National Park Bank v. Lanahan

Jurisdiction — Assignment for the benefit of Creditors — Eights of Creditors at Law — Interpleader—Multiplicity of Suits— Complication of Accounts — Trustee—Jurisdiction in Inter-pleader— Indifferent stallholder — Attorney and client— Appeal. The jurisdiction assumed by a Court of equity upon the application of a trustee under a voluntary assignment for the benefit of creditors, is not an exclusive jurisdiction, and does not interfere with the right of a creditor to proceed by attachment or otherwise, against the property or funds in the hands of the trustee, for the purpose of testing in a Court of law the lona fides of the assignment. The principle on which Courts of equity exercise jurisdiction in cases of interpleader, multiplicity of suits, and complication of accounts, has no application to a case where creditors are prosecuting their legal rights in a Court of law against a fraudulent assignment; and a trustee claiming under such an assignment has no right to the interposition of a Court of equity upon such grounds. Jurisdiction in interpleader is founded upon a conflict between two or more persons severally claiming the same debt, through separate and different interests, and the person liable to discharge the debt is unable to ascertain which of the claimants is entitled, and he is therefore threatened with two or more suits in respect of a subject-matter in which he claims no interest, and in regard to which he is an indifferent stakeholder. A trustee who is entitled to commissions on three or four hundred thousand dollars, if the deed of trust be sustained, cannot be said to be an indifferent stakeholder, without any interest in the subject-matter in controversy. An attorney has no right in his own name, and on his own motion, to appeal from an order or judgment of the Court below affecting the interests of his client.

Appeals from the Circuit Court of Baltimore City. On the 16th day of December, 1881, Robert' W. L. Rasin, as general partner in the firm of R. W. L. Rasin & Company, of which Edward K. Cooper was recited to he the other and a special partner, executed to the appellee a deed of trust of all- the property of said firm, and all his individual estate, for the full and equal benefit of the partnership and his individual creditors, according to their respective rights. The deed was recorded on the day of its execution, and on the next dajr the trustee duly filed his bond in the Superior Court, according to law. On the 20th of December, 1881, the trustee filed his petition in the Circuit Court reciting the premises and praying permission to administer the trust under the direction of the Court. On the same day the Court passed an order granting the prayer of the petition, and, in terms authorizing the trustee to administer both the partnership and individual trusts under its direction. On the 19th of December, 1881, Edward K. Cooper, the alleged special partner executed and delivered to Messrs. William E. Porter and Robert A. Dobbin a deed oí' all his estate for the equal benefit of his creditors. Mr. Porter having declined to act, Mr. Cooper on the 22nd of December, 1881, appointed Mr. J. Swan Erick in his place, and by a confirmatory deed conveyed his estate to Messrs. Dobbin and Erick upon the same trusts. The last named trustees forthwith gave bond according to law, and applied to the Circuit Court for permission to administer their trust under its direction, which was duly granted. Alter the order of December 20th, the appellee proceeded in the administration of his trusts, and made large sales of the trust assets, and settlements and adjustments of the business of the insolvent firm with the Court’s authority and approval. A certain Robert J. Ruth, who was claimed by some of the creditors to have been a partner in the insolvent firm (but who, as well as the other partners, denied that he was such,) had for the purpose of saving all question, executed to the appellee, on the 24th of January, 1882, in conjunction with the said R. W. L. Rasin and R. W. L. Rasin & Company, a deed confirming in all respects, the original deed of trust of the 16th of December, 1881. Mr. Lauahan, thereupon, on the 1st of Eebruary, 1882, in conjunction with the said Ruth and the said Rasin (the latter interposing in his individual capacity as well as for the firm and as its acting partner,) filed a petition under oath in the Circuit Court wherein the execution of the confirmatory deed of the 24th oí' January, 1882, and the filing of a new bond thereunder by the trustee were recited, copies of the respective documents being filed as exhibits. The petitioners united in praying the Court to authorize and direct the trustee to administer the trust under its direction, authority and control, and that he he directed to give the usual notice to creditors to file their claims with the clerk. On the said 1st of February, 1882, the Court passed the order prayed, and in terms