Mueller v. Bruss

• Decision Date: 17 December 1901
• Citation: 112 Wis. 406,88 N.W. 229
• Parties: MUELLER v. BRUSS ET AL.
• Court: Wisconsin Supreme Court

112 Wis. 406

88 N.W. 229

MUELLER

v.BRUSS ET AL.

Supreme Court of Wisconsin.

Dec. 17, 1901.

Appeal from superior court, Milwaukee county; Orren T. Williams, Judge.

Action by David Mueller against Julius Bruss and others. From an order overruling defendants' demurrer to the complaint, defendants appeal. Reversed.

Demurrer to plaintiff's complaint. It is alleged that about May 2, 1899, the defendant Julius Bruss filed a voluntary petition in bankruptcy, and was thereafter duly adjudged a voluntary bankrupt. July 10, 1899, the plaintiff was elected trustee, and duly qualified. Prior to October 18, 1898, Bruss owned certain real estate. On the date last mentioned, while in debt to creditors who have proved their claims in said bankruptcy proceedings, and which debts are yet unpaid, he conveyed certain of said real estate to his wife, the defendant Wilhelmine, without any consideration. On October 24, 1898, he conveyed certain other real estate to his daughter, the defendant Lydia Schneider. Both of said conveyances were voluntary, and made with intent to hinder, delay, and defraud his creditors, which fraudulent intent was participated in by the said grantees, who took possession of the property, and now claim to be the owners thereof. Julius failed to schedule said property as a part of his assets, and withheld all information in regard to the same from the trusteee. There is also an allegation that this action is not prosecuted in collusion with the defendants. The demurrer was based on the grounds that the court had no jurisdiction, that the plaintiff had no legal capacity to sue, and that the complaint fails to state a cause of action. From an order overruling the demurrer, the defendants have taken this appeal.C. W. Briggs and Sheridan & Wollaeger, for appellant.

Sylvester, Scheiber & Orth, for respondent.

BARDEEN, J. (after stating the facts).

1. The first question raised by the defendants is whether the courts of this state will take jurisdiction of actions arising under the federal bankruptcy act. The plaintiff is suing, in his capacity as trustee in bankruptcy of the defendant Julius Bruss, to set aside conveyances of his real estate alleged to have been made some six months prior to the filing of his voluntary petition. His authority to sue is given by Bankr. Act 1898, § 70. Subdivision “e” of this section provides: “The trustee may avoid any transfer by the bankrupt of his property which any creditor of such bankrupt might have avoided, and may recover the property so transferred, or its value, from the person to whom it was transferred, unless he was a bona fide holder for value prior to the date of the adjudication,” etc. It is said by defendants' counsel that congress has no power to impose on the state courts the duty of administering any part of the bankrupt act, that it is purely discretionary with them whether they will act or not, and that the policy of this state, declared under the act of 1867, was that such jurisdiction would not be entertained. He cites two cases (Brigham v. Claflin, 31 Wis. 607, 11 Am. Rep. 623, and Bromley v. Goodrich, 40 Wis. 131, 22 Am. Rep. 685) to sustain his position. In the first of these cases, Mr. Justice Cole, who wrote the opinion, was inclined to hold that the federal courts had exclusive jurisdiction of all proceedings under the bankrupt law; but the case was decided on the ground that, the transaction attacked by the assignee being valid under the state law, the courts of this state would not lend their aid to avoid it at the suit of the assignee, because the federal act declaring it void was penal in its character. This was in recognition of the doctrine that one state will not take cognizance of or enforce penalties imposed by the laws of another state, and applying it to the act of congress which created a forfeiture as to all conveyances of property by the debtor within the four months previous to the filing of his petition. The Bromley Case confirmed the former one, and held that the federal courts had exclusive jurisdiction of such proceedings, and that the state courts would not declare such conveyances void in absence of an adjudication by the federal court. But this case is unlike either of the cases mentioned. Those were cases where the conveyances mentioned were made within the four months limited by section 35 of the act of 1867. In this case the conveyances attacked were made more than six months prior to the filing of the petition in bankruptcy, and do not come within the prohibitory terms of the act of 1898. The action is by the trustee, representing the creditors, to set aside conveyances alleged to have been made in fraud of creditors, and prohibited by section 2320, Rev. St. 1898. It involves no application of the penal statutes of the United States. Under the act of 1867 the supreme court of the United States held, contrary to the cases above cited, that the assignee in bankruptcy might sue in the state courts, no exclusive jurisdiction being given to the courts of the United States, and that in such cases the state courts did not exercise a new jurisdiction conferred upon them, but their ordinary jurisdiction derived from their constitution under state law. Claflin v. Houseman, 93 U. S. 130, 23 L. Ed. 833;McKenna v. Simpson, 129 U. S. 506, 9 Sup. Ct. 365, 32 L. Ed. 771. The latter case is one very similar in its facts to the one at bar, and held that the decision of the state court as to what should be deemed a fraudulent conveyance did not present a federal question, so that it could be taken to the supreme court for review. It will be observedthat one of the reasons given why this court declined to allow the assignee the right to sue was because the federal courts had exclusive jurisdiction, and conflicts of interest might arise. No such ground exists under the present bankrupt act. The recent case of Bardes v. Bank, 178 U. S. 524, 20 Sup. Ct. 1000, 44 L. Ed. 1175, holds distinctly that under this act the United States courts have no jurisdiction over independent suits brought by a trustee in bankruptcy to assert a title to money or property as assets of the bankrupt, against strangers to the bankruptcy proceeding, unless by consent of the proposed defendant. In Lyon v. Clark, 124 Mich. 100, 82 N. W. 1058, 83 N. W. 694, the case was first decided...