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GLOBE BANK AND TRUST COMPANY OF PADUCAH, KENTUCKY, v. MARTIN, TRUSTEE IN BANKRUPTCY OF ATKINS.
FIRST NATIONAL BANK OF PADUCAH, KEN
TUCKY, v. SAME.
OLD STATE NATIONAL BANK OF EVANSVILLE,
INDIANA, v. SAME.
MARTIN, TRUSTEE IN BANKRUPTCY OF ATKINS, v. GLOBE BANK & TRUST COMPANY OF PADUCAH, KENTUCKY.
APPEALS FROM UNITED STATES COURT OF APPEALS FOR THE
PETITION FOR WRIT OF CERTIORARI.
Nos. 99, 100, 101, argued December 4, 7, 1914, and No. 292, submitted
December 4, 1914.-Decided February 23, 1915.
A controversy over the distribution of a fund in the hands of the trustee
arising from proceeds of property attached under attachment by a creditor, within four months of the petition, the lien of which has been preserved for the estate, is a controversy arising in bankruptcy proceedings and appealable, as in other cases in equity, under the Circuit Court of Appeals Act, and is not controlled by $ 25 of the
Bankruptcy Act. This case being appealable to this court under the Circuit Court of
Appeals Act, the petition for writ of certiorari is denied. The title with which the trustee is vested under $ 70-a includes all prop
erty transferred by the bankrupt in fraud of creditors and which prior to the bankruptcy might have been levied upon and sold under
judicial process against him. Under $ 70-e, the trustee may avoid any transfer by the bankrupt of
his property which any creditor of the bankrupt might have avoided, and the trustee has authority to recover the property in the hands of anyone not a bona fide holder for value.
236 U. S.
Argument for Appellants.
The provisions of the Bankruptcy Act in regard to attachments and
liens acquired under state laws are superior to all state laws in virtue of the constitutional authority of Congress to enact a uniform sys
tem of bankruptcy. Even though a fund representing property conveyed in fraud of cred
itors may be recovered through the state court under an attachment obtained by creditors who, under state law, would alone share in the fund and the lien of which has been preserved under $ 67-b, disposition of the fund is determined by the rule of distribution prevailing in the Federal jurisdiction and not by that in the state court in the absence of bankruptcy, and so held that a fund so obtained should be distributed between all the creditors as a general asset of the estate and not between those creditors who would alone have shared in the fund had their attachment been obtained more than
four months prior to the petition. The liens on property passing to the trustee to which a preference is
given under & 64-b in accordance with state laws are statutory liens such as those for furnishing labor and materials and that section does not prevent the application of $ 67-f in the circumstances here
shown. 193 Fed. Rep. 841; 201 Fed. Rep. 31, affirmed.
The facts, which involve the construction of $ 67-f of the Bankruptcy Act of 1898, and the application of proceeds resulting from a lien preserved for the estate thereunder, are stated in the opinion.
Mr. D. H. Hughes, with whom Mr. Alexander Gilchrist, Mr. C.K. Wheeler and Mr.J.G. Wheeler were on the brief, for appellants:
The Circuit Court of Appeals erred in refusing to dismiss appeal and petition for review. In re Mueller, 135 Fed. Rep. 711; In re Loving, 224 U. S. 183; Coder v. Arts, 213 U. S. 213; Bankruptcy Act, 1898, $$ 25-a and 25-b.
The Circuit Court of Appeals also erred in holding that recovery of property under $ 1907, Carroll's Kentucky Statutes, ed. 1909, is for benefit of creditors whose debts were created after voluntary conveyance, as well as those whose debts were created before such conveyance, although
Argument for Appellee, and for Petitioner in No. 292. 236 U. S.
no actual fraud shown. Atkins v. Globe Bank, 124 S. W. Rep. 879; Bankruptcy Act, 1898, SS 64-b-(5), 67-f, 70 (4); In re Bennett, 153 Fed. Rep. 673; In re Allen (D. C.), 96 Fed. Rep. 512; Merchants Bank v. Sexton, 228 U. S. 634; In re Laird, 109 Fed. Rep. 550; First National Bank v. Staake, 202 U. S. 141; Miller v. New Orleans Fertilizer Co., 211 U. S. 496.
Mr. W. F. Bradshaw, Jr., and Mr. J. D. Mocquot for appellee, and for petitioner in No. 292:
Kentucky Statutes, S$ 1906, 1907, providing for recovery of property conveyed in fraud of creditors, affords the creditor no lien upon the property except such as is acquired by and arises at the time of the institution of the creditor's action. The statute merely affords a cause of action. The creditor first attaching in such an action acquires a first lien on the property. Stamper v. Hibbs, 94 Kentucky, 358.
Kentucky Statutes, $$ 2487, 2488, provide for an inchoate lien which exists before the institution of the action. An action brought under those statutes is for the purpose of enforcing a preëxisting lien. In re Bennett, 153 Fed. Rep. 673; Hall v. Guthrie, 103 S. W. Rep. 731; Winters v. Howell, 109 Kentucky, 163.