assumed “jurisdiction of the trust estate and property-referred to in said petition as therein prayed.” The notice to creditors was duly published, and a large number filed their claims in pursuance of it. On the 11th of February, 1882, Mr. Cooper executed and delivered to the appellee a confirmatory deed in which, after reciting that he was absent from the city, when the original deed of trust of the 16th of December, 1881, was executed by Rasin, as acting partner, he ratified and confirmed the said deed and all that had been done in the premises. Mr. Cooper had already on the 27th of January, 1882, executed another -confirmatory deed to Messrs. Dobbin and Frick, in which he recited his previous deed to those gentlemen and referring to the fact that he was charged with having made ' himself responsible as a general partner of the firm of R. W. L. Rasin & Co., (which he denied,) and that his deeds to his said trustees were claimed to be defective, by reason of their not providing for the payment of his liabilities^ as such general partner (if in fact he had incurred such,) he declared that his said deeds should bo taken and construed as making his assets liable, in due course of law and equity, for such partnership liabilities, if any, after paying his individual debts, and that no part of the fund should he payable to him until -all his debts and liabilities of all sorts should he first provided for. On the 13th of February, 1882, a certain W. George Weld and Alexander J. Wedderburn, at the instigation and request of certain of the attaching creditors in this case, filed, their petitions in the Court of Common Pleas in insolvency, against the said Rasin and Cooper, praying to have them declared insolvents. The petitioners claimed to be creditors of each of the said insolvents and of the firm of R. W. L. Rasin & Co., and alleged, among other things, that the various trust deeds heretofore mentioned had been executed by said insolvents, with intent to delay, hinder and defraud their creditors, both individual and partnership. The answers of Rasin and Cooper set up the proceedings already had in the Circuit Court, in respect to the trust property, under the deeds of trust impeached, and relied on the assumption and exercise of jurisdiction by that Court over the same. Meantime, the administration of the trust estate by Mr. Lanahan, under the direction of the Circuit Court, was carried on, by sale and other disposition of the trust property, real and personal. On the 20th of January, 1882, he reported sales of partnership property to the amount of $260,000, which were duly ratified. Upon the realty which constituted a part of the property so sold, there were mechanics’ liens to the amount of over $55,000, for the enforcement of which proceedings had been instituted in the Circuit Court for Anne Arundel County, and which after litigation, were compromised by the trustee under the Court’s direction. Other sales and transactions of large amounts were likewise made under the same direction, and reported and confirmed. Large demands against the insolvent partnership were compromised and settled, and accounts were stated by the auditor under the direction of the Court. Contracts entered into by the insolvent firm tor the manufacture and delivery of fertilizers were carried out by the trustee, and the crude materials among the assets were used for that purpose, under the direction of the Court. Pendings these proceedings in the Circuit Court, certain of the creditors of Rasin and R. W. L. Rasin & Company, brought suit against them in the various common law Courts of the city and the Circuit Court of the United States, which were prosecuted, regularly, to judgment. The earliest of these judgments was rendered on the 13th of February, 1882, in the Superior Court of Baltimore City, and an attachment thereon was laid in the hands of the appellee on.the 15th of February, 1882. The judgments in favor of John W. Anderson, assignee, were rendered the 4th of April and the 6th of July, 1882, respectively, and the attachments thereupon were laid in the hands of the appellee on the 7th of April and 7th of July, 1882, respectively. These proceedings were in the Circuit Court of the United States. The judgment in favor of the appellant, The National Park Bank of New York, was rendered on the 6th of July, 1882, in the United States Circuit Court, and the attachment thereon was laid in the appellee’s hands on the 7th of July, 1882. On the 11th of December, 1882, the trustee filed the petition which is the foundation of the present controversy. It affirmed that the original deed of trust, of itself, and a fortiori after its ratification and confirmation by Cooper, was a valid and lawful conveyance of the assets which it professed to convey, and by reason thereof, and of the equal distribution among creditors, which it prescribed, was entitled to the favorable consideration of the Court, and furnished a lawful and competent