Ledbetter v. Mandell

On December 8, 1906, there was filed in the clerk’s office of the United States Court for the Southern District of the Indian Territory a complaint in equity by the H. B. Claflin Company, K. Mandell & Co., and certain other persons plaintiffs against H. Munzesheimer and Sam Daube and W. A. Ledbetter, defendants. That bill alleged that in November,-1896, the defendants Munzesheimer and Daube executed a deed of assignment under the laws of the state of Arkansas in force and operation in the Indian Territory, in which deed the plaintiffs herein were named as creditors, and are all preferred creditors, to a large amount. The plaintiff then set forth the nature of the stock and property conveyed by said deed of assignment, and alleged that the defendant Ledbetter, acting as assignee under the trust" conferred upon him, took the inventory of said property, and filed his bond and oath, thereby qualifying as assignee; “that, by the terms of the law under which said Ledbetter acts as assignee, he is not permitted to sell the said property at retail, nor to keep the store open for the collection of debts or for the supplying of customers who are already indebted to the estate with other goods, nor is he permitted to sell at private sale any of the real estate or other property of said estate, nor is he permitted to replenish the stock of goods nor to sell at either pub-

“That, unless the said. Ledbetter is restrained from selling under the laws of Arkansas, as an assignee of said estate, he will sell the property as required by law, which will result as heretofore alleged.”

It further alleges that Munzesheimer and Daube are insolvent, and “that it is for the best interest of all creditors of said estate preferred in said deed of assignment that the said Ledbetter should be, by order of this court, relieved of the requirement and necessity of acting under the said deed of assignment in the sale of said property, and should be restrained from selling said property as such assignee, and the said Ledbetter, who is á lawyer actively engaged in the practice of his profession, but knows nothing of the mercantile business, together with an experienced merchant, who thoroughly understands the details of such business, should in the judgment of creditors be appointed joint receivers for all the property of said estate' * * * that may have passed by virtue of the deed of assignment.” Wherefore plaintiffs prayed “for the restraining order herein suggested and for an order appointing two joint receivers of said estate, requiring of them sufficient bond to protect the rights of all parties, and to render said estate safe, also giving to them broad and comprehensive power in the management and control of the property of said estate and in the protection of the same, with such restrictions and requirements as the court may see proper to require, but, in any event, relieving the said Ledbetter of his duties and responsibilities as assignee under the deed of assignment requiring the proceeds to be paid as named in said instrument, except when otherwise ordered by this court,” and “for such other relief, general and special, as may be necessary in the premises.” Munzesheimer and Daube and Ledbetter, assignee of said firm, interposed an answer, waived the issuance of service, entered their appearance, and admitted the allegations of the bill. Thereupon the court made an order on the 8th of December, 1896, filed on the 9th, “that the said W. A. Ledbetter, as assignee, is hereby enjoined and restrained from selling any of the property conveyed to him under and by virtue of said deed of assignment as herein provided, and said W. A. Ledbetter is hereby appointed receiver to take possession of, manage, control, and dispose of all of said property conveyed to him, as such assignee, and he is appointed co-receiver to act in connection with the said W. A. Ledbetter in accordance with the provisions of this order as hereinafter set forth.” It was further provided that, upon the execution and filing of the oath and bond required by law in the sum of $50,000, “the title to all the lands, tenements, goods, chattels, funds, assets, moneys, credits, choses in action, rights, and interests of every kind, name, and nature, either in law or equity, or any part thereof belonging to same as conveyed in said deed of assignment, shall be vested in said Ledbetter, and he

“That the proceeds realized from the sale of any of said property and from the collections on notes and accounts and other evidences of debt shall be placed to the credit of Ledbetter, receiver, and shall be subject only to his check.”

The first object of the suit had been accomplished upon the entry ■of this order. Ledbetter, as assignee, had been disposed of. The duties and obligations imposed upon him by law as assignee which in the view of the plaintiffs would have been disastrous to their interests had been wiped out. Instead of the estate being wound up under the assignment law of the state of Arkansas which by the acts of Congress (Act May 2, 1890, c. 182, § 31, 26 Stat. 94 ) had been extended to the Indian Territory, it was to be administered by a receiver appointed hy the court. By the acts of the plaintiffs the estate had been brought into court, there to be administered and distributed.

