Source: https://supreme.justia.com/cases/federal/us/250/223/
Timestamp: 2019-04-26 16:08:13+00:00

Document:
In a suit by a trustee in bankruptcy to set aside preferences and transfers, the jurisdiction of the district court depends upon the allegations of the bill, and not on the proof in support of them, and where the bill makes a substantial case within the jurisdiction, the court must determine the merits. P. 250 U. S. 227.
Under the Bankruptcy Act, as amended in 1903 and 1910, the district court has jurisdiction of a suit brought by the trustee against a third party without his consent, to set aside preferences under § 60b and transfers under § 67e and 70e. Id.
Whether an alleged surrender of real property and delivery of rent notes amounted to conveyances under the state law held matters appertaining to the merits, and not to be considered on direct appeal under § 238 of the Judicial Code. P. 250 U. S. 229.
This case is here (Judicial Code, § 238) solely upon a question of the jurisdiction of the District Court of the United States for the Southern District of Georgia to entertain the suit brought by R. A. Flanders, as trustee in bankruptcy of M. C. Coleman, against E. J. Coleman.
E. J. Coleman be required to specifically perform his promise and agreement to convey title to the land to M. C. Coleman, and the title be made in the petitioner's name as trustee for the benefit of the creditors of the bankrupt. Afterwards, the complainant filed an amendment to the bill in which it was alleged that, within the period of four months immediately preceding the filing of the bankruptcy proceedings by M. C. Coleman, to-wit, in January, 1915, while insolvent, and with intent to hinder, delay, and defraud his creditors, the said M. C. Coleman, who then held the title to the above-described real estate, fraudulently disclaimed such title and surrendered possession thereof to E. J. Coleman, and thereby fraudulently transferred his rights, title, interests, and equity in said real estate to E. J. Coleman, and transferred said rent notes with the purpose and intent to make the tenant the tenant of the respondent, and as such he has attorned.
grant any relief to the complainant; that, in reaching this determination, the court had considered the evidence of the complainant, assuming it to be true for that purpose, only; and that it did not show such a transfer within the meaning of the laws of Congress relating to bankruptcy as would give the court jurisdiction of the proceedings.
Since the amendments to the Bankruptcy Act of 1903 and June 25, 1910 (32 Stat. 797; 36 Stat. 838, c. 412), the district courts of the United States are given concurrent jurisdiction with the state courts to set aside preferences under § 60b of the act, and fraudulent transfers within four months prior to the filing of the petition, under § 67e of the act, and transfers under § 70e, making void any transfer by the bankrupt of his property which any creditor might have avoided, and giving the trustee the right to recover the same. See Stellwagen v. Clum, 245 U. S. 605, 245 U. S. 614; Collett v. Adams, 249 U. S. 545.
The opinion of the district court, as set forth in the record, shows that its conclusion that there was no jurisdiction was based upon a consideration of the evidence, from which it was found that no preference was shown under § 60b, nor any fraudulent transfer under §§ 67e or 70e. To justify its conclusion that it was without jurisdiction, the district judge cites certain decisions of this Court. Bardes v. Hawarden Bank, 178 U. S. 524, in which this Court held that, under § 23 of the Bankruptcy Act, the district court could, by the consent of the defendant and not otherwise, entertain suits by the trustee against third persons to recover property conveyed by the bankrupt before the institution of the bankruptcy proceedings. It is sufficient to say of that case that it was decided under the terms of the act before the amendments of 1903 and 1910, respectively, to which we have referred, and which give concurrent jurisdiction to the state and federal courts. The district court also cited Harris v. Bank of Mt. Pleasant, 216 U. S. 382, wherein no transfer of the bankrupt's property was alleged in the petition. The suit was one by the trustee to recover securities of the bankrupt, alleged to be held by the bank for the security of an overdraft which, it was averred, had been paid, and also to recover certain notes alleged to have been paid by the bankrupt.
The opinion of the district court shows that it really considered the merits of the case in reaching the conclusion that it was without jurisdiction. As this Court has not infrequently said, jurisdiction must be determined not upon the conclusion on the merits of the action, but upon consideration of the grounds upon which federal jurisdiction is invoked.

References: § 60
 § 67
 § 238
 § 238
 § 60
 § 67
 § 70
 v. 
 v. 
 § 60
 v. 
 § 23
 v.