Fred Rector v. City Deposit Bank Company

• Decision Date: 19 February 1906
• Docket Number: No. 137,137
• Citation: 26 S.Ct. 289,200 U.S. 405,50 L.Ed. 527
• Parties: FRED C. RECTOR, Trustee of Reinhard & Company, Plff. in Err. , v. CITY DEPOSIT BANK COMPANY
• Court: U.S. Supreme Court

200 U.S. 405

26 S.Ct. 289

50 L.Ed. 527

FRED C. RECTOR, Trustee of Reinhard & Company, Plff. in Err.,

v CITY DEPOSIT BANK COMPANY.

No. 137.

Submitted December 12, 1905.

Decided February 19, 1906.

Messrs. David F. Pugh, Fred C. Rector, and Pugh & Pugh, for plaintiff in error.

[Argument of Counsel from pages 405-408 intentionally omitted] Messrs.Talfourd P. Linn, and Outhwaite, Linn, & Thurman for defendant in error.

Mr. Justice White delivered the opinion of the court:

The firm of Reinhard & Company, composed of John G. Reinhard and Henry A. Reinhard, carry on a banking business in Columbus, Ohio. On April 10, 1900, the firm made a general assignment under the insolvent laws of Ohio. On the following day a petition in involuntary bankruptcy under the laws of the United States was filed against the firm, and on August 10, 1900, it was adjudged bankrupt, and subsequently Rector, the plaintiff in error, was appointed the trustee.

In a court of common pleas of the state of Ohio the trustee began this suit against the defendant in error to recover the sum of $1,300, which it was subsequently agreed was only $1,161.74. The petition alleged the adjudication in bankruptcy and the appointment of the trustee, and based his right to recover upon the ground that on April 10, 1900, the firm had transferred and assigned to the defendant bank, who had received the same, the sum of money sued for, which it was alleged was the property of Reinhard & Company, and, in substance, the payment to the bank was alleged to constitute a voidable preference.

The answer admitted the making of the general assignment, the adjudication of the firm as an involuntary bankrupt, and the appointment and qualification of the plaintiff as trustee. The other averments of the petition were denied.

A trial was had to a jury. At the close of the evidence for the plaintiff the court, at the request of the defendant, instructed a verdict in its favor, and judgment was entered dismissing the action. The circuit court of Franklin county affirmed the judgment, which was thereafter affirmed by the supreme court of Ohio, without opinion. The chief justice of the supreme court of Ohio made, and the court caused to be filed and entered on its journal, the certificate which is in the margin.

On motion of the plaintiff in error, Fred C. Rector, trustee, this court orders it to be certified and made part of the record in this case, and the Honorable William T. Spear, chief justice of said supreme court, does now certify, that in said cause, and on the hearing before this court, it was claimed, contended, and alleged by the said plaintiff in error that, on the 10th day of April, A. D. 1900, Reinhard & Company, a partnership, by deeds of its individual members, committed an act of bankruptcy, to wit: made a general assignment for the benefit of creditors; that on the 11th day of April, A. D. 1900, a petition in bankruptcy was filed in the district court of the United States of the southern district of Ohio, eastern division; that on the 10th day of August, A. D. 1900, said Reinhard & Company were, by said court, adjudged bankrupt, and on September 13, A. D. 1900, said plaintiff in error was appointed trustee thereof; that on the 10th day of April, A. D. 1900, said Reinhard & Company, then being, to the knowledge of the defendant in error, insolvent, assigned and transferred to the defendant in error, The City Deposit Bank Company, and that the said last-named company then and there received from said Reinhard & Company, the sum of $1,161.74 of moneys belonging to said Reinhard & Company; that said assignment and transfer was an unlawful preference, given to the said defendant in error, and violated the provisions of § 60a and § 60b of the United States bankrupt law; that it became and was material to the said cause for this court to determine whether the said sum of $1,161.74 was so assigned and transferred; whether it was an unlawful preference; whether it was a violation of said § 60a and § 60b of the said bankrupt law; and whether the said plaintiff in error, under said law, was entitled to have the said assignment and transfer set aside and declared null and void, and to have a judgment and order for the recovery of said money against said defendant in error; that the decision of this court was adverse to the claims and contentions of the said plaintiff in error, in this: that said court decided that said assignment and transfer of said sum of $1,161.74 was not an unlawful preference, in violation of the said provisions of the bankrupt law, and that the said plaintiff in error was not deprived of any right under said law, and was not entitled to have said assignment and transfer set aside, and to recover the said sum of $1,161.74 from said defendant in error.

