PIGG et al. v. CASPER CO., Inc., 196 F. 177

PRITCHARD, Circuit Judge (after stating the facts as above). There are a number of assignments of error, some of which relate to the question of jurisdiction and others to the failure of the court below to grant the motion to dismiss complainant’s bill and dissolve the injunction theretofore granted. We are of the opinion that the assignments of error which relate to the question of jurisdiction are without merit.

The sixth assignment of ei-ror is in the following language: “That the said court erred in holding that the complainants were entitled to the relief prayed for in the bill, in entertaining the same, in enjoining J. H. Pigg, trustee, from selling under the deed of trust from T. M. Angle, and in vacating and setting aside the deed from the Casper Company, Inc., to T. M. Angle and of T. M. Angle to J. II.

Pigg, trustee for Rada Pigg.” This assignment raises the question as to whether the complainant in this action, under the circumstances, is entitled to the relief which it seeks, and this also involves the further question as to whether the complainant is entitled in a court of equity to have a deed vacated upon the ground of fraud in which it participated, as appears from the allegations of the bill. Relief in a suit of this character will not be granted where it appears (as it does in this instance) that the complainant was an active participant in the fraudulent conduct upon which it bases its suit.

The bill filed herein seeks to set aside a certain conveyance of real estate alleged to have been made by the Casper Company without valid consideration and with intent to defraud its creditors or a creditor, to wit, the United States government; and, while it is sought to cancel a deed made to the defendants upon the ground that it was made with the intent to defraud the government. yet the government is not a party to this suit. As we have stated, the bill was filed by the corporation itself. Ordinarily a fraudulent grantor cannot maintain a bill to set aside his own fraudulent act.

However, it is insisted by counsel for complainant that this bill can be maintained because since the conveyance was made the stock of the company has passed into other hands than those which held the stock at the time the conveyance was made. This position is untenable, in that the present stockholders became such with full knowledge that the conveyance had been made. It appears, among other things, that as a part of the purchase price they agreed to pay for the stock they assumed certain obligations growing out of the conveyance which they now seek to set aside.

That stockholders can sometimes file a bill of complaint to set aside a conveyance of property owned by a corporation in fraud of its creditors and in fraud of the rights of minority stockholders may be true. However, in the case of Hawes v. Oakland, 104 U. S. 451, 26 L.

Ed. 827, the fifth syllabus is in the following language: “It must also be made to appear that the complainant made an earnest effort to obtain redress at the hands of the directors and shareholders of the corporation, and that the ownership of the stock was vested in him at the time of the transactions of which he complains, or was thereafter transferred to him by operation of law.” It appears' that the present stockholders of the Casper Company who are now using the corporate name to set aside the conveyance in question became stockholders since the execution of the deed which they now ask to vacate, and that they did not acquire the right which they now seek to assert by operation of law.

We are of opinion that the bill cannot be maintained and that the same should be dismissed, without prejudice to the rights of any creditors of the corporation, prior or subsequent, to attack the conveyance as in fraud of their lights and without prejudice to any right of the present stockholders of the company either at law or in equity to seek redress for any fraud or deceit which may have been practiced upon them by the vendors of the stock. For the reasons stated, the decree of the lower court is reversed. Reversed.