An action for the recovery of property fraudulently conveyed by a bankrupt vests exclusively in the trustee under the provisions of 88 70-a (4) and 70-e of the Bankruptcy Act of 1898. Anderson v. Anderson, 80 Kentucky, 638; Annis v. Butterfield, 58 Atl. Rep. 898; Buffington v. Harvey, 95 U. S. 99; Bush v. Export Storage Company, 136 Fed. Rep. 918; Clark v. Larremore, 188 U. S. 486; In re Downing, 201 Fed. Rep. 93; Glenny v. Langdon, 98 U. S. 20; Gray, 3 Am. Bankruptcy, 647; 62 N. Y. Supp. 618; Hunt v. Doyal, 57 S. E. Rep. 489; Moyer v. Dewey, 103 U. S. 647; RuhlKoblegard v. Gillespie, 61 W. Va. 584; Trimble v. Woodhead, 102 U. S. 647; Williamson v. Seldon, 53 Minnesota, 73.
236 U.S. Argument for Appellee, and for Petitioner in No. 292.
Although in the absence of bankruptcy only certain creditors could, under the state law, recover the property fraudulently conveyed, when bankruptcy intervenes the property fraudulently conveyed passes as an asset of the estate, recoverable by the trustee for the benefit of the creditors generally. Annis v. Butterfield, 58 Atl. Rep. 898; Clark v. Larremore, 188 U. S. 486; In re Downing, 201 Fed. Rep. 93; First National Bank v. Staake, 202 U. S. 141.
A controversy between the trustee representing general creditors on one hand and a class of creditors claiming exclusive right to the fund realized from the recovery of property fraudulently conveyed on the other hand, the property being at the time of the bankruptcy in the adverse possession of the fraudulent vendee, constitutes a controversy arising in a bankruptcy proceeding appealable under $ 24-a of the Bankruptcy Act. Coder v. Arts, 213 U. S. 223; Hewit v. Berlin Machine Works, 194 U. S. 296; Knapp v. Milwaukee Trust Co., 216 U. S. 545; In re Loving, 224 U. S. 183; In re Mueller, 135 Fed. Rep. 711; Security Warehousing Co. v. Hand, 206 U. S. 415; Thomas v. Sugarman, 218 U. S. 129; York Mfg.Co. v. Cassell, 201 U.S. 344.
If this controversy is to be regarded as involving only an order of distribution under the claim of the appellants to a lien upon the fund, it may then be held a bankruptcy proceeding reviewable in a revisory proceeding in the Circuit Court of Appeals under $ 24-b, and reviewable by this court on writ of certiorari. But even in such event, inasmuch as the appeal involves both questions of law and of fact, and a writ of certiorari only a question of law, this court may retain jurisdiction upon either proceeding and determine the question of law. Bryan v. Bernheimer, 181 U. S. 188; Duryea Power Co. v. Sternbergh, 218 U. S. 299; First National Bank v. Chicago Trust Co., 198 U. S. 280; Holden v. Stratton, 191 U. S. 115.
By whatever means the fund representing property conveyed in fraud of creditors may be recovered and
Opinion of the Court.
236 U. S.
brought into the bankruptcy court, the disposition of the fund in bankruptcy is determined by the rule of distribution prevailing in the Federal jurisdiction, and is not affected by any rule of distribution prevailing in the state court in the absence of bankruptcy. Acme Harvester Co. v. Beekman Lumber Co., 222 U. S. 307; First National Bank v. Staake, 202 U. S. 141; Miller v. New Orleans Fertilizer Co., 211 U. S. 496.
In the Supreme Court neither party will be permitted to abandon the issues made by them and considered by the inferior courts and in this court take the position that their rights really rested upon other grounds not at issue. Tefft v. Munsuri, 222 U. S. 114.
MR. JUSTICE Day delivered the opinion of the court.
These are appeals from a decree of the United States Circuit Court of Appeals for the Sixth Circuit involving the distribution of a fund in the hands of a Trustee in Bankruptcy. The cases are reported in the Circuit Court of Appeals in 193 Fed. Rep. 841 and 201 Fed. Rep. 31.
One Thomas J. Atkins, upon a petition in involuntary bankruptcy, was, on December 28, 1908, in the United States District Court for the Western District of Kentucky, duly adjudicated a bankrupt. On December 3, 1906, the bankrupt conveyed certain parcels of real estate to his son, Edward L. Atkins, and to the children of said Edward L. Atkins. At the time of the conveyance, the bankrupt was indebted to the Globe Bank and Trust Company of Paducah, Kentucky, the First National Bank of Paducah, Kentucky, and the Old State National Bank of Evansville, Indiana. He also became indebted, subsequently to the delivery of said deed, to certain other creditors in considerable sums. On August 25, 1908, the Globe Bank & Trust Company instituted a suit in the