E.I. Du Pont de Nemours & Co., Inc. v. John F. Cullen, Trustee of Antinarelli Enterprises, Inc., 791 F.2d 5, 1st Cir. (1986)
E.I. Du Pont de Nemours & Co., Inc. v. John F. Cullen, Trustee of Antinarelli Enterprises, Inc., 791 F.2d 5, 1st Cir. (1986)
2d 5
14 Collier Bankr.Cas.2d 1219
The appellant, E.I. du Pont de Nemours & Co., Inc., has been trying to collect
about $50,000 that Antinarelli Enterprises owes it under a 1983 judgment in
Massachusetts state court. In June 1984 du Pont brought a state court action,
aimed at collecting the money. In that action, the state court appointed a
receiver, who, in turn, seized cash and American Express drafts belonging to
Antinarelli and transferred them to du Pont. Du Pont's satisfaction was shortlived, however, for a short time later Antinarelli went bankrupt, and the
bankruptcy court set aside the transfer as a voidable preference. 11 U.S.C. Sec.
547(b). The appointment of the receiver and the transfer of funds both took
place within the (crucial) ninety-day period before bankruptcy. 11 U.S.C. Sec.
547(b)(4)(A). Thus, the transfer was voidable--unless du Pont had somehow
obtained a lien against the property more than 90 days before bankruptcy.
2
This is just what happened, says du Pont. It argues that its collection action is
properly seen (at least in part) as either a statutory "action to reach and apply,"
Mass.Gen.Laws ch. 214, Sec. 3(7), or a nonstatutory "creditor's bill," see 21
Am.Jur.2d Creditors' Bills (1981); J. Nolan, 31 Massachusetts Practice:
Equitable Remedies Sec. 388 (1975), or both. When a judgment creditor brings
either sort of state law action, says du Pont, the filing of the complaint
instantaneously creates a lien against the relevant property. See Rioux v.
Cronin, 222 Mass. 131, 137-38, 109 N.E. 898, 901-02 (1915) (judgment
creditor's mere filing of creditor's bill creates lien); J. Nolan, supra, Sec. 382, at
460-62 & n. 9 (judgment creditor's mere filing of statutory action to reach and
apply also creates lien, but cf. Rioux, 222 Mass. at 139, 109 N.E. at 902); see
also L. Reed, 6 Massachusetts Practice: Equity Pleading and Practice Sec. 473,
at 556 n. 10 (1952); id. at 166 (Supp.1973). And, in this case the filing of the
complaint in the state court action took place more than 90 days before
Antinarelli went bankrupt.
Neither the bankruptcy court nor the district court accepted du Pont's
arguments. Both courts found the transfer voidable, and held in favor of
Antinarelli's bankruptcy trustee. Du Pont appeals to us. But we conclude that
the lower courts were right.
We assume, at least for the sake of argument, that du Pont is correct about the
legal consequences that flow from bringing a statutory "reach and apply" action
or a nonstatutory "creditor's bill." That is to say, we assume that filing such an
action creates a lien under Massachusetts law, apparently because the action is
an equitable analogue to a levy of execution at law. See Rioux, 222 Mass. at
137-38, 109 N.E. at 902. We do not agree with du Pont, however, that its state
court action can be viewed as either a statutory "action to reach and apply" or a
nonstatutory "creditor's bill"; rather, it is a different legal animal, namely, a
statutory action to appoint a receiver, Mass.Gen.Laws ch. 156B, Secs. 104, 105.
This conclusion is fairly obvious once one examines du Pont's complaint in the
state court action. We recognize that no one has formally placed the complaint
in the record of this case. Yet, we see no reason to continue playing Hamlet
without the prince. Nor do we believe it desirable to treat the complaint like
Hamlet's father's ghost--exerting an unseen yet controlling influence from the
limbo of the appendix to the trustee's district court brief. A copy of the
complaint is in that appendix; neither party disputes its authenticity; and we
have adequate legal power to take judicial notice of it. See, e.g., Green v.
Warden, U.S. Penitentiary, 699 F.2d 364, 369 (7th Cir.), cert. denied, 461 U.S.