On the 24th of February, 1897, an order was entered, which provided that:

“It having been made to appear to the court that W. A, Ledbetter, receiver, has sold and disposed of all the property and effects in his hands as such receiver belonging to the estate of Munzesheimer and Daube, and that he has now in his hands funds which ought to be distributed among the creditors of the ■estate, * * * the said W. A. Ledbetter, as such receiver, is hereby ordered and directed to file in this court a full and complete report and statement exhibiting his dealings with said estate, showing the amount of money received hy him and the disbursements made by him. And W. H. L. Campbell, the master in chancery of this court, is hereby ordered and directed to examine said report of said W. A. Ledbetter, receiver, and report to this court as soon as practicable his conclusion as to whether or not said report is in all things ■correct. Said W. A. Ledbetter, as such receiver, is hereby ordered and directed to disburse among the creditors of said estate all funds in his hands as such receiver, according to the terms of the deed of assignment executed to him by Munzesheimer and Daube on the 9th day of November, 1896, but the said * * * receiver is hereby ordered and directed to reserve sufficient funds in his hands to pay the commission to which he is entitled, and all other expenses and disbursements incurred in the management and control of said estate as assignee and receiver.”

After the entry of this order, the docket shows the following entries: On the 10th of March, 1897: “Petition for allowance of certain claims filed.” On the 30th of April, 1897: “Protest against same filed.” On the 3d of February, 1899: “Dismissed.” Thereafter, on July 31, 1899, Ledbetter, as receiver, filed what is denominated his ■"cross-complaint” against K. Mandell & Co., plaintiffs in the original equity suit, and on the 5th of September, 1899. filed his first amended cross-bill in lieu of his first cross-bill, in which he sets up the proceedings had, the order made, and, the receipt by him, in compliance with the order of the court, of the property which realized

He further alleges that, by reason of the premises, he is entitled to have refunded to him by Mandell & Co. the money so collected by them from him, and to have the same restored to the trust fund in his hands, in order that the same may be appropriated, under the terms of the assignment and orders of the court, to the payment of the claims justly due to creditors of said Munzesheimer & Daube. He further alleges that there is yet due to creditors preferred by the said assignment the sum of about $35,000, and that, with the exception of the funds held by Mandell & Co., there is practically nothing with which to pay them, the said Munzesheimer & Daube being wholly insolvent, and he asked judgment that he be permitted to appropriate the $1,750 in his possession belonging to K. Mandell & Co. in part satisfaction and reimbursement of said sum of $6,609 so wrongfully and fraudulently collected by Mandell, and have judgment for the money paid in order that he may restore the same to the trust funds in his hands, and pay it out legally to the persons entitled thereto under the orders of the court; that K. Mandell & Co. be required to discover to this court what other property and moneys or other things and choses in action he has in his possession and in his control belonging to said Munzesheimer .& Daube, and which, under the terms of the deed of assignment and the orders of this court appointing the petitioner receiver, pass to the petitioner in trust for distribution, and that the said Mandell & Co. be required to surrender up to the petitioner all such property. On June 5, 1900, a judgment was entered as follows:

“And this cause came on to be heard on the amended cross-bill of W. A. Led-better, assignee and receiver of Munzesheimer & Daube, herein filed on the 5th of September, 1899, against K. Mandell, doing business under the trade name of H. Mandell & Co., one of the plaintiffs in this cause, and it appearing to the court that on the 3d day of February, 1899, the clerk of this court, through mistake and inadvertence and without any order of the court to that effect, but on account of a confusion of the number of this case with the numbers of a list of cases which had been ordered stricken from the docket, wrote opposite this case on the minutes of the court the word ‘Dismissed,’ it is ordered that the said entry be, and the same is hereby, annulled, held for naught, and expunged from the minutes of the court because of the facts aforesaid ; and it appearing to the court that the said K. Mandell has been personally served with a copy of the original cross-bill of the said W. A. Ledbetter, and has had ample time and notice to appear and make answer unto the same and has failed to do so, the court is now here of the opinion that the material allegations of said cross-bill as amended should be, and the same hereby are. taken for confessed as against the said K. Mandell, and it is ordered and decreed that the said W. A. Ledbetter, receiver of the property and effects of the said Munzesheimer & Daube in the custody of the court, in this cause do have and recover of and from the said K. Mandell the sum of $7,792, which he will distribute and pay out to the parties entitled thereto under the orders of this court in this case.”

