Source: https://supreme.justia.com/cases/federal/us/242/426/
Timestamp: 2019-04-19 18:41:54+00:00

Document:
Justia › US Law › US Case Law › US Supreme Court › Volume 242 › Knauth, Nachod & Kuhne v. Latham & Co.
A bill seeking to impress a trust upon personal property belonging to a bankrupt's estate, upon the theory that it was procured by means of moneys of which the plaintiff was defrauded by the bankrupt, must trace such moneys by adequate averments into the specific property sought to be affected.
Claimants seeking priority of payment from a bankrupt's estate upon the ground that moneys obtained from them fraudulently by the bankrupt went into his business and swelled the estate must go to the bankruptcy court in which the estate is being administered; such claims are not adjudicable in suits for the recovery of the bankrupt's property in other jurisdictions.
remain in full force and effect."
Later the trustee in bankruptcy was substituted as complainant.
July 1, 1910, Knauth, Nachod, & Kuhne filed in the cause a so-called cross-bill, subsequently amended, which on motion was dismissed both for want of equity upon its face and because the court lacked jurisdiction to entertain it. The circuit court of appeals affirmed this action.
The amended cross-bill is a mass of prolix and vagrant statements and allegations from which it is difficult to spell out any very definite theory. Apparently because $98,000 -- approximate market value of 1,300 bales of cotton -- had been fraudulently obtained from Knauth, Nachod, & Kuhne by the bankrupts and used by them in their business, the former sought to impress a trust upon what the latter thereafter acquired, including the 4,200 bales of cotton found at Mobile.
The allegations of the bill are wholly inadequate to trace the funds into any specific cotton, Peters v. Bain, 133 U. S. 670, 133 U. S. 693, and the cross-bill must be regarded as an attempt to secure from the estate priority of payment on account of money fraudulently obtained by the bankrupts and put into their business. Manifestly such a proceeding could not be entertained in the Southern District of Alabama. The estate was being administered in another court. Mueller v. Nugent, 184 U. S. 8; Jones v. Springer, 226 U. S. 153; Acme Harvester Co. v. Beekman Lumber Co., 222 U. S. 300; Lazarus v. Prentice, 234 U. S. 267; Jaffe v. Weld, 208 N.Y. 593.
The record contains the amended bill of complaint, motions to dismiss, with objections thereto, final judgment of dismissal for want of jurisdiction, assignment of errors, etc.
Shortly after Knight, Yancey, & Company were adjudged bankrupts, upon application of the receivers (May, 1910), the United States District Court, Northern District of Florida, enjoined the Louisville & Nashville Railroad from removing or disposing of 3,600 bales of cotton in its possession at Pensacola, and in June thereafter, the duly selected trustee instituted suit seeking to recover possession of the cotton upon the ground that it had been transferred with intent to prefer. By the court's direction 2,635 bales were thereafter delivered to Latham & Company, who claimed them as owners, a forthcoming bond having been given. The remainder -- 965 bales -- was sold, and proceeds deposited in the First National Bank of Pensacola to await final orders.
Subsequently, appellants instituted an original proceeding claiming that the bankrupts had fraudulently obtained from them $98,000 and invested it in this or other cotton or otherwise, and that they were entitled to impress a trust upon the avails of such funds.
The record also consists of the amended bill, filed April 14, 1914, motions to dismiss, with objections thereto, final judgment of dismissal for want of jurisdiction, assignments of error, etc.

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