U.S. Supreme Court
Cates v. Allen, 149 U.S. 451 (1893)
Cates v. Allen
Argued March 22, 1893
Decided May 10, 1893
149 U.S. 451
A contract creditor who has not reduced his claim to judgment has no standing in a circuit court of the United States, sitting as a court of equity, upon a bill to set aside and vacate a fraudulent conveyance.
Scott v. Neely, 140 U. S. 106, affirmed and applied.
The fact that a court of chancery may summon a jury cannot be regarded as the equivalent of the right of a trial by jury, secured by the Seventh Amendment to the Constitution. chanroblesvirtualawlibrary
When a suit over which a state court has full jurisdiction in equity is removed to a circuit court of the United States on the ground of diverse citizenship, and it appears that the courts of the United States have no jurisdiction in equity over such a controversy, the cause should be remanded to the state court, instead of dismissing it for want of jurisdiction.
R. C. Cates, D. Andrews, and L. L. Cates, as individuals and as composing the firms of Luke Cates & Company and Andrews, Cates & Company, made their deed of assignment for the benefit of creditors December 7, 1886, whereby they conveyed their property to assignees therein mentioned, to be converted into money and applied to the payment of their debts, certain creditors being preferred. J. H. Allen, T. W. West, and J. C. Bush, citizens, respectively, of Louisiana, Missouri, and Alabama, and doing business in New Orleans as general commission merchants and cotton factors, under the name of Allen, West and Bush, filed their bill of complaint, December 8, 1886, in the chancery court of Lee County, Mississippi, against R. C. Cates, L. L. Cates, D. Andrews, and the assignees mentioned in the assignment, alleging an indebtedness to the complainants of more than $16,000 on open account, and charging that the assignment above mentioned was fraudulent in law and in fact made without any valuable consideration, and with the fraudulent intent to hinder, delay, and defraud the complainants and other creditors, and that the same ought to be set aside, and the property assigned subjected to the payment of complainants' demand. The bill also charged that one of the assignees, who at the time of the filing of the bill was in possession of a large part of the assigned property, was insolvent, and that it would be dangerous to allow him to remain in the possession and control thereof; that he was in possession of the books of account and choses in action of the assignors, and was proceeding to collect the same; that there was danger that they would be lost to complainants and the other creditors, and that irreparable injury might thereby result. The bill prayed for answers under oath, and that on final hearing the assignment might be decreed to be void and set aside; that all the property chanroblesvirtualawlibrary
covered by the assignment might be subjected to the payment of complainants' debts, and then to the payment of such other demands as might be brought before the court; for an injunction; for a writ of sequestration; for a receiver; that the filing of the bill be held to give complainants the first lien on the effects of the said debtors in the hands of the assignees, or either of the parties, or any other person, and for general relief. A writ of sequestration was issued, and the sheriff took possession of the property, and a number of other creditors were subsequently admitted as co-complainants.
On December 15, 1886, Allen, West and Bush and their co-complainants filed their petition to remove the cause into the United States District Court for the Northern District of Mississippi, exercising the jurisdiction of a circuit court of the United States, and bond was given, and the cause removed accordingly. Receivers were thereafter appointed, and on April 15, 1887, the Tishomingo Savings Institution, a preferred creditor, was made a defendant. A demurrer was filed, alleging as grounds that there was no equity on the face of the bill; that the claims of complainants had not been reduced to judgment; that they had no lien, and were not entitled to file a bill under the law, and for want of proper parties. This demurrer was overruled, and defendants answered. Evidence was taken and hearing had, and on October 28, 1887, the court adjudged the assignment to be fraudulent and void, and set the same aside; found the sum of $17,732.71 to be due Allen, West and Bush; decreed that indebtedness to be a first lien and charge on the assets of Andrews, Cates & Company, and ordered the receiver to pay said sum out of the proceeds of the sales and collections of and from the assets of that firm. Various other orders were entered in that behalf and with reference to other funds and appropriations for the claims of other creditors which it is unnecessary to notice. The report of the receiver showed amounts paid to Allen, West, and Bush for nearly $14,000. chanroblesvirtualawlibrary