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.
Page 87 U. S. 415
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.
Page 87 U. S. 416
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.
Page 87 U. S. 417
MR. JUSTICE HUNT delivered the opinion of the Court.
In looking into the record, we do not find that the question of
the jurisdiction of the state courts over Mrs. Fritton's claim, now
made in the argument of the learned counsel of the assignees, was
anywhere made in the courts below. It does not appear to have been
made before the auditor, or before the supreme court on appeal. On
the contrary, it affirmatively appears that the assignees submitted
the question of the title to the fund to both of these courts, and
asked its decision in their favor. In the proceeding before the
auditor, before the jury passed on the questions of fact, this was
the case. After the jury had passed upon them, the counsel for the
assignees again appeared before the auditor, claiming the fund and
insisting that under the findings of
Page 87 U. S. 418
the jury Born was an 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.
So, upon the appeal to the supreme court, the same ground was
taken.
In all these instances, the assignees submitted the decision of
their claims to the state courts, and, in asking those courts to
decide in their favor, necessarily asked them to decide the
case.
While the assignees have made sufficient objection to the
judgment rendered against them, we nowhere find an objection to the
power of the court to render a judgment. An objection that the
court has not decided correctly is a very different thing from an
objection that the court has no power to decide.
The present was the case of the foreclosure of a mortgage under
the state laws. The disposition of any surplus that might arise
from a sale on such mortgage, under a proceeding in the state
courts,
prima facie belonged to the state courts. The
subject matter was within their jurisdiction, and under their
control. If special circumstances existed which altered that
result, it was the duty of the party making such claim to state
them and ask a ruling accordingly. Nothing of the kind was done in
the present instance.
To be available here, an objection must have been taken in the
court below. Unless so taken, it will not be heard here. It is not
competent to a party to assent to a proceeding in the court below,
take his chance of success, and, upon failure, come here and object
that the court below had no authority to take the proceeding. This
point comes before us at every term and is always decided the same
way. [
Footnote 1]
We are not called upon, therefore, to decide whether, in
Page 87 U. S. 419
a case like the present, the state court, having the fund in its
possession, was competent to proceed to its distribution, or
whether if demand had been made, there having been previous to that
time a decree of bankruptcy and the appointment of assignees, the
whole subject should have been remitted to the United States court.
[
Footnote 2]
The assignees contend further that the judgment below was
erroneous for the reason that the judgment of Mrs. Fritton was void
under the Bankrupt Act, and that she was not entitled to the fund
awarded to her. This is the question and the only question which
was litigated by the assignees in the state courts.
The thirty-ninth section of the Bankrupt Act defines what acts
of the debtor afford grounds for declaring him to be a bankrupt
upon the petition of his creditor, among which are the
following:
"Or who being bankrupt or insolvent, . . . shall make any
payment, gift, grant, sale, . . . or give any warrant to confess
judgment, or procure or suffer his property to be taken on legal
process with intent to give a preference to one or more of his
creditors."
The Bankrupt court, on the 31st of January, 1868, adjudged that
Born had committed some of the acts in this section specified, by
reason of which his creditor was entitled to have him declared a
bankrupt.
Whether Mrs. Fritton shall retain this fund or shall lose it
depends upon the thirty-fifth section of the same act. That section
enacts that 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
Page 87 U. S. 420
of this act, the same shall be void and the assignees may
recover the property &c., from the person so to be
benefited.
To authorize the assignees to recover the money or property
under this section, it is necessary that he 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. For a full discussion of
the law on this general subject,
see the recent case of
Wilson v. City Bank. [
Footnote 3]
In the case before us, both of these necessary facts have been
found against the assignees. In answer to the second inquiry
submitted to them, the jury said that Mrs. Fritton had not
reasonable cause to believe that Born was insolvent at the time he
executed the warrant of attorney. In answer to the further inquiry,
they said that this warrant of attorney was not given with a view
to a preference over other creditors. The warrant of attorney
cannot, therefore, be held void under the thirty-fifth section of
the Bankrupt law. That section does not reach it, and as the act of
the parties was valid under the statutes of Pennsylvania, there is
nothing to impeach its validity.
We have not the evidence before us, and we must assume that the
verdict of the jury is right. 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.
We are of the opinion that the judgment of the Supreme Court of
Pennsylvania was right, and that it should be
Affirmed.
[
Footnote 1]
Brown v. Clarke,
4 How. 4;
Phelps v.
Mayer, 15 How. 160;
Turner v.
Yates, 16 How. 14;
Camden v.
Doremus, 3 How. 515;
Bank v.
Kennedy, 17 Wall. 19;
Read v.
Gardner, 17 Wall. 409;
Ray v.
Smith, 17 Wall. 412;
Insurance
Co. v. Folsom, 18 Wall. 237;
Town of
Ohio v. Marcy, 18 Wall. 552;
Lucas v.
Brooks, 18 Wall. 436;
Shutte v.
Thompson, 15 Wall. 151;
Prout
v. Roby, 15 Wall. 472.
[
Footnote 2]
See Marshall v.
Knox, 16 Wall. 551.
[
Footnote 3]
84 U. S. 17 Wall.
473;
see also Bump on Bankruptcy 532-542, 547.
