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minous with said completed section herein- tion 3 provided that patents should be isbefore granted;

"Sec. 8. And be it further enacted, That said Pacific Railroad Company, Southern Branch, its successors and assigns, is hereby authorized and empowered to extend and construct its railroad from the southern boundary of Kansas, south through the Indian territory, with the consent of the Indians, and not otherwise, along the valley of Grand and Arkansas rivers, to Fort Smith, in the state of Arkansas; and the right of way through said Indian territory is hereby granted to said company, its successors and assigns, to the extent of one hundred feet on each side of said road or roads, and all necessary grounds for stations, buildings, workshops, machine shops, switches, side tracks, turntables, and water stations.

"Sec. 9. And be it further enacted, That the same grant [s] of lands through said Indian territory are hereby made as provided in the first section of this act, whenever the Indian title shall be extinguished by treaty or otherwise, not to exceed the ratio per mile granted in the first section of this act: Provided, That said lands become a part of the public lands of the United States."

sued not to the state, but to the company direct, which made the state nothing but a mere conduit for the passage of title. And this is so even if it were ruled that the state of Kansas was made trustee under § 9, because it would only be trustee of the bare legal title. In very many cases "in which the grant was directly to the railroad company, or in which the act of Congress required that the patents for lands earned should be issued not to the state, for the benefit of the railroad company, but directly to the company itself," it has been held that the title vested absolutely in the railroad company. Sioux City & St. P. R. Co. v. United States, 159 U. S. 349, 364, 40 L. ed. 177, 182, 16 Sup. Ct. Rep. 17, 23.

Title passed by the grant on the performance of its conditions and to the grantees to whom the patents were to be issued, and here § 3 provided that patents should issue not to the state, but to the railroad company direct.

And if the lands in the Indian territory could be held in any view to have been granted in præsenti, such grant was certainly not to the state of Kansas.

The road, in aid of which the grant was made to the state, extended no farther than the southern boundary thereof, and the patents were to be issued to the company. True, as declared in § 1, the road was to be constructed "with a view to an extension of the same through a portion of the Indian territory to, Fort Smith, Arkansas," and that extension was authorized by § 8, but the lands referred to in § 9 were not lands in the state of Kansas, nor was that It seems

The bill averred that the road was constructed through the Indian territory, and set forth at length Indian treaties and congressional legislation with reference to that territory, under which it was alleged that the Creek Indian Nation had ceased to occupy or claim the lands in question as a tribe or nation, and that some of the lands had been allotted in severalty to individual members of the Creek Nation; and that thereby said lands passed to the state un-state mentioned in the section. der the provisions of the grant mentioned. It was prayed that a decree be entered adjudging the state to be the owner, as trustee for the railway company, of all odd-numbered sections of land to the extent of the grant along the line of the road through the Creek Nation, in the Indian territory, and that the allottees be directed to surrender the possession to the state as trustee, and be enjoined from disposing of said lands, or "in the event that, from any equitable considerations, the court shall entertain the view that the allottees and those claiming under them should not be disturbed, then that an account be taken of the value of the lands in controversy," and that the United States be adjudged to pay to the state, as trustee, the sum of such values, estimated at more than $10,000,000.

clear that those lands were not intended to be granted to that state for the construction of a road beyond its boundaries.

In our opinion it appears upon the face of the bill that the state of Kansas is only nominally a party, and that the real party in interest is the railroad company.

Sec

Moreover, the bill sets forth many communications and protests by the railroad company to the Dawes Commission, the townsite commission, the Indian agent, and the Secretary of the Interior, in all of which the tracts in controversy were claimed by the railroad company as its own without reference to any interest of the state of Kansas therein.

In these circumstances we think it apparent that the name of the state is being used simply for the prosecution in this court of the claim of the railroad company, and our original jurisdiction cannot be maintained.

Again, the United States is the real party in interest as defendant, and has not consented to be sued, which it cannot be without its consent. Minnesota v. Hitchcock, 185 U. S. 373, 387, 46 L. ed. 954, 962,

sued, and the judicial power of the United States extends to such a controversy."

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. Ct. Rep. 568; United States v. Lee, 106 U. S. 196, 207, 27 L. ed. 171, 177, 1 Sup. Ct. Rep. 240.

"If whether a suit is one against a state is to be determined, not by the fact of the party named as defendant on the record, but by the result of the judgment or decree which may be entered, the same rule must apply to the United States. The question whether the United States is a party to a controversy is not determined by the merely nominal party on the record, but by the question of the effect of the judgment or decree which can be entered."

