Fred Bardes v. First National Bank of Hawarden, Iowa

• Decision Date: 28 May 1900
• Docket Number: No. 503,503
• Citation: 178 U.S. 524,20 S.Ct. 1000,44 L.Ed. 1175
• Parties: FRED BARDES, Trustee of the Estate of Frank T. Walker, Bankrupt, Appt ., v. FIRST NATIONAL BANK OF HAWARDEN, IOWA, et al
• Court: U.S. Supreme Court

178 U.S. 524

20 S.Ct. 1000

44 L.Ed. 1175

FRED BARDES, Trustee of the Estate of Frank T. Walker, Bankrupt, Appt.,

v FIRST NATIONAL BANK OF HAWARDEN, IOWA, et al.

No. 503.

Submitted January 31, 1900.

Decided May 28, 1900.

Messrs. C. A. Brandenburg, Wm. F. Lohr, Henry C. Gardiner, Frederick W. Lohr, Deloss C. Shull, and Wm. H. Farnsworth for appellant.

Messrs. William Milchrist and John Hutchinson for appellees.

Mr. Justice Gray delivered the opinion of the court:

This was a bill in equity, filed April 28, 1899, in the district court of the United States for the northern district of Iowa, sitting in bankruptcy, by Fred Bardes, a citizen of Iowa, as trustee in bankruptcy of the estate of Frank T. Walker (who had by that court been adjudged a bankrupt upon his own petition), against the First National Bank of Hawarden, Iowa, a corporation created and existing under the acts of Congress relating to national banks, and against citizens of Iowa and of South Dakota, to set aside a conveyance of goods, of the value of $3,500, alleged to have been made by the bankrupt, within four months before the institution of the proceedings in bankruptcy to the defendants, and to compel them to account or the goods or their proceeds, on the ground that the conveyance was in fraud of the provisions of the bankrupt act of July 1, 1898, and in fraud of the creditors of the bankrupt. The defendants demurred to the bill upon the ground that the court could not take jurisdiction of the case. The court sustained the demurrer, and entered a final decree dismissing the bill for want of jurisdiction, but without prejudice to the plaintiff's right to institute proceedings in a court having jurisdiction. The plaintiff took an appeal directly to this court; and the district judge certified that the bill was dismissed for want of jurisdiction only, and, to the end that this court might be fully advised in the premises, stated in his certificate the following questions as having arisen before him, namely:

'1st. Do the provisions of the 2d clause of § 23 of the act of Congress known as the bankrupt act of 1898 control and limit the jurisdiction of all courts, including the several district courts of the United States, over suits brought by trustees in bankruptcy to recover or collect debts due from third parties, or to set aside transfers of property to third parties, alleged to be fraudulent as against creditors, including payments in money or property to preferred creditors?

'2d. Can the district court of the United States under any circumstances entertain jurisdiction over suits brought by trustees in bankruptcy to set aside fraudulent transfers of money or property, made by the bankrupt to third parties before the instituio n of the proceedings in bankruptcy?

'3d. Can this court, being the district court for the northern district of Iowa, take jurisdiction over the suit as it now stands on the record?'

The record clearly shows, with perhaps unnecessary fullness, that the case was decided upon questions of jurisdiction only, and what those questions were. Huntington v. Laidley, 176 U. S. 668, 676, 20 Sup. Ct. Rep. 526, 528, 44 L. ed. ——, and cases there cited.

At a former day of this term, a certificate made by the district judge of the same questions, on which he desired the instruction of this court for his guidance, was dismissed by this court because he was not authorized by the acts of Congress to make such a certificate before deciding the case. Bardes v. First Nat. Bank, 176 U. S. 526, 20 Sup. Ct. Rep. 196, 44 L. ed. ——.

