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minous with said completed section herein. tion 3 provided that patents should be isbefore granted; .
sued not to the state, but to the company “Sec. 8. And be it further enacted, That direct, which made the state nothing but said Pacific Railroad Company, Southern a mere conduit for the passage of title. Branch, its successors and assigns, is here. And this is so even if it were ruled that by authorized and empowered to extend, and the state of Kansas was made trustee under construct its railroad from the southern $ 9, because it would only be trustee of boundary of Kansas, south through the In- the bare legal title. In very many cases dian territory, with the consent of the In- "in which the grant was directly to the dians, and not otherwise, along the valley railroad company, or in which the act of of Grand and Arkansas rivers, to Fort Congress required that the patents for lands Smith, in the state of Arkansas; and the earned should be issued not to the state, right of way through said Indian territory for the benefit of the railroad company, is hereby granted to said company, its suc- but directly to the company itself,” it has cessors and assigns, to the extent of one been held that the title vested absolutely hundred feet on each side of said road or in the railroad company. Sioux City & roads, and all necessary grounds for sta- St. P. R. Co. v. United States, 159 U. S. tions, buildings, workshops, machine shops, 349, 364, 40 L. ed. 177, 182, 16 Sup. Ct. switches, side tracks, turntables, and water Rep. 17, 23. stations.
Title passed by the grant on the perform“Sec. 9. And be it further enacted, That ance of its conditions and to the grantees the same grant [s] of lands through said to whom the patents were to be issued, and Indian territory are hereby made as pro- here § 3 provided that patents should isvided in the first section of this act, when- sue not to the state, but to the railroad ever the Indian title shall be extinguished company direct. by treaty or otherwise, not to exceed the And if the lands in the Indian territory ratio per mile granted in the first section of could be held in any view to have been this act: Provided, That said lands become granted in præsenti, such grant was cera part of the public lands of the United tainly not to the state of Kansas. States."
The road, in aid of which the grant was The bill averred that the road was con- made to the state, extended no farther than structed through the Indian territory, and the southern boundary thereof, and the set forth at length Indian treaties and con- patents were to be issued to the company. gressional legislation with reference to that True, as declared in § 1, the road was to territory, under which it was alleged that be constructed "with a view to an extension the Creek Indian Nation had ceased to oc- of the same through a portion of the Incupy or claim the lands in question as a dian territory to, Fort Smith, Arkansas,” tribe or nation, and that some of the lands and that extension was authorized by $ 8, had been allotted in severalty to individual but the lands referred to in § 9 were not members of the Creek Nation; and that lands in the state of Kansas, nor was that thereby said lands passed to the state un- state mentioned in the section. It seems der the provisions of the grant mentioned. clear that those lands were not intended to It was prayed that a decree be entered ad- be granted to that state for the construction judging the state to be the owner, as trustee of a road beyond its boundaries. for the railway company, of all odd-num- Moreover, the bill sets forth many combered sections of land to the extent of the munications and protests by the railroad grant along the line of the road through company to the Dawes Commission, the the Creek Nation, in the Indian territory, townsite commission, the Indian agent, and and that the allottees be directed to sur- the Secretary of the Interior, in all of render the possession to the state as trustee, which the tracts in controversy were claimed and be enjoined from disposing of said lands, by the railroad company as its own without or "in the event that, from any equitable reference to any interest of the state of considerations, the court shall entertain the Kansas therein. view that the allottees and those claiming In these circumstances we think it apunder them should not be disturbed, then parent that the name of the state is being that an account be taken of the value of used simply for the prosecution in this the lands in controversy," and that the court of the claim of the railroad company, United States be adjudged to pay to the and our original jurisdiction cannot be state, as trustee, the sum of such values, maintained. estimated at more than $10,000,000.