We are not dealing here with the merits of the controversy raised by the bill, but solely with the question of the original jurisdiction of this court. And, as the United States has not consented to be sued, it results that, on this ground also, the bill must be dismissed.

And it is so ordered.

Mr. Justice Moody took no part in the disposition of this case.

Err.,

V.

RALPH W. JACKMAN, as Trustee of the
Estate of John H. Young, a Bankrupt.
Error to state court-Federal question-how

raised.

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 claiming under them, and, if their allotments should be taken from them, which is part of the relief sought by the bill, the United States would be subject to a demand from them for the value thereof or for other lands, while the bill prays in the alternative that, "in the event that from any equitable considerations the court should entertain the view that the allottees and those claiming under them should not be disturbed, then that an account be taken of the value of the lands in controversy at the time of the respective allotments, and the defendants, the United States of America, be ordered, adjudged, and decreed to pay to your Pleading-demurrer-waiver of objection by oratrix, as trustee, the sum of such values."

It does not follow that because a state may be sued by the United States without its consent, therefore the United States may be sued by a state without its consent. Public policy forbids that conclusion.

In United States v. Texas, 143 U. S. 621, In United States v. Texas, 143 U. S. 621, 646, 36 L. ed. 285, 293, 12 Sup. Ct. Rep. 488, 494, it was held that the exercise by this court of original jurisdiction "in a suit brought by one state against another to determine the boundary line between them, or in a suit brought by the United States against a state to determine the boundary between a territory of the United States and that state, so far from infringing, in either case, upon the sovereignty, is with the consent of the state sued. Such consent was given by Texas when admitted into the Union upon an equal footing in all respects with the other states." That case was quoted from with approval in Minnesota v. Hitchcock, supra, where Mr. Justice Brewer, delivering the opinion, pointed out that the judicial power of the United States extends to cases in which the United States is a party plaintiff as well as to cases in which it is a party defendant, for "while the United States, as a government, may not be sued without its

1. A judgment of the highest state court in favor of a trustee in bankruptcy in an action brought by him to recover the value of an alleged voidable preference may be reviewed by the Federal Supreme Court as a decision against a Federal right or immunity, specially set up or claimed, where the

state court answered some of the defendant's contentions by the construction which it gave to the bankrupt act.*

pleading over.

2. The question whether the election by a trustee in bankruptcy to avoid a preference should be exercised by a demand before suit, or can be exercised by the suit itself, is not open to the defendant, although it demurred to the complaint, and urged, as a ground of demurrer, the absence of an allegation of a demand, where it did not stand on the demurrer, but answered, and not only traversed the allegations of the complaint, but set up an independent defense, and showed that a demand would have been unavailing.

Error to state court-questions reviewable-
findings of fact.

the answer to the question whether or not
3. Findings of fact upon which depends
certain transactions were invalid under the
bankrupt act as operating to give a creditor
an unlawful preference are conclusive upon
the Supreme Court of the United States, in
reviewing, by writ of error, the judgment
of a state court.†
Bankruptcy-suit to avoid preference-scope
of inquiry in state court.

4. The validity of all other claims against the bankrupt, and the question whether others have received voidable preferences and have not been required to surrender them, cannot be litigated in a suit in a state court to avoid an alleged unlawful preference, since this would, in effect,

*Ed. Note.-For cases in point, see vol. 13, Cent. Dig. Courts, § 1053.
†Ed. 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.

[No. 163.]

sum of $27,000 for moneys borrowed from time to time for a period of about two years 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.

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N ERROR to the Supreme Court of the State of Wisconsin to review a judgment which affirmed a judgment of the Circuit Court of Eau Claire County, in that state, in favor of a trustee in bankruptcy in a suit to avoid an alleged unlawful preference. Affirmed.

See same case below, 125 Wis. 465, 104 N. W. 98.

Statement by Mr. Justice McKenna:

This action was brought by defendant in error, hereafter called the trustee, in the circuit court of Eau Claire county, state of Wisconsin, against the plaintiff in error, hereafter called the bank, under § 60b of the bankrupt act of 1898 [30 Stat. at L. 562, chap. 541, U. S. Comp. Stat. 1901, p. 3445], to recover the value of property which, it is alleged, was transferred by the bankrupt to the bank, for the purpose of giving the latter a preference over other creditors. Judgment was recovered by the trustee, which, on appeal, was affirmed by the supreme court of the state. 125 Wis. 465, 104 N. W. 98. Thereupon this writ of error was sued out.