By the bankrupt act of July 1, 1898, chap. 541, trustees in bankruptcy appointed by the creditors of the bankrupt or by the court of bankruptcy take the place and are vested with the powers of assignees in bankruptcy under former bankrupt acts. Among the duties imposed upon such trustees by § 47 are to '(2) collect and reduce to money the property of the estates for which they are trustees, under the direction of the court.' By § 70 the trustees, upon their appointment and qualification, are vested by operation of law with the title of the bankrupt, as of the date when he was adjudged a bankrupt, in all his property, excepting that exempt by law from execution and liability for debts, and including property transferred by him in fraud of his creditors. And by the 5th clause of § 67 'all conveyances, transfers, assignments, or encumbrances of his property, or any part thereof, made or given by a person adjudged a bankrupt under the provisions of this act, subsequent to the passage of this act, and within four months prior to the filing of the petition, with the intent and purpose on his part to hinder, delay, or defraud his creditors or any of them, shall be null and void as against the creditors of such debtor, except as to purchasers in good faith and for a present fair consideration; and all property of the debtor conveyed, transferred, assigned, or encumbered as aforesaid shall, if he be adjudged a bankrupt and the same is not exempt from execution and liability for debts by the law of his domicil, be and remain a part of the assets and estate of the bankrupt, and shall pass to his said trustee, whose duty it shall be to recover and reclaim the same, by legal proceedings or otherwise, for the benefit of the creditors.' 30 Stat. at L. 557, 564, 565.

The present appeal from the final decree of the district court dismissing the bill for want of jurisdiction distinctly presents for the decision of this court the question whether, under the act of 1898, a district court of the United States in which proceedings in bankruptcy have been commenced and are pending under the act has jurisdiction to entertain a suit by the trustee in bankruptcy against a person holding, and claiming as his own, property alleged to have been conveyed to him by the bankrupt in fraud of creditors. This is a question of general importance, upon which there has been much difference of opinion in the lower courts of the United States.

Its determination depends mainly on the true construction of two sections of the bankrupt act of 1898, which it may be convenient to set forth in full, as follows:

'Sec. 2. Creation of Courts of Bankruptcy and Their Jurisdiction.—That the courts of bankruptcy, as hereinbefore defined, viz., the district courts of the United States in the several states, the supreme court of the District of Columbia, the district courts of the several territories, and the United States courts in the Indian territory and the district of Alaska, are hereby made courts of bankruptcy, and are hereby invested, within their respective territorial limits as now established, or as they may be hereafter changed, with such jurisdiction, at law and in eqit y, as will enable them to exercise original jurisdiction in bankruptcy proceedings, in vacation in chambers, and during their respective terms as they are now or may be hereafter held, to (1) adjudge persons bankrupt who have had their principal place of business, resided, or had their domicil within their respective territorial jurisdictions for the preceding six months, or the greater portion thereof, or who do not have their principal place of business, reside, or have their domicil within the United States, but have property within their jurisdictions, or who have been adjudged bankrupts by courts of competent jurisdiction without the United States and have property within their jurisdictions; (2) allow claims, disallow claims, reconsider allowed or disallowed claims, and allow or disallow them against bankrupt estates; (3) appoint receivers or the marshals, upon application of parties in interest, in case the courts shall find it absolutely necessary for the preservation of estates, to take charge of the property of bankrupts after the filing of the petition and until it is dismissed or the trustee is qualified; (4) arraign, try, and punish bankrupts, officers, and other persons, and the agents, officers, members of the board of directors or trustees, or other similar controlling bodies of corporations, for violations of this act, in accordance with the laws of procedure of the United States now in force, or such as may be hereafter enacted, regulating trials for the alleged violation of laws of the United States; (5) authorize the business of bankrupts to be conducted for limited periods by receivers, the marshals, or trustees, if necessary in the best interests of the estates; (6) bring in and substitute additional persons or parties in proceedings in bankruptcy when necessary for the complete determination of a matter in controversy; (7) cause the estates of bankrupts to be collected, reduced to money, and distributed, and determine controversies in relation thereto, except as herein otherwise provided; (8) close estates, whenever it appears that they have been fully administered, by approving the final accounts and discharging the trustees, and reopen them whenever it appears they were closed before being fully administered; (9) confirm or reject compositions between debtors and their creditors, and set aside compositions and reinstate the cases; (10) consider and confirm, modify or overrule, or return with instructions for further proceedings; records and findings certified to them by referees; (11) determine all claims of bankrupts to their exemptions; (12) discharge or refuse to discharge bankrupts, and set aside discharges and reinstate the cases; (13) enforce obedience by bankrupts, officers, and other persons to all lawful orders, by fine or imprisonment, or fine and imprisonment; (14) extradite bankrupts from their respective districts to other listricts; (15) make such orders, issue such process, and enter such judgments, in addition to those specifically provided for, as may be necessary for the enforcement of the provisions of this act; (16) punish persons for contempts committed before referees; (17) pursuant to the recommendation of creditors, or when they...