Murray v. Sioux Alaska Mining Co.

HUNT, Circuit Judge (after stating the facts as above). The established rule of practice in equity in the federal courts is that a creditors’ bill cannot be maintained to set aside a fraudulent conveyance until the..creditor has re [526] duced his claim to judgment and had execution issued thereon, and until a return is made that execution is unsatisfied. Scott v. Neely, 140 U.S. 106, 11 S.Ct. 712, 35 L.Ed. 358; Cates v. Allen, 149 U.S. 451, 13 S.Ct. 977, 37 L.Ed. 804; Hollins v. Iron Co., 150 U.S. 371, 14 S.Ct. 127, 37 L.Ed. 1113, But in cases where the statutes of the state or territory in which the action is commenced have created rights and provided for their enforcement, there is a modification to the extent that federal courts will enforce and administer such rights, either at law or in equity or in admiralty, as the nature of the new rights may require. Cowley v. Railroad Co., 159 U.S. 569, 16 S.Ct. 127, 40 L.Ed. 263; Darragh v. H. Wetter Mfg. Co., 78 F. 7, 23 C.C.A. 609. By section 833, Compiled Laws of Alaska, it is provided that the distinction between actions at law and suits in equity, and the forms of all such actions and suits, are abolished, and there shall be but one form of action for the enforcement or protection of rights or prevention of private wrongs, which is denominated a “civil action.” In Madden v. McKenzie, 144 F. 65, 75 C.C.A. 222, it was held that, while this statute does not abolish all distinction between law and equity as to procedure, it has the effect to render inapplicable to any complaint the objection that the plaintiff has a plain, speedy, and adequate remedy at law. We believe plaintiff makes a showing for equitable relief. It is not denied that the Mining Company is wholly insolvent, or that the claim of Murray is not justly owing. Execution would be of no avail as against the Mining Company. In such cases it would seem not to be necessary for the creditor first to reduce his claim to a judgment, and it is to be accepted, as against the demurrer, that the defendant Mining Company purposely and fraudulently chose Smith as trustee in order to prevent Murray from compelling Smith, a nonresident out of the jurisdiction of Alaska, to account in the courts in Alaska. In such a case equity will not require the question of the validity of the debt due by the Mining Company to Smith to be tried out in an action of law, for it would be useless to go through such a form. Case v. Beauregard, 101 U.S. 688, 25 L.Ed. 1004; Wyman v. Wallace, 201 U.S. 230, 26 S.Ct. 495, 50 L.Ed. 738; Tompkins Co. v. Catawba Mills (C.C.) 82 F. 780; [527] Adler Goldman Commission Co. v. Williams (D.C.) 211 F. 530; Fraser v. Cole, 214 F. 556, 131 C.C.A. 102. The property sought to be recovered can only be effectually reached by a proceeding in the nature of a creditors’ bill, whereby, as part of the relief to be granted, Smith may be adjudged to be trustee liable to account under his trust. The point that the action is not brought on behalf of appellant and other creditors is not fatal to the bill. Tatum v. Rosenthal, 95 Cal. 129, 30 P. 136, 29 Am.St.Rep. 97. At most there would be a defect of parties plaintiff, which is a ground of special, demurrer, or the point might perhaps be presented by answer. Morrison v. Blue Star Navigation Co., 26 Wash. 541, 67 P. 244. In Birely’s Executors v. Staley, 5 Gill & J.(Md.) 432, 25 Am.Dec. 303, in a suit in equity to vacate conveyances, two creditors joined in the bill of complaint, and it was urged that all or one only should have been made party complainant. The court held that that was a mere formal objection, and if well taken might have been removed by amending the bill. The court said: “Rules of pleading in equity are not governed by the same technicality as to matters of form that controls proceedings at law. Courts of equity look to substance, not form. The distinction, then (if it exist at all, which we cannot admit), is a mere matter of form; nothing in reason or substance can be urged in its support. If one of many creditors proceed, and be successful, the fund is retained in chancery until all the creditors are notified to come in and assert their claims. The same practice prevails on like proceeding by two.” We think, too, that injunction pendente lite should be issued restraining defendants Belleview and Hastings Creek Dredging Company from paying defendant Smith the consideration for the transfer and sale of the dredge involved until further order of the District Court. The judgment is reversed, and the cause is remanded, with directions to overrule the demurrer and require an answer; and the order of the District Court, vacating the temporary restraining order, is set aside, and the District Court is directed to grant a temporary restraining order pendente lite. Reversed and remanded.