Mays v. Fritton - 87 U.S. 414 (1874)
U.S. Supreme Court
Mays v. Fritton, 87 U.S. 20 Wall. 414 414 (1874)
Mays v. Fritton, 87 U.S. (20 Wall.) 414 (1874)
87 U.S. (20 Wall.) 414
1. Where the consideration of a question is prima facie within the jurisdiction and control of a state court -- such as determining to whom the surplus of a fund raised by the foreclosure of a mortgage belongs -- if the person who gave the mortgage becomes bankrupt and his assignee goes into the state court, submits to its jurisdiction, and nowhere asserts in any way the rights of the federal courts in the matter -- he cannot, after taking his chance for a decision in his favor, and getting one against him, raise in this Court the point of want of jurisdiction in the state court.
2. To authorize the assignee to recover the money or property under the thirty-ninth section of the Bankrupt Act, it is necessary that be should establish the act of the bankrupt not only of which he complains, but
also that it was done with a view to give a preference over other creditors, and that the other party to the transaction had reasonable cause to believe that such person was insolvent. Wilson v. City Bank, 17 Wall. 473, affirmed. The statute assumes that there may be cases where the various acts of conveyance and disposition may be made, which would not amount to giving a preference.
3. Where, on a feigned issue directed to a jury, both of the necessary facts above mentioned have been found against the assignee, and this Court has not the evidence before it, it must assume that the verdict of the jury is right.
In the year 1862, one Born executed a mortgage to Doll and others on real estate which he then owned. Some years afterwards, that is to say, on the 16th of January, 1868, he gave to a Mrs. Fritton a bond for $4,000, payable in one year, with warrant to confess judgment. On this warrant Mrs. Fritton caused a judgment to be entered on the day on which it was given.
On the 31st day of the same month, a petition was presented by a creditor of Born alleging that various acts of bankruptcy had been committed by him on the 1st, 3d, and 4th of the same month, and praying that he might be declared a bankrupt. On the 28th day of February, 1868, he was accordingly adjudged a bankrupt, and on the 18th of March one Mays was appointed assignee.
On the 6th of July, 1868, Doll, the mortgagee, already mentioned, foreclosed his mortgage in one of the county courts of Pennsylvania, and he having received from the sheriff the amount of it (no question as to the validity of his lien having existed), there remained a sum of $5,192 above that amount, which the court referred to an auditor to distribute. Going before the auditor, Mrs. Fritton insisted that her judgment was a lien upon the proceeds of the property sold and that she was entitled to the proceeds.
The assignees appeared by their counsel and claimed the entire fund on the grounds:
"First. That it was the property of a bankrupt and that, by reason of the bankruptcy, all his estate passed to the assignees."
"Second. That Mrs. Fritton's judgment was given in fraud of the Bankrupt law,"
and was void for various other reasons set forth.
The Bankrupt Act enacts:
"SECTION 35. If any person, being insolvent or in contemplation of insolvency, and within four months before the filing a petition by or against him, with a view to give a preference, procures his property to be attached or seized on execution, or makes any payment, pledge, transfer, or who shall within six months make any sale, transfer, conveyance, or other disposition of his property to any person having reasonable cause to believe that such person is insolvent and such payment &c., is made in fraud of the provisions of this act, the same shall be void, and the assignee may recover the property &c., from the person so to be benefited."
Mrs. Fritton denied the above-mentioned allegations of fact made by the assignees, and on her affidavit that they were untrue a jury was demanded and granted in pursuance of the practice in such cases in Pennsylvania. The jury found that at the time of giving the bond and warrant, Born was insolvent, but that Mrs. Fritton had not reasonable cause to believe that he was, and that the judgment was given to secure a prior debt, but was not given to enable Mrs. Fritton to obtain a preference over other creditors.
After the jury had thus passed upon the questions of fact, the counsel for the assignees again appeared before the auditor, claiming the fund and insisting that under the findings of the jury, Born was insolvent when he executed the warrant of attorney to Mrs. Fritton; that it was given to secure a prior debt and was a fraud upon the provisions of the Bankrupt Act.
The auditor awarded the fund to Mrs. Fritton, and the assignees took an appeal to the supreme court.
Upon the appeal to that court, it was contended that there was error, among other things,
"in disregarding the various provisions of the United States bankrupt law in regard to preferences given by bankrupts, and in giving Mrs. Fritton a preference over other creditors, contrary to the twenty-ninth section of the United States Bankrupt Act."
In stating their position before the supreme court the assignees, in their argument, which was contained in the record, said:
"The inquiry is reduced to this: who is entitled to the fund in court, Mrs. Fritton or Born's assignees?"
The supreme court affirmed the award below, which gave the fund to Mrs. Fritton, and the case was now brought here on error by the assignees.