DAVIDSON-WESSON IMPLEMENT CO., Ltd., v. PARLIN & ORENDORFF CO., 141 F. 37

PARDEE, Circuit Judge (after stating the facts). The foregoing statement shows .that the Parlin & Orendorff Company, claiming to be a contract creditor of the Davidson-Wesson Implement Company, Limited, but asserting no lien, seeks relief in the Circuit Court of the United States for the Western District of Louisiana of both a legal and an equitable nature of the most drastic character—a judgment for the amount of the alleged debt, and an injunction, a receiver, and a liquidation of the defendant corporation.

The bill must have been framed in view of the laws of Louisiana (see Acts La. 1898, p. 312, No. 159), for it is inadmissible under the rules and principles of equity as administered in the courts of the United States.

Counsel calls his bill “a creditors’ bill”; but it is settled since the beginning that a simple contract creditor has no standing in a court of equity to enforce payment or subject equities until after he has reduced his demand to judgment and- has exhausted his remedy at law. ' Assuming that the complainant below is seeking to avail himself in the United States courts of rights given creditors under the laws of Louisiana, the cases of Scott v. Neely, 140 U. S. 106, 11 Sup. Ct. 712, 35 L. Ed. 358; Cates v. Allen, 149 U. S. 451, 13 Sup. Ct. 977, 37 L. Ed. 804; Hollins v. Brierfield Coal & Iron Co., 150 U.

S. 378, 14 Sup. Ct. 127, 37 L. Ed. 1113, dispose of this appeal adversely to his pretensions. And see Atlanta & F. R. Co. v. Western Railway Co. of Alabama, 50-Fed. 790, 1 C. C. A. 676. We quote from Cates v. Allen, supra: “Complainants were simple contract creditors, who had not reduced their claims to judgment, and therefore had no standing in the United States Circuit Court, sitting as a court of equity, upon a bill to set aside and vacate a fraudulent conveyance.

The suit was originally brought in the state court under sections 1843 and 1845 of the Code of Mississippi of 1880, which provided that the chancery courts of that state should have jurisdiction of bills exhibited by creditors who had not obtained judgments at law, or, having judgments, had not had executions returned unsatisfied, to set aside fraudulent conveyances of property or other devices resorted to for the purpose of hindering, delaying, or defrauding creditors, and might subject the property to the satisfaction of the demands of such creditors as if the complainants had) had judgment and execution thereon returned no property found; and that ‘the creditor in such case shall have a lien upon the property described therein from the filing of his bill, except as against bona fide purchasers before the service of process upon the defendant in such bill.’ These sections were considered in Scott v.

Neely, 140 U. S. 106, 11 Sup. Ct. 712, 35 L. Ed. 358, and it was therein determined that the Circuit Courts of the United States in Mississippi could not under their operation taire jurisdiction of a bill in equity to-subject the property of the defendants to the payment of a simple contract debt in advance of any proceeding at law, either to establish the validity or amount of the debt, or to enforce its collection.

It was there shown that the-Constitution of the United States, in creating and defining the judicial power of the general government, had established the distinction between law and equity, and that equitable relief in aid of demands cognizable in the courts of the United States only on their law side could not be sought in the same action, although allowable in the state courts by virtue of state legislation (Bennett v. Butterworth, 11 How. 669, 13 L. Ed. 859; Thompson v. Railroad Companies, 6 Wall, 134, 18 L. Ed. 765; Scott v. Armstrong, 146 U. S-. 499, 512, 13-Sup. Ct. 148, 36 L.

Ed. 1059), and that the Code of Mississippi in giving to a simple contract creditor a right to seek in equity, in advance of any judgment or legal proceedings upon his contract, the removal of obstacles to the recovery of his claim caused by fraudulent conveyances of property whereby the whole suit involving the determination of the validity of the contract and the amount due thereon is treated as one in equity to be heard and disposed of without a trial by jury, could not be enforced in the courts of the United States because in conflict with the constitutional provision by which the right to a trial by jury is secured.

The principle that a general creditor cannot assail as fraudulent against creditors an assignment or transfer of property made by his debtor until the creditor has first established his debt by the judgment of a court of competent jurisdiction, and has either acquired a lien upon the property, or is in a situation to perfect a lien thereon and subject it to the payment of his judgment, upon the removal of the obstacle presented by the fraudulent assignment or transfer, is elementary. Waite on Fraud. Con. § 73, and cases cited.

The existence of judgment, or of judgment and execution, is necessary, first, as adjudicating and definitely establishing the legal demand; and, second, as exhausting the legal remedy.” The decree of the Circuit Court granting an injunction and appointing a receiver is reversed, and the cause is remanded, with instructions to discharge the receiver and dismiss the bill, with all costs.