foundation for the jurisdiction which the Court had assumed and was exercising. The petition claimed that after the Court had assumed jurisdiction and control over the trust assets, and had ordered notice to be given to creditors to file their claims, no creditor was at liberty to proceed at law for the purpose of obtaining a preference, and no judgment obtained or attachment issued under such proceeding could create any lien or establish a priority over other creditors. It then averred that all the judgments and attachments before referred to [of which a list was filed with the petition,] and all the suits under which they were obtained and issued, were for the express purpose of creating and securing such unlawful priorities and were an unwarrantable interference with the Court’s jurisdiction and would oust and defeat the same, and ought to be enjoined and restrained. The petition further charged that even if there were any ground for impeaching the validity of the deed of trust, (which it denied,) it was competent for the judgment and attaching creditors, by proper intervention in tlic trust proceedings, to raise all such questions, and was within the competency and jurisdiction of the Circuit Court to decide them, and pass upon and adjudicate, according to their priority, all liens and preferences, if any, acquired by said creditors through their proceeding at law. The petition also charged that by reason of the jurisdiction long before assumed by the Circuit Court over the trust property and the administration of the trust, and by virtue of the dealings of the Court, and of the trustee, under its orders, with the trust and assets, and the fact that the property and its proceeds, so far as sold, were, to all legal intent, in the Court’s custody, the Circuit Court was the proper and the only proper tribunal for the assertions of the liens and priorities sought to he obtained by the attaching creditors. The petitioner further claimed, that inasmuch as these creditors had already done everything at law to fix their priorities, if any, and the order thereof, leaving nothing undetermined but their right, if any, to condemn in the hands of the petitioner, the assets over which the Court had taken jurisdiction and which the petitioner had administered and was administering under its orders, it was their duty and they should be compelled by the Court to desist from proceeding further at law and to assert before the Court, in the trust proceeding, any further claims or pretensions which they might set up against the trust fund. The petitioner accordingly prayed on his own behalf and as trustee and on behalf of his cestuis que trust, the creditors who had come in, under his notice for an equal distribution of the fund, that the Court would enjoin the judgment and attaching creditors from proceeding further at law, and compel them to assert any further-rights they might have or claim, in the trust proceeding. The petition further represented that if the attaching creditors were permitted to go on with their attachmehts, the trial of which they were urging, and were successful in them, the whole of the trust estate might be consumed, and must be greatly wasted by multiplication of costs, to the entire exclusion of the creditors whose claims were filed in the trust proceedings; that the trustee must be put to great labor, responsibility and expense in defending a multiplicity of suits, without the protection of the Court in the matters in which he had acted under its authority. On the other hand, he charged that the creditors who had filed their claims under the order and invitation of the Court, and the creditors and others to whom he had made sale_ and transfer of the trust assets by its direction, were urging him in their turn, to proceed with the administration of the trust; consummate the engagements which he had entered into under the Court’s orders; and made distribution of the trust funds thereunder. The trustee, therefore, claimed that in his position and relation as an official-of the Court, acting under its orders in good faith and bound thereby, it was his privilege and duty to ash the intervention of the Court and its protection against these conflicting and antagonistic demands and proceedings. He accordingly prayed to he held harmless and unmolested in the premises, and that the judgment and attaching creditors be compelled to come into Court in the trust proceedings, and interplead therein, the said last-named creditors to be enjoined, meanwhile, from proceeding further in their suits at law against the petitioner, and from interfering, by or through any legal process, with, him or the property and assets under administration in the Court.4 The petitioner further charged that by the terms of the deed of trust to himself and the like deed of Cooper to his trustees, the obligation was imposed to pay the surplus of individual property over individual debts to the partnership creditors, and vice