I'EDERkL REPORTER,
vol. 49.
THOMPSON
et al. o.
RAINWATER
et 01.
({;ireuUOourt of Appeals, E'41hth. Oweuit. February 8,1892.) 1. INDIAN TERRITORy.,....AsSIGNMENT FOR BENEFIT OF CREDITORS-EQUITY JURISDICTION.
Although in.1tl85 there was no statute in force in the Indian Territory authorizing assignments for the benefit of creditors, yet, such an assignment having heen made"the United States court for the territory, in pursuance of its equity jurbdiction u,nder Act Congo March 1, 1889, (25 St. p. 783,) will recop;nize and enforce the trust, and apply the principles of equity in determining the nature and extent of tbetrustee's liabUity. In a suit to enforce a trust for the benefit of creditors, wbere it is found that tbe trustee haa turned over a large' part of the trust funds to his daughter, who Is II. party to tbe lIuit, the decree should state the total sum for which the trustee Is liable, and fix a reasonable time for paying it into court, and award execution on default thereof. "It should fix· the total value of the assets received by the daughter, and requireber to pay the amount Into court, lIuch sum to be credited, when paid, on the total'sum found to be due'from tbe trustee. It t1hould find the amounts due on each of the several judgments recovered against the debtors by the parties to the proceeding,. and should contain appropriate directions for the distribution of the fund realized. · BENEFIT OJ' CREDITORB-ENFORCEMENT OJ' TRUST-DEORED.
D.
v.
407
son to be$12,099.1l,including interest from January 1,1887,00 July' 1; 1891. EJeeeptions were filed to the report, which were overruled, and thereupon a final decree was entered, from which the present appeal is prosecuted. By its final decree the lower court adj-udged that Johnson Thompson and M18. J. A.French should pay into court the sum of $10,871.11 within 10 days from the date of the order, and that, in default of such payment, execution' should issue. It was further that Mrs. French had received assets of Smith & French of the value of $6,. 638.11; that judgment be entered against her'!1nd in favor of the appellees for that amount; and that whatever amount 'might be collected thereon $hould be credited on the sum of$10,871.11, which both of the appellants had been ordered to pay into court. Th0ma8 Marcum, Wm;' M. Oraven8, and S. S., Fear8, for appellants. N. B. Mauy, Sandela Hutchinga, and Orr Christie, for appellees. Before CALDWELL, Circuit Judge, and SHffiAS ahd THAYER, District Judges. THAYER, District Judge, (after atatingthejact8 qaabinte.) ,With respoot to the ,main contention in the lower court, we only: deem it necessary to
say thattbere is abundant evidence in the record to'support thefiilding that a trust wat: created for the ,benefit of the creditors of Smith &. French. We have nodoubt" in view of aU the testimony, that by virtueohn agreement between Smith & French and JohnSon Thompson j mude80metime in tbe fallof1885, T.hompson assumed possession and control of alltbe partnership assets of Smith & French, and undertook to apply them, as far ·as they would extend, towards the payment oUlie partrlership debts· ·A considerable portion of these assets were subsequently turned over to Mrs. French- by Johnson Thompson, the trustp,e.It has been eontended inthis-oourt that the appellees are withoutrighUol'elief, because at the date of:the alleged assignment by Smith & French there waS no statute or law in force in thelndian Territory, where the assignment was made, a'uthorizing such a conveyance. Wethink this contention is wholly without merit. In the absence of an)'l' statute . regulating or expressly authorizing assignments,; Smith & French certainly had power,tl) pay. their debts, and to that end might transfer their property to a third person for the benefit of their creditors; anll we think that the. transaction between Smith & French and Johnson 'rhompsoo'created a trust for the benefit of the oreditors oithe firm, which the United States court in the Indian Territory had power toenforee. In cases of equitable cognizance, of which that court has jurisdiction under the act of congress ,ot Mar<lh 1,1889, (25 St. p. 783,)itis its right and duty to apply those general rules of law which are usually recognized and enfof.ced by courts of equity. It follows, therefore, thatthe lower court properly treaten the appellants as tr\l$tees, and properly applied the principles of equity in determining the natll're and extent of their liability. ' This view of the case also disposes of the question of interest, concern· ing which much controversy has arisen. Although there w(tS no statute on the subject in the Indian Territory, yet it was competent for the lower
408
FEDERAL REPORTER,
court to the appellants with interest upon the amount of the trust assets,. following in that respect the uniform practice of courts of equity when with trustees who have wrongfully appropriated trust. property. Finding no error in the proceedings in the respects above mentioned. we will next consider an exception that has been taken to the master's report. The members of this court are of the opinion that Johnson Thompson should not have been charged. on account of the "Markel' cattle notes." with a sum exceeding &1,500, and interest thereon from January 1, 1887j whereas, the master appears to have charged him with a sumponsiderably in eJCcess of $3.322. After a careful examination of the evidence, we have reached the conclusion that the,illterest of the firm of French & Smith in the Markernotes did not exceed.