Again, the United States is the real parIn our opinion it appears upon the face ty in interest as defendant, and has not of the bill that the state of Kansas is only consented to be sued, which it cannot be nominally a party, and that the real party without its consent. Minnesota v. Hitchin interest is the railroad company. Sec- 1 cock, 185 U. S. 373, 387, 46 L. ed. 954, 962,
22 Sup. Ct. Rep. 650, 656; Oregon v. Hitch-, consent, yet, with its consent, it may be cock, 202 U. S. 60, 50 L. ed. 935, 26 Sup. sued, and the judicial power of the United Ct. Rep. 568; United States v. Lee, 106 States extends to such a controversy." U. S. 196, 207, 27 L. ed. 171, 177, 1 Sup. We are not dealing here with the merits Ct. Rep. 240.
of the controversy raised by the bill, but "If whether a suit is one against a state solely with the question of the original jurisis to be determined, not by the fact of the diction of this court. And, as the United party named as defendant on the record, but States has not consented to be sued, it reby the result of the judgment or decree sults that, on this ground also, the bill which may be entered, the same rule must must be dismissed. apply to the United States. The question And it is so ordered. whether the United States is a party to a controversy is not determined by the merely Mr. Justice Moody took no part in the nominal party on the record, but by the disposition of this case. question of the effect of the judgment or decree which can be entered."
In the present case the parties defendant other than the United States and its officers EAU CLAIRE NATIONAL BANK, Plff. in are Creek Indian allottees and persons claim
Err., ing under them, and, if their allotments should be taken from them, which is part RALPH W. JACKMAN, as Trustee of the of the relief sought by the bill, the United
Estate of John H. Young, a Bankrupt. States would be subject to a demand from Error to state court-Federal question-how them for the value thereof or for other lands,
raised. while the bill prays in the alternative that,
1. A judgment of the highest state court "in the event that from any equitable con- in favor of a trustee in bankruptcy in an siderations the court should entertain the action brought by him to recover the value view that the allottees and those claiming of an alleged voidable preference may be under them should not be disturbed, then reviewed by the Federal Supreme Court as that an account be taken of the value of a decision against a Federal right or immuthe lands in controversy at the time of the nity, specially set up or claimed, where the respective allotments, and the defendants, ant's contentions by the construction which
state court answered some of the defendthe United States of America, be ordered, it gave to the bankrupt act.* adjudged, and decreed to pay to your Pleading-demurrer-waiver of objection by oratrix, as trustee, the sum of such values."
pleading over. It does not follow that because a state 2. The question whether the election by may be sued by the United States without a trustee in bankruptcy to avoid a preferits consent, therefore the United States may ence should be exercised by a demand bebe sued by a state without its consent. fore suit, or can be exercised by the suit it
self, is not open to the defendant, although Public policy forbids that conclusion.
it demurred to the complaint, and urged, as In United States v. Texas, 143 U. S. 621, a ground of demurrer, the absence of an al646, 36 L. ed. 285, 293, 12 Sup. Ct. Rep. legation of a demand, where it did not stand 488, 494, it was held that the exercise by on the demurrer, but answered, and not only this court of original jurisdiction “in a traversed the allegations of the complaint, suit brought by one state against another but set up an independent defense, and to determine the boundary line between showed that a demand would have been unthem, or in a suit brought by the United availing. States against a state to determine the Error to state court-questions reviewableboundary between a territory of the United
findings of fact. States and that state, so far from infring the answer to the question whether or not
3. Findings of fact upon which depends ing, in either case, upon the sovereignty, is certain transactions were invalid under the with the consent of the state sued. Such bankrupt act as operating to give a creditor consent was given by Texas when admitted an unlawful preference are conclusive upon into the Union upon an equal footing in the Supreme Court of the United States, in all respects with the other states.” That reviewing, by writ of error, the judgment case was quoted from with approval in of a state court. Minnesota v. Hitchcock, supra, where Mr. Bankruptcy-suit to avoid preference—scope Justice Brewer, delivering the opinion,
of inquiry in state court. pointed out that the judicial power of the
4. The validity of all other claims United States extends to cases in which against the bankrupt, and the question
whether others have received voidable prefthe United States is a party plaintiff as
erences and have not been required to surwell as to cases in which it is a party render them, cannot be litigated in a suit defendant, for "while the United States, as in a state court to avoid an alleged unlawa government, may not be sued without its | ful preference, since this would, in effect,
*Ed. Note.--For cases in point, see vol. 13, Cent. Dig. Courts, $ 1053. tEd. Note.-For cases in point, see vol. 13, Cent. Dig. Courts, $ 1090.
transfer the administration of the bank- value of his property was substantially $35,rupt's estate from the Federal district court 000. He was indebted to the bank in the to the state court.
sum of $27,000 for moneys borrowed from
time to time for a period of about two years [No. 163.]
previous to that time. On said day Young Argued January 16 and 17, 1907. Decided executed to the bank a chattel mortgage on February 25, 1907.
