Calcasieu Nat. Bank v. Campbell

DAWKINS, J.

Plaintiff, a creditor of Alfred S. Campbell, brought this suit to annul as simulated, and in the alternative as a fraudulent preference, a special mortgage given on January 24, 1922, by the said defendant to his father Alfred Campbell.

Defendants, father and son, pleaded the reality of the transaction, and denied the charges of fraud.

The case was tried and submitted on the issues thus raised, and on the day it was decided below, but before decision, defendant mortgagee filed an exception of no cause of action, which was overruled, and there was judgment for plaintiff annulling the said mortgage as fraudulent. Defendant Alfred Campbell, mortgagee, alona appealed.

On August 30, 1923, appellant filed in this court a motion suggesting that, since the taking of this appeal, the common debtor, Alfred S. Campbell, had been adjudged a bankrupt and a trustee appointed for his estate. An order was issued by the Chief Justice making the trustee a party appellee, but he has made no appearance in this court.

Opinion.

In his brief appellant asks “that the judgment appealed from be reversed, and plaintiff’s suit dismissed, and, in the alternative, if not rejected outright, that the judgment appealed from should be reversed and the ease remanded, and the parties ordered to litigate their respective rights before the bankruptcy court, which alone has authority to administer the bankrupt’s estate and distribute its assets.”

We have no evidence before us, other than the motion and the admission of opposing counsel of the state of bankruptcy of- the debtor, and it is doubtful if we could render a judgment, without the consent or authorization of the federal judge to the,, trustee to appear, which would be binding upon the officer of that court. On the other hand, that court, under the bankruptcy statute (section 64, par. 5 [U. S. Comp. St. § 9648]), is required to' recognize the laws affecting' liens, privileges, or preferences of the particular state in which it sits, in so far as they concern the rights of creditors, etc., unless there be a conflict with some law of the United States, or the bankruptcy law itself makes provision therefor, in which event, of course, the latter prevail. Under the showing made by this record no creditor, other than plaintiff, having assailed the mortgage of the appellant, and the debtor having gone into bankruptcy more than four months after the same was executed and recorded, the plaintiff and the appellant alone can be affected by the decision herein; and. hence we can appreciate why the trustee representing creditors generally has not deemed it necessary to appear.

While, as heretofore suggested, our judgment may not be technically binding upon the bankruptcy court, we have no doubt that court will accept the construction placed upon the state’s laws by its court of last resort, and hence can see no reason why we should not dispose of the issues of this case involving as it does, an interpretation of our statutory provisions. In other wo’rds, the real parties before us who are interested in, and will be affected by the judgment, are these two creditors, and not the trustee.

Exception of No Cause of Action.

The sense in which it is said that the petition does not disclose a cause of action is that the allegation of insolvency amounts to a conclusion of law, and that plaintiff should have charged the debtor’s liabilities exceeded his assets. The Code itself, article, 1985, defines insolvency as follows:

“By being in insolvent circumstances is meant, that the whole property and credits are not equal in amount, at a fair appraisement, to the debts due by the party. And if he, who alleges the insolvency shows the amount of debts, it is incumbent on the other party to show property to an equal or greater amount. To prove the state of his affairs at the period of the contract, the debtor may, at the option of the plaintiff, ,be examined as a witness in the action for annulling the contract.”'

So that, when plaintiff alleged the common debtor to be insolvent at the time of giving the mortgage assailed, the result was to charge just what appellant says should have been charged, i. e., that liabilities exceeded assets. And it may further be noted that under the article just quoted, when the debts had been shown, the burden shifted to appellant “to show property to an equal or greater amount.”

We have therefore concluded that the authorities cited in support of the exception are inapplicable, and that it was correctly overruled.