The complaint of the trustee alleges that on the 7th of June, 1902, John H. Young duly filed his petition in bankruptcy in the United States district court for the western district of Wisconsin, pursuant to the act of Congress, and was on said day duly declared a bankrupt. Subsequently defendant in error was duly elected and appointed by the creditors of the bankrupt as trustee in bankruptcy, and duly qualified as such

2,100,000 feet of saw logs, to secure the sum of $15,900, then owing from him to the bank, and also executed a chattel mortgage, transferring 1,000,000 feet of lumber, about 600,000 shingles, and about 200,000 lath, to secure the sum of $11,100, owing by him to the bank. This indebtedness existed long prior to said mortgages, and the property transferred constituted substantially all of the property then owned by Young not exempt from execution, which facts were well known by him and the bank. The effect of the foreclosure of the mortgages would be to enable the bank to obtain a much larger percentage of its debt than would the other creditors of Young in the same class as the bank. The mortgages were given by Young and taken by the bank for the sole purpose of hindering and delaying the other creditors, and were executed and received for that purpose, and the bank, at the time of their execution, had reasonable cause to believe that they were given with the Intention to give it a preference over other creditors.

The Waters-Clark Lumber Company is a corporation of the state of Minnesota, and D. S. Clark is the president thereof and also a director in the bank, and W. K. Coffin is the cashier of the latter. On or about the 10th of March, 1902, Coffin, acting or the bank, requested Young to transfer to the lumber company, for the benefit of the bank, all of the property embraced in the mortgages, together with certain other property. Pursu ant to such request Young did, on or about the 10th of March, 1902, transfer, by absolute bills of sale, to the lumber company, all of the property described in the mortgages, and 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 tion, was the owner and in possession of certain lumber, shingles, and lath, located at Cadott, Chippewa county, Wisconsin, and certain logs in or near the Yellow river and Chippewa river in Chippewa county, which were reasonably worth the sum of $35,000. The value of all other property owned by him did not exceed the sum of $500.

trustee.

behalf of the bank, took possession of the property transferred, and thereafter sold the same and applied the proceeds to the payment of the indebtedness secured by the mortgages. At the time the bills of sale were made the lumber company and the bank thought the property transferred constituted 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 l was in reality acting as trustee for the

the said plaintiff may be entitled to recover on account of the transactions mentioned in plaintiff's complaint."

The

Questions were submitted to the jury covering the issues in the case, except the value of the property, which, by stipulation of parties, was reserved for the court. jury, in response to the questions, found that at all the days mentioned in the complaint the property transferred at a fair val

bank, and made such pretended purchase said trustee for all sums of money which with the understanding and agreement with the bank and Young that it would account to the bank for the proceeds of the property transferred to the amount of his indebtedness, and that any sums realized in excess of his indebtedness should be paid to Young. The bills of sale were not executed in compliance with the statutes of the state. Except as to the agreement to pay said indebtedness, no consideration was paid 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 property, nothing was paid to Young therefor. By reason of said transactions the bank, within four months, appropriated to the payment of its claims substantially all of the property of Young, which at said time was and has been ever since worth $35,000. There is no other property in the possession of the trustee, belonging to Young, out of which his other creditors can be paid.

The bank demurred to the complaint on the following grounds: The court had no jurisdiction of the subject of the action; the trustee had no legal capacity to sue, in that the complaint did not allege that authority or permission was given him to bring suit; defect of parties, in that Young and the lumber company were not made parties; and that the complaint did not state a cause of action. The demurrer was overruled, and the bank, availing itself of the permission granted, filed an answer, in which it admitted its corporate character and that of the lumber company, and the execution of the mortgages and the bills of sale, and that the instruments were not executed in the manner provided by the statutes of the state. It denied all the other allegations of the complaint, and alleged that a portion of the proceeds of the sale of the property was paid to the bank to discharge valid and existing liens which it held against the property. And it alleged that the mortgages were given for a good and valuable consideration, and that neither of them nor the payments to the bank were made or received for the purpose of giving the bank a preference over other creditors of Young, "contrary to the provisions of the bankruptcy laws," and "that, prior to the commencement of this action, the plaintiff commerced an action in this court against said WatersClark Lumber Company to recover from said Waters-Clark Lumber Company the purchase price of logs and other material sold by said Young to said Waters-Clark Lumber Company, and thereby elected to treat and consider said contract between said Young and said Waters-Clark Lumber Company as legal and valid, and elected to look to and hold the said Waters-Clark Lumber Company, instead of this defendant, as liable to