2,100,000 feet of saw logs, to secure the sum
of $15,900, then owing from him to the bank, N ERROR to the Supreme Court of the and also executed a chattel mortgage, trans
State of Wisconsin to review a judg. ferring 1,000,000 feet of lumber, about 600,ment which affirmed a judgment of the Cir-000 shingles, and about 200,000 lath, to se. cuit Court of Eau Claire County, in that cure the sum of $11,100, owing by him to state, in favor of a trustee in bankruptcy the bank. This indebtedness existed long in a suit to avoid an alleged unlawful pref- prior to said mortgages, and the property erence. Affirmed.
transferred constituted substantially all of See same case below, 125 Wis. 465, 104 the property then owned by Young not exN. W. 98.
empt from execution, which facts were well
known by him and the bank. The effect of Statement by Mr. Justice McKenna: the foreclosure of the mortgages would be
This action was brought by defendant in to enable the bank to obtain a much larger error, hereafter called the trustee, in the percentage of its debt than would the othcircuit court of Eau Claire county, state er creditors of Young in the same class as of Wisconsin, against the plaintiff in error, the bank. The mortgages were given by hereafter called the bank, under $ 60b of Young and taken by the bank for the sole the bankrupt act of 1898 [30 Stat. at L. purpose of hindering and delaying the other 562, chap. 541, U. S. Comp. Stat. 1901, p. creditors, and were executed and received 3445), to recover the value of property for that purpose, and the bank, at the time which, it is alleged, was transferred by the of their execution, had reasonable cause to bankrupt to the bank, for the purpose of believe that they were given with the intengiving the latter a preference over other tion to give it a preference over other credcreditors. Judgment was recovered by the itors. trustee, which, on appeal, was affirmed by The Waters-Clark Lumber Company is a the supreme court of the state. 125 Wis. 465, corporation of the state of Minnesota, and 104 N. W. 98. Thereupon this writ of error D. S. Clark is the president thereof and also was sued out.
a director in the bank, and W. K. Collin is The complaint of the trustee alleges that the cashier of the latter. On or about the on the 7th of June, 1902, John H. Young 10th of March, 1902, Coffin, acting nor the duly filed his petition in bankruptcy in the bank, requested Young to transfer to the United States district court for the western lumber company, for the benefit of the bank, district of Wisconsin, pursuant to the act all of the property embraced in the mortgages, of Congress, and was on said day duly de- together with certain other property. Pursuclared a bankrupt. Subsequently defendant ant to such request Young did, on or about in error was duly elected and appointed by the 10th of March, 1902, transfer, by absolute the creditors of the bankrupt as trustee in bills of sale, to the lumber company, all of bankruptcy, and duly qualified as such the property described in the mortgages, and trustee.
other saw logs owned by him. The propThe plaintiff in error is and was, at all erty transferred was reasonably worth the the times mentioned in the complaint, a na- sum of $35,000. Immediately on the executional bank. Young, during the four months tion of the bills of sale the lumber company, immediately preceding the filing of his peti-acting pursuant to the directions by and in tien, was the owner and in possession of cer- behalf of the bank, took possession of the tain lumber, shingles, and lath, located at property transferred, and thereafter sold the Cadott, Chippewa county, Wisconsin, and same and applied the proceeds to the pay. certain logs in or near the Yellow river and ment of the indebtedness secured by the Chippewa river in Chippewa county, which mortgages. At the time the bills of sale were reasonably worth the sum of $35,000. were made the lumber company and the The value of all other property owned by bank thought the property transferred conhim did not exceed the sum of $500.