It is contended that this court is without jurisdiction. The argument upon which this proposition is rested is this: First. It is said that whilst, in the petition, the right of recovery was based upon the ground of fraudulent preference, it was not disclosed therein whether the preference relied upon was in violation of the bankrupt law of the United States or of the insolvent laws of the state of Ohio; and therefore a Federal question was not raised, as it was necessary to specially direct the attention of the state court to such a question if it was intended to rely upon it. Second. But even if the Federal question was referred to in the petition, as the cause of action stated in nowise involved the construction or validity of any provision of the bankrupt act, therefore there is no right to review under § 709 of the Revised Statutes, U. S. Comp. Stat. 1901, p. 575.

Both these contentions might well be disposed of by saying that the action was brought by a trustee appointed under the bankrupt law of the United States, seeking to recover what was asserted to be an asset of the bankrupt estate under that law. This, therefore, presented a Federal question, and the denial of the asserted right was a denial of a right or title specially claimed under a law of the United States. Peck v. Jenness, 7 How. 612, 12 L. ed. 841; Barton v. Geiler, 108 U. S. 161, 27 L. ed. 687, 2 Sup. Ct. Rep. 387; Williams v. Heard, 140 U. S. 529, 35 L. ed. 550, 11 Sup. Ct. Rep. 885; Dushane v. Beall, 161 U. S. 513, 40 L. ed. 791, 16 Sup. Ct. Rep. 637; Stanley v. Schwalby, 162 U. S. 275, 40 L. ed. 967, 16 Sup. Ct. Rep. 754. Whether expressions, relied upon in argument, contained in Cramer v. Wilson, 195 U. S. 416, 49 L. ed. 258, 25 Sup. Ct. Rep. 94, must be taken as not in harmony with the previous cases, or whether those expressions simply implied that where a right claimed by a trustee in bankruptcy in its final aspect depended solely upon a state law, the courts of the United States would follow the construction given by the highest courts of the state to the state law, we do not deem it necessary now to say, for, without reference to the doctrine announced in the previous cases, and without regard to the import of the case of Cramer v. Wilson, the contention as to the want of jurisdiction is without merit. It is to be observed that the matter certified by the supreme court of Ohio was made by that court a part of the record, and, if it be considered as having the force of an opinion of that court, would clearly establish the fact that the court had considered and decided a Federal question, which, apart from other considerations, would obviously give jurisdiction. But even if the action of the court be treated as not an opinion, but a mere certificate, the same result would follow. It is elementary that the certificate of a court of last resort of a state may not import a Federal question into a record where otherwise such question does not arise; it is equally elementary that such a certificate may serve to elucidate the determination whether a Federal question exists. Applying this principle, we think, as the suit was brought by a trustee in bankruptcy in virtue of the power and authority conferred upon him by a law of the United States, the certificate makes clear the fact, if it were otherwise doubtful, that rights under the bankrupt law were relied upon and passed upon below. And as, this being true, the right of the trustee in bankruptcy to recover thus depended upon a law of the United States, there was clearly jurisdiction within the purview of § 709 of the Revised Statutes, U. S. Comp. Stat. 1901, p. 575. Nutt v. Knut, 200 U. S. 12, 50 L. ed. ——, 26 Sup. Ct. Rep. 216.

Coming to the merits, we premise that if the court below had found the facts we should be bound thereby. Here, however, as we have seen, the court below did not find the facts, but instructed a verdict for the defendant, being of the opinion that, upon no view of the evidence, was there a case made which would have justified a verdict for the plaintiff. This raises a question of law, which is this: Was the evidence such as would have justified the jury, under any reasonable view thereof, to find for the plaintiff? In other words, Was there sufficient evidence to warrant the submission of the case to the jury? This brings us to consider the evidence, in order to ascertain what inferences, one way or the other, might reasonably have been drawn by the jury therefrom.

Outside the testimony of the trustee as to the insolvency of the bankrupt estate, the only evidence introduced was the testimony of John Field, manager of the Columbus Clearing House Association. By that testimony the following facts were disclosed:

Prior to the bankruptcy of Reinhard & Company that firm carried on a banking business in the city of Columbus, Ohio, and the firm, as well as the City Deposit Bank Company, were members of the clearing house association. In order to accomplish the purpose of its existence the clearing house association was an agent, for a limited purpose, of the banks composing the association; that is, its duty was to clear or balance daily the...