debts; that the lumber company, acting for the bank and pursuant to the arrangement between it and the bank, took the legal title to the lumber and logs for the benefit of the bank under an agreement with it and Young to account to the bank for a portion of the proceeds; that it was the intention of Young, by the execution of the mortgages and the transfer of the property, to give the bank a preference, and that the bank and officers and agents had reasonable cause to believe that Young intended to give it such preference and to enable it to obtain a greater percentage of its indebtedness than any other of his creditors of the same class would be able to obtain.

The court found that the lumber which was included in the bank's mortgage was worth $3.452.85, and that a note for that sum and value was given by the lumber company to Young and by him transferred to the bank; that the Cadott logs, included in the mortgage and sold by Young to the lumber company, were worth $10,077.84; that the up-river logs not included in the mortgage, but sold to the lumber company, by Young, were worth $11,055.84; and that a note which was given as the net proceeds of the sale of both quantities of logs over and above certain labor liens was worth $2,508.14. This note was given by the lumber company to Young and transierred by him to the bank. The trustee contended in the trial court that he was entitled to recover for the entire value of the logs and lumber, and that no credit should be allowed tne bank for the sums paid by it to discharge certain liens on the property for labor claims and unpaid purchase money. The court rejected the contentions and gave judgment for the trustee in the sum of $6,254.99. In this sum was included the value of the notes.

The assignments of error are that the supreme court erred in the following particulars: (1) In determining that the complaint stated a cause of action. (2) In determining that the bank was liable for the value of the logs and lumber to the extent of the chattel mortgage interest of the bank therein. (3) In determining that the bank was liable for having received a preference 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 a creditor to obtain any portion of his debt, constituted a preference. (b) That, although the effect of the transfer in question did not operate to give the bank a greater percentage of its debts than other creditors of the same class, such transfer constituted a preference. (c) In determining, by such rules of construction of the bankrupt act, that the evidence was sufficient to establish that the bank had reasonable cause to believe that a preference was intended. (7) (8) (9) In holding that the bank was liable for the full value of the preference received in an amount in excess of what was necessary to pay all the other creditors of the bankrupt, and claims of fictitious creditors and claims of creditors who had themselves received preference, and in not limiting the recovery to such sum as would be sufficient to pay the claims of creditors whose claims were provable. (10) (11) In affirming the judgment against the bank, and not rendering judgment for it.

Messrs. James Wickham, Burr W. Jones, and Frank R. Farr for plaintiff in error. Messrs. C. T. Bundy, W. P. Bartlett, and R. P. Wilcox for defendant in error.

Mr. Justice McKenna, after stating the case as above, delivered the opinion of the court:

A motion is made to dismiss on the ground that the record presents nothing but questions of fact. It is contended that neither in the pleadings of the bank nor in any way was any right, privilege, or immunity under a Federal statute specifically set up or claimed in the state courts. The only

On the merits of the case we start with the facts established against the bank, that the property of Young, at the time he executed the chattel mortgages and when he executed the deed to the lumber company, at a fair valuation, was insufficient to pay his debts, and that, by the execution of those instruments, and the transfer of his property effected thereby, he intended to give the bank a preference over his other creditors, and that the bank had reasonable cause to believe that he intended thereby to give it a preference, and to enable it to obtain a greater percentage of its debt than any other creditor of Young of the came class. These, then, are the prominent facts, and seemingly justified the judgment. Against this result what does the bank urge? It urges, first, that there is included in the judgment the sum of $1,335.62, the net proceeds of the sale of certain logs, called the "up-river-logs," which, it is contended, were not covered by either of the mortgages, and that the supreme court, in its opinion, apparently supposed that those logs were covered by the mortgages, and erred in giving judgment therefor. This is a misunderstanding of the opinion. While the court did not explicitly distinguish between the mortgages and the deed to the lumber company, we think it is clear that the court regarded the deed, and what was to be done under it, as the consummation of the "legal wrong," to use the language of the court, which went back to the time of the mortgages. In other words, that the upriver logs as well as the other property were conveyed to the lumber company for the purpose of giving a preference to the bank.

The bank also attempts to urge against:

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