stituted all of the available assets of Young, On the 10th of February, 1902, Young was and that the result of such transfer and the wholly insolvent, and owed debts which appropriation of the proceeds thereof would largely exceeded the value of his property, result in the other creditors of Young losing which fact was well known to him and the all of his indebtedness to them. The lumber bank. The aggregate amount of his indebt-company, acting as vendee of said property, edness exceeded the sum of $40,000, and the I was in reality acting as trustee for the
bank, and made such pretended purchase said trustee for all sums of money which with the understanding and agreement with the said plaintiff may be entitled to recover the bank and Young that it would account on account of the transactions mentioned in to the bank for the proceeds of the property plaintiff's complaint.” transferred to the amount of his indebted- Questions were submitted to the jury covness, and
that any sums realized in ering the issues in the case, except the value excess of his indebtedness should be paid of the property, which, by stipulation of to Young. The bills of sale were not parties, was reserved for the court. The executed in compliance with the statutes of jury, in response to the questions, found the state. Except as to the agreement to that at all the days mentioned in the compay said indebtedness, no consideration was plaint the property transferred at a fair valpaid by the lumber company for the prop- uation was insufficient to
was insufficient to pay Young's erty, and, at the time of the transfer of the debts; that the lumber company, acting for property, nothing was paid to Young there the bank and pursuant to the arrangement for. By reason of said transactions the between it and the bank, took the legal title bank, within four months, appropriated to to the lumber and logs for the benefit of the payment of its claims substantially all the bank under an agreement with it and of the property of Young, which at said time Young to account to the bank for a portion was and has been ever since worth $35,000. of the proceeds; that it was the intention There is no other property in the possession of Young, by the execution of the mortgages of the trustee, belonging to Young, out of and the transfer of the property, to give the which his other creditors can be paid. bank a preference, and that the bank and
The bank demurred to the complaint on officers and agents had reasonable cause to the following grounds: The court had no believe that Young intended to give it such jurisdiction of the subject of the action; the preference and to enable it to obtain a greattrustee had no legal capacity to sue, in that er percentage of its indebtedness than any the complaint did not allege that authority other of his creditors of the same class or permission was given him to bring suit; would be able to obtain. defect of parties, in that Young and the The court found that the lumber which lumber company were not made parties; and was included in the bank's mortgage was that the complaint did not state a' cause of worth $3,452.85, and that a note for that action. The demurrer was overruled, and sum and value was given by the lumber the bank, availing itself of the permission company to Young and by him transferred granted, filed an answer, in which it ad- to the bank; that the Cadott logs, included mitted its corporate character and that of in the mortgage and sold by Young to the the lumber company, and the execution of lumber company, were worth $10,077.84; the mortgages and the bills of sale, and that that the up-river logs not included in the the instruments were not executed in the mortgage, but sold to the lumber company, manner provided by the statutes of the by Young, were worth $11,055.84; and that state. It denied all the other allegations of a note which was given as the net proceeds the complaint, and alleged that a portion of the sale of both quantities of logs over of the proceeds of the sale of the property and above certain labor liens was worth $2,was paid to the bank to discharge valid avd 508.14. This note was given by the lumber existing liens which it held against the prop-company to Young and transferred by him erty. And it alleged that the mortgages to the bank. The trustee contended in the were given for a good and valuable con- trial court that he was entitled to recover sideration, and that neither of them nor the for the entire value of the logs and lumber, payments to the bank were made or received and that no credit should be allowed tne for the purpose of giving the bauk a prefer- bank for the sums paid by it to discharge ence over other creditors of Young, “con- certain liens on the property for labor claims trary to the provisions of the bankruptcy and unpaid purchase money. The court relaws,” and “that, prior to the commence-jected the contentions and gave judgment ment of this action, the plaintiff commerced for the trustee in the sum of $6,254.99. In an action in this court against said Waters- this sum was included the value of the notes. Clark Lumber Company to recover from said The assignments of error are that the suWaters-Clark Lumber Company the pur- preme court erred in the following particuchase price of logs and other material sold lars: (1) In determining that the comby said Young to said Waters-Clark Lumber plaint stated a cause of action. (2) In de Company, and thereby elected to treat and termining that the bank was liable for the consider said contract between said Young value of the logs and lumber to the extent and said Waters-Clark Lumber Company as of the chattel mortgage interest of the bank legal and valid, and elected to look to and therein. (3) In determining that the bank hold the said Waters-Clark Lumber Com- was liable for having received a preference pany, instead of this defendant, as liable to contrary to $$ 60a and 60b of the bankrupt act of July 1, 1898, as "a portion of its chat- questions presented by the pleadings, it is. tel mortgage interest in said logs, the sum urged, were, did the bankrupt give the bank of $1,335.62 as the proceeds of the sale of a preference, and did the bank accept it the portion of said logs known as the 'up- with reasonable grounds to believe that a river logs, on which logs said defendant preference was intended ?