It is upon said judgment that this suit is brought. The complaint was dismissed upon the trial because it was conceded that the so-called cross-complaint was filed at a term subsequent to the date on

In Baker v. Kingsland, 10 Paige, Ch. 366 , proceedings were instituted by a creditor of a decedent to enforce the payment of his claim against the estate. The indebtedness was denied by the executors. The only evidence which the creditor produced before the surrogate to prove the existence of his debt was a copy from the Supreme Court clerk’s office of the docket of a judgment against the executor of the decedent. Upon appeal the court said:

“If the judgment against the personal representatives of the decedent had been even prima facie proof of the original indebtedness, the copy of the docket of the judgment in the Supreme Court was not legal evidence that any such judgment had been recovered. Since the act of 1840 took effect, no docket of a judgment subsequently recovered in the Supreme Court is valid for any purpose, unless it is entered in the county clerk’s office. And the copy of the docket never was legal evidence to prove the existence of a judgment except in some special cases provided by statute. The record of the judgment, or a sworn or exemplified copy thereof, must be produced.”

This case was'cited and followed in Handly v. Greene, 15 Barb. 801 .

In Schenectady, etc., v. Thatcher, 6 How. Prac. 226, the court said:

“The statute requires him [the clerk] ‘immediately after entering the judgment’ to proceed to make up the roll, and among the papers necessary to constitute a complete judgment roll is ‘a copy of the judgment’; that is, a copy of the entry of the judgment made by the clerk in the judgment book. Such entry in the judgment book and copy in the roll is the only record evidence that judgment has been perfected.”

In Forsyth v. Campbell, 15 Hun, 235 , plaintiff attempted to prove the existence of a judgment by producing a certified copy of an order for judgment made by the court. Appellant argued that, since the statute required that the clerk should enter judgment upon such an order, it should be presumed that the clerk performed his duty, in the absence of evidence to the contrary. The court refused to adopt this suggestion, and held that there was not sufficient proof of the judgment. In the following cases it was held that no appeal could be taken from an order directing judgment until the judgment had been actually entered by the clerk: Knapp v. Roche, 82 N. Y. 366 ; Stevens v. Central Bank, 162 N. Y. 253 , 56 N. E. 628 . In Lentilhon v. City of New York, 3 Sandf. 721 , it was held that an entry made by the

“The clerk must keep among the records of the court a book to be called the ‘judgment book,’ and in entering judgments or decrees therein shall leave a space or margin on the record in which to enter a memorandum of the satisfaction or setting aside of any such judgment or decree.”

Section 3950 [Ind. T. Ann. St. 1899, § 2630]:

“All judgments and decrees, whether rendered by the court or by confession, shall be entered by the clerk in the ‘judgment book’ in the order of their date.”

Section 3952 [Ind. T. Ann. St. 1899, § 2632] :

“He shall, immediately after the rendition of any judgment or decree, enter the same in the judgment book, in which shall be alphabetically cross indexed all the judgments of the court, according to the surnames of the plaintiff and defendant. * * * ”

Respondent cites two Massachusetts cases holding that a docket entry is sufficient evidence of a judgment. As under the practice in that commonwealth the docket entry seems to be final judgment, those cases do not affect the case as here presented. It cannot be that a court may not cure an error of its clerk. That having been done, the erroneous entry is as if it had never been made. It is claimed that the order of the court granting the prayer of the original bill of complaint and appointing Ledbetter receiver was the final order in the case, which, having been entered, ousted the court of jurisdiction over Mandell. I do not think so. The purpose of that proceeding was to bring this estate into court, to have it under the control of the court, to be disposed of by the court in the interests and for the benefit of the complainants and the other creditors. Having obtained that relief, the plaintiffs were still in court for the purpose of the administration of the estate, and were and continued to be parties, had rights in court, and duties to the court, and continued there so long as the estate was open and the receiver was acting under the order of the court which they had obtained.