960, 103 S.Ct. 2436, 77 L.Ed.2d 1321 (1983); Ives Laboratories, Inc. v. Darby
Drug Co., 638 F.2d 538, 544 n. 8 (2d Cir.1981), rev'd on other grounds sub
nom. Inwood Laboratories, Inc. v. Ives Laboratories, Inc., 456 U.S. 844, 102
S.Ct. 2182, 72 L.Ed.2d 606 (1982); St. Louis Baptist Temple, Inc. v. FDIC, 605
F.2d 1169, 1172 (10th Cir.1979) ("[F]ederal courts, in appropriate
circumstances, may take notice of proceedings in other courts, both within and
without the federal judicial system, if those proceedings have a direct relation to
matters at issue."); In re Phillips, 593 F.2d 356 (8th Cir.1979) (per curiam);
United States ex rel. Geisler v. Walters, 510 F.2d 887, 890 n. 4 (3d Cir.1975);
cf. Senior Loiza Corp. v. Vento Development Corp., 760 F.2d 20, 25-26 & n. 8
(1st Cir.1985).
6
The complaint tracks, virtually line by line, the statutory requirements for an
action to appoint a receiver. The complaint (which we reprint in an Appendix)
basically alleges:
17
execution [allegation 3] to pay the amount due with the officer's fees, ... one or
more receivers may be appointed [allegation 5] with the [following] powers and
duties....
18
[The court may] appoint one or more receivers to take charge of [the
corporation's] estate and effects [allegation 6(a) ] and to collect the debts and
property due and belonging to it [allegation 6(b) ], with power to prosecute and
defend suits in its name or otherwise [allegation 6(c) ], to appoint agents under
them and to do all other acts which might be done by such corporation, if in
being, which may be necessary for the final settlement of its unfinished
business [allegation 6(d) ].
19
Mass.Gen.Laws. ch. 156B, Secs. 105, 104. The degree of correspondence could
hardly be closer. We do not see how the general additional request for "other
just and equitable relief" (allegation 7) could make a significant difference.
20
At the same time, the complaint leaves out at least one item that the
commentators say is an essential element of both a statutory "action to reach
and apply" and a nonstatutory "creditor's bill," namely, a specific description of
the property that is to be reached. 21 Am.Jur.2d Creditors' Bills Sec. 75, at 60
("The property to be reached by a creditor's bill must be described with
certainty...."); J. Nolan, supra, Sec. 382, at 462 ("It is elementary that the
property to be reached and applied must be sufficiently described in the
complaint."). If (at least sometimes) the filing of a complaint creates a lien even
before others have notice, it is understandable why the commentators might
think a specific description of the relevant property is important; a vague
description might seem to impress a lien upon assets whose value substantially
exceeds the underlying debt. For these reasons, du Pont's state court collection
action cannot be characterized as du Pont now wishes.
21
Du Pont makes three additional arguments. First, it says the parties "stipulated"
in the bankruptcy court that the state court collection action was an action to
reach and apply. At oral argument, however, counsel was unable to find any
such stipulation in the record; nor have we been able to do so.
22
Second, du Pont says the bankruptcy court "found" that the state court action
was an action to reach and apply. As we read its opinion, however, we believe
the court was assuming this characterization simply for the sake of argument.
Regardless, the question is one of law; and, as a matter of law, we find that the
action was not one to reach and apply.
23
Third, du Pont says the later course of the state court collection proceedings
reveal that its action was in fact an action to reach and apply or a creditor's bill.
For purposes of deciding whether a lien arose at the time the complaint was
filed, however, the complaint itself--not the later proceedings--should control.
Moreover, a course of events occurring within the ninety-day preference period
does not normally, in itself, both create a lien and make that lien "relate back"
to a date several weeks earlier, outside the ninety-day period--at least we are
not aware of any authority that would require the "relation back" for which du
Pont argues. Compare 11 U.S.C. Sec. 547(e)(2) (for purposes of dating an
alleged preference, transfer does not occur until date of perfection where
perfection occurs more than 10 days after transfer has taken effect between
transferor and transferee).
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