The supreme never held any chattel mortgage, and which court, however, considered the pleadings to logs were never transferred to said defend- have broader meaning, and answered some ant.” (4) In determining that the bank was of the contentions of the bank by the conliable for the value and moneys it received struction it gave to the bankrupt act. The as a preference, although the trustee had case, therefore, comes within the ruling in not elected to avoid such preference by Nutt v. Knut, 200 U. S. 12, 50 L. ed. 348, bringing suit to recover the same, and had 26 Sup. Ct. Rep. 216. It was there said: not elected to avoid such preference in any “A party who insists that a judgment canmanner. (5) And in holding that, in de- not be rendered against him consistently termining a question of preference, it was with the statutes of the United States may immaterial, under the bankrupt act, whether be fairly held, within the meaning of $ 709 the bank and the other creditors were of (U. S. Comp. Stat. 1901 p. 575), to assert the same class, and in refusing to reverse a right and immunity under such statutes, the judgment because of the error of the although the statutes may not give the circuit court in charging the jury that all party himself a personal or affirmative right of the creditors were of the same class. (6) that could be enforced by direct suit against In its construction of the bankrupt act in his adversary." See also Rector v. City Dethe following particulars: (a) In holding posit Bank Co. 200 U. S. 405, 50 L. ed. 527, that a transfer made within four months of 26 Sup. Ct. Rep. 289. the bankruptcy proceedings, which enabled On the merits of the case we start with a creditor to obtain any portion of his debt, the facts established against the bank, that constituted a preference. (b) That, al- the property of Young, at the time he exethough the effect of the transfer in question cuted the chattel mortgages and when he did not operate to give the bank a greater executed the deed to the lumber company, percentage of its debts than other creditors at a fair valuation, was insufficient to pay of the same class, such transfer constituted his debts, and that, by the execution of a preference. (c) In determining, by such those instruments, and the transfer of his rules of construction of the bankrupt act, property effected thereby, he intended to that the evidence was sufficient to establish give the bank a preference over his other that the bank had reasonable cause to be creditors, and that the bank had reasonable lieve that a preference was intended. (7) cause to believe that he intended thereby to (8) (9) In holding that the bank was liable give it a preference, and to enable it to obfor the full value of the preference received tain a greater percentage of its debt than in an amount in excess of what was neces- any other creditor of Young of the came sary to pay all the other creditors of the class. These, then, are the prominent facts, bankrupt, and claims of fictitious creditors and seemingly justified the judgment. and claims of creditors who had themselves Against this result what does the bank received preference, and in not limiting the urge? It urges, first, that there is included recovery to such sum as would be sufficient in the judgment the sum of $1,335.62, the to pay the claims of creditors whose claims net proceeds of the sale of certain logs, were provable. (10) (11) In affirming the called the "up-river-logs," which, it is conjudgment against the bank, and not render-tended, were not covered by either of the ing judgment for it.
mortgages, and that the supreme court, in
its opinion, apparently supposed that those Messrs. James Wickham, Burr W. Jones, logs were covered by the mortgages, and and Frank R. Farr for plaintiff in error. erred in giving judgment therefor. This is
Messrs. C. T. Bundy, W. P. Bartlett, and a misunderstanding of the opinion. While R. P. Wilcox for defendant in error.
the court did not explicitly distinguish be
tween the mortgages and the deed to the Mr. Justice McKenna, after stating the lumber company, we think it is clear that case as above, delivered the opinion of the the court regarded the deed, and what was court:
to be done under it, as the consummation of A motion is made to dismiss on the the "legal wrong,” to use the language of ground that the record presents nothing but the court, which went back to the time of questions of fact. It is contended that nei- the mortgages. In other words, that the upther in the pleadings of the bank nor in any river logs as well as the other property were way was any right, privilege, or immunity conveyed to the lumber company for the purunder a Federal statute specifically set up pose of giving a preference to the bank. or claimed in the state courts. The only The bank also attempts to urge against