Where the trustee in bankruptcy sells the interest of the
bankrupt in land, the purchaser acquires only the interest of the
bankrupt on the day of adjudication, and no interest therein
subsequently acquired by him in the property passes by the
trustee's deed.
The fact that, after the sale and before the subsequent
acquirement of interest, the bankrupt made an unsuccessful
application to have the sale set aside for inadequacy of price is
not an adjudication that the bankrupt had an interest in the
property sold which passed to the purchaser. Whether a deed given
by a bankrupt a year prior to the adjudication is fraudulent, or
whether it was absolute or merely by way of mortgage, leaving him
an equity of redemption, are not federal questions, and the
decision of the state court is conclusive, and cannot be reviewed
by this Court.
This was a bill originally filed February 1, 1888, in the
Superior Court of Cook county by the plaintiff in error,
Cramer,
Page 195 U. S. 409
under her then name of Fannie N. Dresser, against her sister,
Lilly B. Dresser, Henry H. Gage, Julia Wilson, and two others for
the partition of certain real estate in Chicago, for a settlement
of equities or liens thereon, for a receiver, and for the removal
of certain clouds upon complainant's title.
The material facts of the case are as follows: shortly before
the beginning of this suit, Fannie N. Dresser was the record owner
of the property in question through a patent from the United
States. On January 31, 1888, the day before this suit was
commenced, Fannie N. Dresser conveyed to her sister, Lilly B.
Dresser, an undivided one third of the property in question. The
court found this deed to have been collusive, and executed by an
arrangement with the defendant Gage, who held certain tax deeds to
the premises, found to be invalid, and for the purpose of filing
this bill for partition, and the removal of a cloud upon the title
caused by another tax deed, acquired by Frederick R. Wilson in
1864. His interest in the property was conveyed by him to his
sister, Julia Wilson, in 1877. Julia Wilson was made defendant to
the bill as the owner of this tax title.
It appeared, however, that Julia Wilson died on December 15,
1887, leaving Frederick R. Wilson her sole legatee and executor.
The suit was then abated as to Julia Wilson, and Frederick R.
Wilson was substituted as defendant in her place. The deed to this
property from Frederick R. Wilson to his sister was a conditional
conveyance, but, by agreement of the parties, it was subsequently
treated by them as absolute, and, upon the death of Julia Wilson,
in December, 1887, the property again became vested in Frederick R.
Wilson as her only heir at law and next of kin, and as her sole
devisee under her last will and testament. Shortly after the deed
to Julia, Frederick R. Wilson went into bankruptcy, August 30,
1978, and Robert E. Jenkins was appointed his assignee. The
property was subsequently ordered to be sold, and in 1889 was
purchased from the assignee by one Taylor E. Snow for the sum of
$250. Both Jenkins, the assignee, and Snow, the purchaser, were
Page 195 U. S. 410
made parties defendant to the bill, and subsequently filed
answers and a cross-bill.
It appeared that Gage, after the beginning of the suit, bought
the interest of Lilly B. Dresser, and also that the purchase by
Snow at the bankruptcy sale was made in his interest, so that the
real parties to this litigation are Gage, upon one side, and Wilson
upon the other.
Upon the first hearing, the court entered a decree of partition
denying Wilson's claim of title and holding that his interest
passed to Snow by the assignee's sale. This decree was reversed by
the Supreme Court of Illinois upon the ground that the plaintiff
had not proved her title from the government to the property. Leave
was given the parties to amend, and subsequently an amended bill
was filed and answered. Upon the second hearing, the court held
that the premises were the property of Frederick R. Wilson, and had
been his from 1864 until 1877, when he conveyed them to his sister;
that, at the time of bankruptcy proceedings in 1878, the title was
in Julia Wilson, and that, upon the death of Julia Wilson in 1887,
the title again vested in Frederick R. Wilson; that, at the time
Frederick R. Wilson was adjudged a bankrupt, Julia Wilson was alive
and vested with the title to this property, and that the defendant
Snow acquired no title when he purchased all of the estate, real
and personal, of the bankrupt, Frederick R. Wilson.
This decree was affirmed by the Illinois Supreme Court, 202 Ill.
83, and it is to reverse that decree that plaintiffs have taken a
writ of error from this Court.
Page 195 U. S. 414
MR. JUSTICE BROWN delivered the opinion of the Court.
Upon the first hearing, the superior court entered a decree of
partition finding that the Dresser sisters were the owners of the
property at the beginning of the suit, through a title derived from
the government; that, after the suit began, Lilly B. Dresser
conveyed her interest to Henry H. Gage; that Julia Wilson, to whom
her brother, Frederick R. Wilson, had conveyed his interest in the
property, died testate, leaving her interest in the property to
Frederick R. Wilson, and that this interest subsequently passed to
Snow by purchase from the assignee, Jenkins.
This decree was reversed by the supreme court, 152 Ill. 387,
which held that there was no evidence of a title in fee in
complainants, derived from the government; that, although Frederick
R. Wilson showed a deed to himself from the City of Chicago, dated
May 24, 1864, and possession under such deed, he conveyed his
interest to his sister, Julia Wilson, in 1877; that, about a year
thereafter, he went into bankruptcy, and that at the assignee's
sale nothing passed to the purchaser, Snow, but the interest of the
bankrupt on August 30, 1878. "But," said the court,
"the evidence shows that, at that time, he had no interest,
having, more than a year prior to that date, July 6, 1877, conveyed
it to Julia Wilson, and the evidence is undisputed as to the fact
that she took possession
Page 195 U. S. 415
under that deed, and retained it by her tenants to the date of
her death, and that her tenants remained in such possession when
this suit was begun."
