagrant
statements and allegations from which it is difficult to spell out
any very definite theory. Apparently because $98,000 -- approximate
market value of 1,300 bales of cotton -- had been fraudulently
obtained from Knauth, Nachod, & Kuhne by the bankrupts and used
by them in their business, the former sought to impress a trust
upon what the latter thereafter acquired, including the 4,200 bales
of cotton found at Mobile.
The allegations of the bill are wholly inadequate to trace the
funds into any specific cotton,
Peters v. Bain,
133 U. S. 670,
133 U. S. 693,
and the cross-bill must be regarded as an attempt to secure from
the estate priority of payment on account of money fraudulently
obtained by the bankrupts and put into their business. Manifestly
such a proceeding could not be entertained in the Southern District
of Alabama. The estate was being administered in another court.
Mueller v. Nugent, 184 U. S. 8;
Jones v. Springer, 226 U. S. 153;
Acme Harvester Co. v. Beekman Lumber Co., 222 U.
S. 300;
Lazarus v. Prentice, 234
U. S. 267;
Jaffe v. Weld, 208 N.Y. 593.
The judgment of the circuit court of appeals is
Affirmed.
NUMBER 259
The record contains the amended bill of complaint, motions to
dismiss, with objections thereto, final judgment of dismissal for
want of jurisdiction, assignment of errors, etc.
Page 242 U. S. 429
Shortly after Knight, Yancey, & Company were adjudged
bankrupts, upon application of the receivers (May, 1910), the
United States District Court, Northern District of Florida,
enjoined the Louisville & Nashville Railroad from removing or
disposing of 3,600 bales of cotton in its possession at Pensacola,
and in June thereafter, the duly selected trustee instituted suit
seeking to recover possession of the cotton upon the ground that it
had been transferred with intent to prefer. By the court's
direction 2,635 bales were thereafter delivered to Latham &
Company, who claimed them as owners, a forthcoming bond having been
given. The remainder -- 965 bales -- was sold, and proceeds
deposited in the First National Bank of Pensacola to await final
orders.
Subsequently, appellants instituted an original proceeding
claiming that the bankrupts had fraudulently obtained from them
$98,000 and invested it in this or other cotton or otherwise, and
that they were entitled to impress a trust upon the avails of such
funds.
The involved and erratic allegations are wholly inadequate to
show with sufficient definiteness that the funds were invested in
the cotton at Pensacola, and the bill must be considered as an
attempt to secure priority of payment out of the bankrupts' estate
upon the theory that it was increased by appellants' money. There
was no jurisdiction to entertain such a proceeding in the district
court in Florida, and the judgment below is accordingly
Affirmed.
NUMBER 260
The record also consists of the amended bill, filed April 14,
1914, motions to dismiss, with objections thereto, final judgment
of dismissal for want of jurisdiction, assignments of error,
etc.
At the instance of the receivers of Knight, Yancey, and
Page 242 U. S. 430
Company, May, 1910, the Louisville & Nashville Railroad was
enjoined by the United States District Court, Northern District of
Florida, from removing or disposing of 1,950 bales of cotton then
in its possession at Pensacola, Florida, and claimed by Westphalen
& Company. Afterwards, that firm instituted an original suit to
recover, pending which, under agreement, the cotton was sold and
the proceeds deposited in two banks at Pensacola, subject to final
judgment. The proceedings were substantially the same as in Number
259, and like action was taken by the court. The judgment below
is
Affirmed.