$3,OOOj and as the Marker notes amounted to $8,000, and as the colleoted thereon, after muohtrouble and expense, did nptexceed $4,000. we conclude that Thompson should not have been held accountable to the creditors of Smith & French for more than three-eighths of that amount·......:.,tbat is to say, for more than $1,500. Inconsequence of this error in. the account as stated by the master, it becomes necessary to remit the cause to the lower court with directions to set aside its final deCree of August 26, 1891, and in lieu thereof to enter 8}llew or modified decree <,>,QrrectiIig the error above noted. In entering such decree, the interest computations should be, carried forward to the date when such modified deCree is entered, instead of July 1,1891, as cotnputed by the master." . And, as the existing decree must be modified,. we deem it proper to direct the lower court to alter it in some other respects. wherein it appears to us to. be not sufficiently full and explicit, to-wit: The modified decree should state the total value of the assets of Smith & French which came to the possession of Johnson Thompson, and for which he is primarily responsible. It should require that sum to be paid into court by Johnson Thompson, within such reasonable time as the court may fix, and award execution therefor if not paid within the time limited. . It should state the total value of the assets for which J .. A. French is responsible, and should req.uire said amount to be paid into court by her, and that the sum so paid by her be credited, when paid or collected. on the total sum for which Johnson Thompson is primarily responsible. The decree should also contain appropriate directions for the distribution of said money, when collected. among the judgment creditors ofSmith & French j to which.end there should be a finding in the decree of the amount of the several judgments which have been recovered against Smith & French by those oJ1edltors of the firm who have made themselves parties to the proceeding. In the respects last noted the final decree in the record now before us is not as full, clear, and explicit as the circumstances of the case would seem to require to avoid futUre conlplioations and litigation.
CHICAGO, M. & ST. P. RY. CO. V. PULLMAN PALACE-CAR CO.
409
CHICAGO,
Y. & ST.
P.
Ry.
CO. '11. PULLMAN PALACE-CAR
CO.
(Circwtt Court, N. D. 1lZ1nlois. December 81,1891.) INJUNCTION-RESTRAINING ACTION AT LAW-RELIEF IN EQt:'ITY.
Complainant railroad company and defendant car company entered tnto a con· tract for the joint ownership and operation of parlor and sleeping cars; tb'3 aecounts to be kept by defendant, and monthly balances and payments to be made; complainant, in case of termination, to pay defendant the cash value of its interest in the joint property. On the termination of such contract, the property being in custody of complainant, defendant brought trover to recover its interest in· the property, whereupon complainant filed a bill in equity for an accounting, alleging incorrect and unfair accounts by defendant of tb,e receipts and expenses, and the retention by defendant of profits in excess of its interest in the property, ar.d asking to restrain the action at law. Held that, as the rights of both parties could be completely protected in equity, the action at law should be enjoined.
In Equity. Walke'r« Eddy and John W. Carey, for complainant. Isham « Beale, for defendant. GRESHAM, Circuit Judge. Having owned and operated sleeping-cars on its own lines prior to September 22, 1882, the complainant on that day entered into a contract with the defendant, under which the latter acquired the right and assumed the obligation of operating sleepillg-cars, parlor-cars, and hotel-cars, on all lines owned by the complainant, for 15' years, for the joint benefit of both parties. The cars previously owned by the complainant became joint property,the defendant paying for a one-fourth interest in them. It was contemplated that additional equipment would be needed, and it was obtained. The complainant was to have three-fourths of the profits, and the defendant one-fourtb, and losses were to be borne in the same proportion. It was made the duty of the defendant to keep accurate books of account, showing receipts and expenses, and losses, and balance the books monthly. Payment was to be made by one party to the other, on such showing, before the end of the succeeding month. The complainant had the right to inspect the books at all reasonable times. Section 22 ofarticle 3 of the contract reads: "Incase either of said parties shall at any time hereafter fail to keep and perform any of the covenants herein contained, to be by.such party kept and performed, then and In that case, after written notice shall have been given to the defaulting party of the default complained of, if the said defaUlting party shall refuse or neglect to make good, keep, and fulfill sllch unfulfilled covenants and conditions of this agreement. within a reasonable time after such notice, the other party shall be at liberty to deelare this contract ended, and nolonger in force. The railway company reserves the option and may elect to termi nate the contract set out in the article at the end of five (5) years or at the end of eight (8) years or at the end of eleven (11) years from the thirteenth day of September, 1882: provided that, if it shall elect to terminate it at any of the above-named periods, it shall give notice in writing to the Pullman Company of such election at least six (6) months befl,lrethe day or days on which it may so elect to have this agreement end. lithe agreement Bet out in this article is terminated. accordihgtothe terms hel'eof, by the