The court found that there was nothing to show that Julia Wilson
had not died seised of the property, and that it was not until her
death in 1887 that defendant became repossessed of it. The case was
reversed and remanded with leave to amend the pleadings and put in
additional testimony.
Upon a rehearing in the superior court, a decree was entered in
favor of the defendant, Wilson, establishing his title to the
premises, subject to the repayment of certain taxes paid by Gage.
Upon the second appeal to the supreme court, that court held that,
it having been shown that defendant and his sister had been in
possession of the property for more than twenty years prior to the
bringing of that suit, defendant had a good title by limitation,
unless it was cut off and defeated by the assignee's sale to Snow,
but that, as he had sold to his sister, Julia Wilson, in July,
1877, thirteen months before the bankruptcy, and she had taken
possession, he had no title, and none passed to Snow by purchase
from the assignee.
Complainants, however, took the position that the deed from
Wilson to his sister was not absolute, but was made to secure a
debt, and was constructively a mortgage, and that an equity of
redemption remained in Frederick R. Wilson, which would pass to
Snow as purchaser at the time of the assignee's sale. But the court
held that, under the arrangement between the parties, the deed
became absolute long before the defendant was adjudged a bankrupt.
That, under the law of Illinois, when land has been conveyed by
deed, absolute in form, though intended as security for the payment
of a debt, the payment of the debt may be abandoned, and the deed
treated as an absolute conveyance, although originally intended as
a mortgage, and that such arrangement may be made by parol, and be
binding. 202 Ill. 83.
It thus appears that the case turned upon the validity of the
deed from the appellee to his sister, Julia Wilson. It was
Page 195 U. S. 416
insisted that the deed was either fraudulent and void as against
creditors, or that a residuary interest remained in Frederick R.
Wilson, which would pass under the assignee's sale. This was a
local, and not a federal, question. The deed, having been made a
year before the proceedings in bankruptcy were begun, and eleven
years before the commencement of this suit, was not attacked as
invalid under the Bankrupt Law of 1867, then in force, but as a
fraudulent conveyance under the state law. The question of fraud
was ignored by the state court, although it was directly involved
in the issue, and hence must be treated as overruled. It was
admitted that, if the property were that of Julia Wilson at the
commencement of the bankruptcy proceedings, nothing passed under
the assignee's sale, and it was only upon the theory that it was
the property of the bankrupt that the assignee could convey
anything to the purchaser. To reverse the state court upon this
point would be to hold that it improperly construed its own laws
with reference to fraudulent conveyances. The assignee's sale as a
conveyance of the property of the bankrupt was not attacked in any
way. He was a mere conduit through which the interest of Frederick
R. Wilson, if he had any for himself or his creditors, passed to
Snow. We have repeatedly held that, when the question in a state
court is not whether, if the bankrupt had title, it would pass to
his assignee, but whether he had title at all, and the state court
decided that he had not, no federal question is presented.
Scott v. Kelly,
22 Wall. 57;
McKenna v. Simpson, 129 U.
S. 506. The same principle was applied to a different
class of cases in
Blackburn v. Portland Gold Mining Co.,
175 U. S. 571;
De Lamar's Nevada Gold Mining Co. v. Nesbitt, 177 U.
S. 523. In
Williams v. Heard, 140 U.
S. 529, relied upon by the plaintiff in error, the
property in dispute belonged admittedly to the bankrupts, and the
question was whether it was of such a character as to pass to their
assignee. Of course, this involved a construction of the Bankrupt
Act.
If there be any federal question, it arises from the denial of
the petition of the appellee, filed in the bankruptcy court
Page 195 U. S. 417
September 17, 1889, about two months after the sale was
confirmed, to set aside and vacate such sale for inadequacy of
price and want of notice that the sale would take place. It is
insisted that this denial was
res judicata of Wilson's
interest in the property, and that the refusal of the court to so
treat it denied to the order of the bankruptcy court the full faith
and credit to which it was entitled. But, on referring to the order
of sale of June 27, 1889, we find that the assignee was directed to
sell simply "the interest of such bankrupt and of said assignee,"
without attempting to adjudicate what that interest was, or whether
he had any interest at all. It was left for other courts in other
proceedings to determine what his interest, or that of his
creditors, was on August 30, 1878, the day on which he was adjudged
a bankrupt. That interest would, of course, pass to the assignee.
We have already seen that the supreme court found he had none upon
that day. The district court authorized the sale of such as he had,
but made no attempt to determine or guarantee that he had an
interest that would pass by the sale. The refusal to set aside the
sale was largely a matter of discretion, and may have been
justified by the consideration that the bankrupt was not injured by
the fact that it had taken place. There was certainly no attempt to
adjudicate the amount of his interest.
The circumstance that, nine years after his adjudication in
bankruptcy, he took title to the property as the devisee of his
sister does not lend any significance to the fact that, at the date
of his bankruptcy, his sister was the owner, in possession by
tenants, and that the supreme court found her title to be
absolute.
The decree of that court is therefore
Affirmed.