Respondent contends that the cross-complaint was a document unknown and unauthorized under the laws of the state of Arkansas, and hence was a nullity at any stage of the proceedings. He refers to various sections of the Code of Arkansas bearing on the subject of pleadings, none of which provide for the service of a cross-complaint, and concludes from that fact that a cross-complaint is unauthorized. It seems to me that the following cases show that a cross-complaint or cross-bill is not unknown to equity practice in the state of Arkansas: Pillow v. Sentelle, 49 Ark. 430 , 5 S. W. 783 , was an action-to foreclose a mortgage; the widow and heirs of the mortgagor being joined as defendants. To this action the widow answered and filed a cross-

“More often than otherwise a cross-bill is to obtain discovery from the plaintiff of facts contrary to or different from those stated in the bill, but concerning its matter, or to obtain a decree against the plaintiff in the original suit, and the authorities referred to this sort of cross-bill unless special mention is made of a cross-bill filed to obtain a decree against a codefendant. This latter sort of cross-bill is as well grounded in practice, although it partakes somewhat in the nature of an original bill against the codefendant; it being necessary to compel an answer from him by process, that not being necessary in this state as against the plaintiff in the original suit.”

In Heer Dry Goods Co. v. Shaffer, 51 Ark. 368 , 11 S. W. 517 , plaintiff brought an action on a promissory note to which defendants answered and pleaded a set-off. The Supreme Court in that case stated that a set-off was in every respect essentially a cross-action brought by the defendants against the plaintiff, and that court further stated:

“It is not necessary to summon or warn a plaintiff in an action to answer a set-off pleaded by the defendant. There is no reason why he should be (summoned). The set-off is pleaded in answer to his complaint, and he is bound to take notice of it. A summons or warning order could answer no useful purpose. The statute, without requiring notice in any form to be given to him, says he must file his reply to the set-off on or before the calling of the cause for trial.”

In Sandel’s & H. Dig. Ark., section 5712 states:

“A defendant may file a' cross-complaint against persons other than the plaintiff, and have proceedings thereon as follows.”

Here follow provisions for service of process upon the codefendants. In a footnote to that section the compilers state:

“All of the defendants must be served or appear, but it is not necessary to have service on the plaintiff”—citing Pillow v. Sentelle, supra.

Respondent contends that the cross-complaint was not germane to the issues raised in the complaint, and therefore conferred no jurisdiction. Whether or not the cross-complaint was germane to the issues raised by the complaint was a question which was before the court in the Indian Territory when it had this cross-complaint under consideration, and was necessarily decided in the affirmative by that court when it rendered the judgment in question. That decision, whether in conformity to the laws of Arkansas or not, cannot be attacked collaterally, at least in the absence of contradiction by statutes or decisions. Laing v. Rigney, 160 U. S. 531 , 6 Sup. Ct. 366 , 40 L. Ed. 525 , cited and followed Mutual Reserve Fund E. Ass’n v. Phelps, 190 U.

The respondent further contends that the order by which Eedbetter was directed to disburse among the creditors of the estate all funds in his hands as receiver, according to the terms of the deed of assignment, was a final order ending the proceeding, and cites Smith v. Woolfolk, 115 U. S. 143 , 5 Sup. Ct. 1177 , 29 L. Ed. 357 . Upon careful reading it appears, however, that the proceedings there declared to be ineffectual because of nonservice of process were instituted by the filing of a petition after the court had distributed the proceeds of the sales of lands against which the original proceeding had been directed, had directed the receiver to collect the available assets of the estate, and

“It follows that the record of the proceedings and decree of the circuit court of Chicot county' subsequent to the decree made in' the case of Craig v. Wright, Executrix, and Others, on October 28, 1808, was not binding upon Woolfolk and wife, and could not be received in evidence against them.”

In the case at bar the order relied upon did not purport to be a final order winding up the estate and discharging the receiver. On the contrary, it sent his accounts to the master in chancery. It appears upon the docket that subsequent proceedings were had thereunder. A petition for the allowance of certain claims was filed, against which objections were filed. There was no finality.

It seems to me that Mandell, having sought the jurisdiction of the court, having appeared therein by attorney, having become' a party plaintiff, and having succeeded .in bringing the estate into court, was himself there and remained there for jurisdictional purposes until a final order was entered winding up and disposing of those proceedings, of which there is no trace in this record. The proceeding being still open, the estate being still in court, the receiver not having been discharged, and Mandell having received, as is alleged, a portion of that estate upon false representations, he must be considered still in court .for the purpose of making restitution.

. I conclude, therefore, that we are bound to give full faith and credit to the judgment of the United States Court for the Southern District of the Indian Territory here sued upon, that it was error to dismiss the complaint upon this record, and that the judgment should be reversed and a new trial ordered, with costs to the appellant to abide the event. All concur.