Collett v. Adams

• Decision Date: 28 April 1919
• Docket Number: No. 274,274
• Citation: 39 S.Ct. 372,63 L.Ed. 764,249 U.S. 545
• Parties: COLLETT v. ADAMS
• Court: U.S. Supreme Court

249 U.S. 545

39 S.Ct. 372

63 L.Ed. 764

COLLETT

v ADAMS.

No. 274.

Submitted March 21, 1919.

Decided April 28, 1919.

Messrs. Wilmer S. Hunt, of Houston, Tex., and H. B. Seay, of Dallas, Tex., for appellant.

Mr. Justice VAN DEVANTER delivered the opinion of the Court.

This suit is equity was brought in the District Court for the Southern District of Texas by a trustee in bankruptcy. A motion to dismiss the bill for want of jurisdiction was sustained, and the propriety of that ruling is the sole question presented on this direct appeal. See Judicial Code (Act Jan. 28, 1915, c. 22) § 238, 38 Stat. 804 (Comp. St. § 1215).

The allegations of the bill are to this effect: March 17, 1917, a petition in bankruptcy against Ford C. Cotten was filed in the District Court for the Northern District of Texas, on which in due course he was adjudged a bankrupt. The plaintiff became the trustee. On December 22, 1916, and for some time theretofore, Cotten was the owner and in possession of certain real and personal property in Wharton county, Tex., and on that day transferred the same to James R. Adams, the defendant. Adams was then asserting that Cotten was indebted to him in the sum of $45,311 for property obtained from him through deceit and fraud, and a suit to enforce that claim was pending in a state court in Collin county, Tex. In August, 1916, a writ of attachment in that suit had been levied on the property here in question, but under the laws of Texas the attachment lien was void and of no effect. The transfer from Cotten to Adams was made with the purpose of effecting a settlement of that suit and the claim involved therein, and at the time of the transfer the parties entered into a written agreement wherein it was stipulated that if Cotten was not adjudged a bankrupt on a petition presented within four months after the transfer was filed for record, Adams should dismiss the suit and pay the unpaid costs, and, if on a petition so filed Cotten was adjudged a bankrupt, Adams should have the right to prosecute the suit to judgment and to enforce all liens acquired through the attachment. The deed transferring the real property was filed for record shortly after it was executed, but the agreement never was so filed and constituted a secret understanding between the parties. Following the transfer Adams took possession of the property, real and personal; was still in possession, claiming title and exercising the rights of an owner, when this bill was brought, and had refused, on demand made, to surrender the property to the trustee. At the time of the transfer Cotten was insolvent and intended thereby to effect a preference in favor of Adams, all of which the latter knew or had reasonable cause to believe; and in fact the transfer resulted in such a preference, for the assets were not sufficient to pay all creditors. The property transferred was not exempt, but was such as creditors lawfully could subject to the payment of their claims. Some or all of the personalty has been disposed of by Adams. The real property is in the Southern District of Texas, where this suit was brought. Cotten and the trustee reside in the Northern district, where the bankruptcy proceeding is pending, and Adams resides in the Eastern district. The suit in the state court has not been dismissed, but is still pending in substantially the same condition as when the transfer was made.

The bill contains a prayer for the recovery of the real property or its value, for an accounting as to the proceeds of the personalty, and for other relief the detail and propriety of which require no attention here.

The motion which the court below sustained challenged its jurisdiction on the grounds (1) that the bill could not be brought in that court without the defendant's consent, which was not given; (2) that the bill was not brought in the district where the bankruptcy proceeding was pending or in that of the residence of the defendant; and (3) that the subject-matter of the bill already was involved in the pending suit in the state court in Collin county, a court of competent jurisdiction, and adequate relief could be had in that suit.

On its face the bill shows very plainly that it is brought to avoid a transfer by the bankrupt, which the trustee regards as a voidable preference within the meaning of section 60b of the Bankruptcy Act (Act July 1, 1898, c. 541, 30 Stat. 562 [Comp. St. § 9644]), and to recover the property transferred or its value. There are also present some indications of a purpose to claim relief under sections 67e and 70e (Comp. St. §§ 9651, 9654), but this does not call for special comment, for in point of jurisdiction there is no distinction between a suit under these sections and one under section 60b.

It well may be that under the original terms of the Bankruptcy Act, c. 541, 30 Stat. 544, the bill could not have been brought in the court below without the defendant's consent, (Bardes v. Hawarden Bank, 178 U. S. 524, 20 Sup. Ct. 1000, 44 L. Ed. 1175), but the act was amended materially in 1903 and again in 1910 (Act Feb. 5, 1903, c. 487, 32 Stat. 797; Act Jan. 25, 1910, c. 412, 36 Stat. 838), and it was after those amendments became effective that the bill was brought. The pertinent provisions, with the amendments affecting jurisdiction in italics, are as follows:

Section 23b: 'Suits by the trustee shall only be brought or prosecuted in the courts where the bankrupt, whose estate is being administered by such trustee, might have brought or prosecuted them if proceedings in bankruptcy had not been instituted, unless by consent...