versa, in each case. The petition also proceeded to show that no ascertainment could be had of the amounts and relations of the said respective funds and of the rights of the respective trustees as between themselves or in their relation to creditors of both classes, without such a statement and settlement of the partnership accounts and of the individual estates of the parties as could only be had in a Court of equity. The petition charged and insisted in view of the facts, that in every aspect of the case and the litigation and proceedings referred to, there was a complication of interests and relations between parties, and of accounts between the respective estates involved, which Courts of law were wholly incapable of dealing with. Finally the petitioner averred as follows, viz., “Petitioner further represents, that the trustees of said Cooper, under the deeds herein-before mentioned, have sought the direction of this Court in the administration of their trust, and that jurisdiction and control over the same and over the trust assets have been assumed by the Court, and the said trusts are now being conducted under its direction, notice to creditors has been duly given by said trustees in conformity with its order, all of which will appear by said proceedings in this Court pending. It being apparent, as petitioner insists, from the facts thus and hereinbefore set forth, that an accounting between your petitioner and said trustees, and between the estates which they respectively represent, is indispensable to the settlement of said estates, and the proper distribution of their assets, and to the ascertainment and'determination of the rights of the creditors of said estates, of all classes, and the disposition of their claims, whether to priority or equal distribution; your petitioner represents that a consolidation of the said proceedings had on the application of said trustees with those had in this case, will conduce largely to the convenient adjustment of all the rights and questions so as aforesaid at issue and in controversy.” * * * The petitioner then prayed consolidation of the trust proceedings in Cooper’s case with those in which the petition was filed, and that proper accountings be had of the assets, claims and liabilities of the insolvent firm and each of the partners, and of the claims and demands of Rasin and Cooper against and their liabilities to each other, and to their individual creditors respectively, &c., &c., and that the respective assets of the firm and its partners be distributed by the Court among the individual and partnership creditors, according to their respective rights under the several deeds of trust. It then further prayed as follows: “ And that the said judgment and attachment creditors may he required. and compelled to set up and prosecute in these proceedings, all and singular their respective claims against the said partnership, and against the said partners in their partnership and individual capacities, and against the assets and property of said partnership and said partners, and against your petitioner and the trustees aforesaid of said Cooper, respectively, and against the assets in the hands of your petitioner, under the jurisdiction and control of your Honor in these proceedings, as well, as against the assets of said Cooper, under administration in this Court as aforesaid. “And that the attaching and judgment creditors may be compelled to interplead in these proceedings with the creditors, who have filed their claims to and for an equal distribution under your Honor’s order therein, and to assert and prosecute against said last named creditors before your Honor, in these proceedings, such rights and demands, if any, as they may lawfully have, or claim to have, to liens or preferences or remedy of any sort, over or in exclusion of said last named creditors, so that the same, and all other questions as to the trust estate of R. W. L. Rasin & Company, and R. W. L. Rasin, individually, here under administration, and between said judgment and attachment creditors and this petitioner, and between said creditors and those who have come into the case, in respect thereto, may be fully and finally heard and determined in this Court and these proceedings, and that equity and justice may be done in the premises. “And that pending such interpleader and adjudication thereunder, the said judgment and attachment creditors, and each of them, may be restrained and enjoined from proceeding further at law under their said judgments, or upon their said attachments, or by any legal proceeding or process whatsoever, against this petitioner, or the assets and property, or any part thereof, which were of R. W. L. Rasin & Company, or of Robert W. L. Rasin individually, on the 16th day of December, 1881, and over which this Court has taken jurisdiction, and which your petitioner is administering in these proceedings under its direction.” Process was then prayed against all