Under the Bankrupt Act of 1898, the district court of the United
in which proceedings in bankruptcy are pending has no
jurisdiction, unless by consent of the defendants, of a bill in
equity by the trustee in bankruptcy against persons to whom the
bankrupt, before the proceedings in bankruptcy, made a sale and
conveyance of property which the plaintiff seeks to set aside as
fraudulent as against creditors, but which the defendants assert to
have been made in good faith and to have vested title in them.
The case is stated in the opinion of the Court.
MR. JUSTICE GRAY delivered the opinion of the Court.
On October 12, 1899, certain creditors of W. H. Gilbert filed
against him a petition in bankruptcy in the District Court of the
United States for the Western District of North Carolina, alleging
that he was insolvent, and on October 10, 1899, transferred his
stock of goods, with intent to hinder, delay, and defraud his
creditors, by a bill of sale to John D. Wall and Thomas W.
On October 14, 1899, the district court issued an order of
notice to Wall and Huske to show cause on October 24, 1899, why
they should not be perpetually enjoined from disposing of the goods
alleged to have been purchased by them from Gilbert, and meanwhile
restraining them from disposing of it. At the time of the issue of
that order, Wall and Huske had those goods in their possession.
Page 181 U. S. 245
The district court, on October 27, 1899, adjudged Gilbert a
bankrupt, and on November 6, 1899,
"ordered that the restraining order heretofore issued be
continued until the appointment and qualification of trustee of W.
H. Gilbert, bankrupt. Upon the appointment and qualification of
said trustee, in a proper case and upon a proper showing, an
injunction or restraining order may be obtained upon application,
in which Wall and Huske, defendants above named, may be made
parties, restraining the sale or other disposition of any of the
property until a hearing may be had and the matters at issue be
determined, either by a suit in equity or action at law in the
United States courts or the courts of the state, as petitioners may
Walter D. Cox, on November 23, 1899, was duly elected and
qualified as trustee of Gilbert, Bankrupt, and on December 6, 1899,
filed a plenary bill in equity in the District Court of the United
States for the Western District of North Carolina against Wall and
Huske, to set aside as fraudulent the sale by Gilbert to them,
alleging that Cox had requested them to deliver the property to him
as trustee, to be divided among Gilbert's creditors, but they had
refused to do so, and alleged that the sale to them was valid, and
they thereby acquired title to the property, and were purchasers in
good faith and for a present fair consideration. The bill prayed
that the sale be set aside, and the property be decreed to belong
to Cox as part of the bankrupt's estate, and for an injunction and
On December 16, 1899, Cox filed a supplemental bill setting
forth the former bill and its service upon Wall and Huske, alleging
that the property was within the district and in the jurisdiction
of this court, and was deteriorating in value by reason of being
At the time of the filing of these bills and of the service of
the subpoena upon Wall and Huske, they were in possession of the
stock of goods, holding it under the bill of sale from Gilbert.
On the filing of the bill, the district judge issued an order to
Wall and Huske to show cause why a receiver should not be appointed
to take charge of the stock of goods, and issued an injunction
restraining them from disposing of it until the
Page 181 U. S. 246
further order of the court. By consent, the hearing was
postponed until January 9, 1900.
On January 6, 1900, Wall and Huske, "specially appearing under
protest for the purpose of this plea, and for no other," filed a
plea and demurrer assigning as reasons that the plaintiff had an
adequate remedy at law; that the district court had no jurisdiction
to entertain this bill, or to determine the question arising
between the plaintiff, as trustee in bankruptcy of Gilbert, and
these defendants; that the defendants claimed title to the property
described in the bill under a purchase from Gilbert prior to the
institution of proceedings in bankruptcy against him; that both the
plaintiff and the defendants were citizens of the State of North
Carolina, and that the defendants do not consent to the
jurisdiction of the court.
On January 9, 1900, a hearing was had on the motion for a
receiver and an injunction, and the demurrer and plea, without
objection to its form, and on January 15, 1900, the district court
overruled the demurrer and plea to the jurisdiction of the court,
ordered the injunction to be continued until the final hearing of
the cause, and appointed a temporary receiver to take into his
possession the stock of goods. 99 F. 546.
On January 22, 1900, Wall and Huske filed in the circuit court
of appeals a petition asking the supervisory power of that court
under the Bankrupt Act of 1898. Upon that petition, the decision of
the district court was affirmed on May 1, 1900. 101 F. 403.
On June 2, 1900, Wall and Huske filed a motion for a rehearing,
which was granted by the circuit court of appeals, and that court
certified the following questions on which it desired the
instructions of this Court:
"First. Under the facts and the pleadings above stated, had the
District Court of the United States for the Western District of
North Carolina jurisdiction over the controversy?"
"Second. Said district court having adjudicated bankruptcy on
account of an alleged fraudulent transfer of the bankrupt's
property, and having appointed a receiver to hold the estate thus
conveyed, had it, in said proceedings, or in ancillary proceedings
instituted either by the original petitioners, the receiver
Page 181 U. S. 247
of the court, the bankrupt's trustee, or of the court's own
motion, jurisdiction to bring in the alleged fraudulent transferee
of the property thus in the court's possession, and do full and
complete justice in one litigation?"
"In disposing of the questions certified, we are confined to the
facts stated in the certificate, and cannot consider the
allegations, made in the briefs, of other facts."
According to the statements of the certificate, the present case
is a bill in equity, filed by a trustee in bankruptcy in the
district court of the United States in which bankruptcy proceedings
are pending, against persons to whom the bankrupt, before the
petition in bankruptcy, had made a sale and conveyance of property,
which the plaintiff sought to set aside as fraudulent against
creditors, but which the defendants asserted to have been made in
good faith and to have vested title in them. This is a bill of
which, unless by consent of the defendants, the district court of
the United States, as was directly adjudged by this Court at the
last term, since the first hearing of this case in the circuit
court of appeals, has no jurisdiction under the Bankrupt Act of
1898. Bardes v. Hawarden Bank, 178 U.
; Mitchell v. McClure, 178 U.
; Hicks v. Knost, 178 U.
. The statement certified distinctly shows that
the defendants, specially appearing for the purpose, protested that
the district court had no jurisdiction to entertain this bill or to
determine the question arising between the trustee and the
defendants, and that the defendants did not consent to the
jurisdiction of the court. The answer to the first question
certified must therefore be that the district court had no
jurisdiction of the case.
The second question, if it does not depend on the first, is too
comprehensive and indefinite to be answered at all. It speaks
generally of the district court having appointed a receiver, but
does not state, nor does the certificate show, that the receiver
was appointed before the election of the trustee in bankruptcy.
Beyond this, the question comprehends what the district court may
do not merely on this bill by the trustee, but on proceedings,
original or ancillary, by the petitioning creditors, or by the
receiver, or on the court's own motion.
First question answered in the negative.