the judgment and attaching creditors, with publication against non-residenis, also subpoana to Rasin and Cooper and to the trustees of Cooper. The-injunction was prayed in these words: “May it please your Honor, to grant to this petitioner the writ of injunction, to the judgment and attaching creditors aforementioned directed, that is to say, to the Third Rational Bank of Baltimore,” &c., &c., &c., &c., “and each of them, enjoining and restraining them, and each of them, their respective agents and attorneys, and all persons acting for them, from suing out any process or instituting any proceedings whatever at law, and from proceeding further in any action by them, or either of them, heretofore instituted at law, or under any judgment by them, or either of them, at law recovered, or under any attachment or other process or proceeding whatsoever, by them heretofore sued out against Robert W. L. Rasin and-Edward K. Cooper, as copartners, lately trading under the firm name of R. W. L. Rasin & Company, or Robert W. L. Rasin individually, or Robert W. L. Rasin, trading as R. W. L. Rasin & Company, against or to affect in whole or in part, or in any way, the assets and property which were of said firm, or of said R. "W. L. Rasin, on the 16th day of December, 1881, and now are in the hands or under the control of said Thomas M. Lanahan, by or through the deed of trust of the last mentioned date hereinbefore referred to, and are in course of administration by him, as trustee thereunder in this Court in these proceedings, until the further order of this Court.” The preliminary injunction was granted as prayed on the 11th of December, 1882, in the usual form, with leave to the defendants to move for a dissolution on filing their answers and giving five days’ notice. None of the attaching defendants answered except Coates, who admitted the facts and the validity of the trust deeds, and assented to the prayer of the petition. R. W. L. Rasin answered, admitting the allegations of the petition, and assenting to and joining in its prayer for relief. He also set up the insolvent proceedings, against himself and Cooper as additional ground for such relief Frederick W. Bruñe,-Esq.,, one of the counsel of The National Park Bank of New York, and of John W. Anderson, assignee, two of the judgment and attaching creditors, filed a petition in his own name, as “an attorney and counsellor of the Circuit Court of the United States for the Fourth Circuit in and for the Maryland District,” in which he charged that by the service of the injunction upon him (his clients being non-residents,) an illegal attempt had been made to restrain him as an attorney and counsellor of the United States Court, and through him his clients, from asserting their just rights. He claimed, that it was not competent for the Circuit Court of Baltimore City, by injunction, to restrain the Circuit Court of the United States, or its officers, attorneys or suitors from prosecuting their lawful remedies in cases within the Federal jurisdiction. He further claimed, that a Court of equity was not competent to restrain proceedings at law even in a State Court, where that Court had already lawfully acquired jurisdiction and ■was competent to administer justice. He insisted that the proceedings in the equity Court being founded on the theory of the validity of the trust deed, and the proceedings at law being founded on the theory of its invalidity, the two proceedings did not conflict with each other, and the prior action of the equity Court was, therefore, no such assumption of jurisdiction as ousted that of the law Courts. After stating his views and arguing them, Mr. Bruñe suggested to the Court, that inasmuch as his clients could not be made parties to the equity proceeding, and as their appearance and answer might prejudice their rights by making them appear to recognize a jurisdiction erroneously assumed, he submitted that they be not required to answer before the hearing of a motion to dissolve, and he, therefore, filed a motion to that effect, himself, without answering further. The Cecil National Bank of Port .Deposit, a suitor in the Superior Court of Baltimore Cityr and an attaching creditor, likewise filed a motion to dissolve. After full argument, the Court on the 24-th of March, 1882, overruled the motions to dissolve, and continued the injunction. The respondents Anderson, Pinckney and the National Marine Bank are not parties to these appeals. After the passage of the decree the National Park Bank of New York, on the 29th of March, 1883, filed its answer, and on the same day the Cecil National Bank also answered. On the 31st of March, 1883, both of the banks named appealed from the order granting* and the order continuing, the injunction. On the same day, Mr. Bruñe appealed from the order of December 11th, 1882, granting an injunction against Anderson, and also from the order of the 24th of March, 1883, overruling and dismissing his own motion.