Opinion
No. 4234.
June 5, 1930.
Appeal from the District Court of the United States for the Southern Division of the Southern District of Illinois.
Petition by A.P. Bickenbach, trustee in bankruptcy of Elmer E. Landis, bankrupt, to adjudicate rights of the Farmers' Bank of Mt. Pulaski, Ill., and others, in which Elmer E. Landis and wife appeared and answered. From an order of the District Court, the Farmers' Bank of Mt. Pulaski, Ill., and others appeal.
Affirmed.
The facts are undisputed and are as follows:
David B. Landis died testate at Logan county, Ill., June 15, 1906, the owner of real and personal property in that county and state. He left surviving him his widow, Susannah I. Landis, his sons, Leland K. Landis and Elmer E. Landis, and his daughter, Louisa S. Griffin, and no other child or descendant of any deceased child. The will of David B. Landis was executed on April 16, 1906, and after his death was duly probated and recorded at Logan county, Ill. The only items of the will which are material to the controversy are the second and third, and they are as follows:
"Second. I give, bequeath and devise unto my beloved wife, Susannah I. Landis, all of my estate and property, wherever situated and of whatsoever composed; to have and to hold the same for and during the period of her natural life.
"It is my desire and intention to invest in my said wife a life estate only in the real estate of which I may die seized. I hereby declare that the provisions made in this will for my said wife shall be in lieu of her dower in any real or personal estate, and the acceptance of such provision by her shall bar and discharge all claim on her part against my estate, real and personal.
"Third. After the expiration of the prior life estate therein of my said wife, I give, devise and bequeath the remainder in the real estate hereinbefore devised unto my said wife for life unto my children Lulu S. Griffin, Leland K. Landis and Elmer E. Landis and to the descendants of any of my said children that shall depart this life before the death of my said wife, in fee simple, in equal shares among them, giving to the descendants of any deceased child his, her, or their parent's portion, in equal shares among them.
"It is my intention that the interest hereby given to my said children and to the descendants of any of them that shall depart this life before the death of my said wife leaving descendants who survive my said wife, shall not become a vested interest during the life time of my said wife."
Elmer E. Landis was duly adjudged a bankrupt on June 18, 1925, and A.P. Bickenbach was afterwards duly appointed, and qualified, as trustee of his estate.
On May 22, 1927, the widow, Susannah I. Landis, died, leaving as her only heirs at law her three children, Leland K. Landis, Elmer E. Landis, and Louisa S. Griffin.
The trustee in bankruptcy, on December 10, 1928, filed a petition in the proper jurisdiction setting forth the above facts, and the further fact that appellants had recovered separate money judgments against Elmer E. Landis in the Circuit Court of Logan county, Ill., which petition fully set forth the several amounts of the respective judgments and the dates of their rendition, and asked that an order be entered fixing the rights of the parties in and to decedent's real estate, and that the undivided one-third part thereof be ordered sold free and disincumbered of all liens and dower rights or tenancies as might be directed by the court. Due notice was given Elmer E. Landis and his wife, Jessie Landis, of the filing and hearing of the petition. They appeared and filed answer, alleging no title in appellee. The issue was submitted to the referee, and upon review by the lower court it was determined, on June 28, 1929, that Elmer E. Landis, at the time of his adjudication in bankruptcy, was the owner of a vested remainder of an undivided one-third interest in the real estate, free and disincumbered of all rights and claims of appellants, subject to tenancies of tenants, and that his interest should be sold by the trustee in bankruptcy.
Robert R. Humphry and Harold F. Trapp, both of Lincoln, Ill., for appellants.
Alton G. Hall and Clayton J. Barber, for appellee.
Before EVANS, PAGE, and SPARKS, Circuit Judges.
The primary question presented is whether or not the lands devised to the bankrupt by the will in question are assets in the hands of the trustee in bankruptcy.
"(a) The trustee of the estate of a bankrupt * * * shall * * * be vested by operation of law with the title of the bankrupt, as of the date he was adjudged a bankrupt, * * * to all * * *
"(5) property which prior to the filing of the petition he could by any means have transferred or which might have been levied upon and sold under judicial process against him." USCA, title 11, § 110(a)(5).
It is admitted by the parties that the will devises to the bankrupt a remainder in the lands, but beyond this point they differ widely. Appellants, on the one hand, contend that the interest devised is a contingent remainder, and as such does not pass to the trustee in bankruptcy On the other hand, appellee insists that the interest devised is a vested remainder, and, whether vested or contingent, it passed to the trustee in bankruptcy, under the statute, as assets of bankrupt.
If the interest devised by the will was a vested remainder, both parties concede that it passed to the trustee in bankruptcy. If under the Illinois law a contingent remainder also passes to the trustee in bankruptcy, then the order must be affirmed regardless of whether or not the lower court erred in holding the interest to be vested rather than contingent.
The property which passes to the trustee in all such cases is governed primarily by the federal statute previously set forth herein. It specifies two classes of property of the bankrupt which by operation of law is vested in the trustee; viz., (1) all property which, prior to the filing of the petition, the bankrupt could by any means have transferred; (2) all property which, prior to the filing of the petition, might have been levied upon and sold under judicial process against him. In determining what property falls within these classes we are to be governed by the laws of Illinois, due to the fact that the trust was created, and is being administered, and the property involved is situated in that state. In re Twaddell (D.C.) 110 F. 145; In re Moore (D.C.) 22 F.2d 432.
That a contingent remainder cannot be levied upon and sold under judicial process is not denied, and the controversy is therefore reduced to one question — Prior to the filing of the petition in bankruptcy was there any means under the Illinois law by which bankrupt could have transferred his contingent remainder, assuming for the purpose of argument only that it is a contingent remainder? If there was, then it passed to the trustee; otherwise not.
Although a conveyance of an expectancy, as such, is inoperative at law, it may be enforced in equity as an executory agreement to convey if it is sustained by a sufficient consideration. Parsons v. Ely, 45 Ill. 232. It is true that a contingent remainder cannot be granted, and no legal estate passes by a deed of it; yet it may be transferred by a warranty deed by way of estoppel if the contingency occurs upon which the estate is to vest. Hill v. Hill, 264 Ill. 219, 106 N.E. 262; Drury v. Drury, 271 Ill. 336, 111 N.E. 140. Contingent interests and expectancies depending upon survival are assignable in equity, and they may also be the subject of a contract, such as a contract of sale, when made for a valuable consideration, which courts of equity, after the contingency has happened, will enforce. Ridgeway v. Underwood, 67 Ill. 419; Hudnall v. Ham, 183 Ill. 486, 56 N.E. 172, 48 L.R.A. 557, 75 Am. St. Rep. 124.
The section of the Illinois statute referring to quitclaim deeds contains the following language: "Every deed in substance in the form prescribed in this section, when otherwise duly executed, shall be deemed and held a good and sufficient conveyance, release and quitclaim to the grantee, his heirs and assigns, in fee of all the then existing legal or equitable rights of the grantor, in the premises therein described, but shall not extend to after-acquired title unless words are added expressing such intention." Chapter 30, par. 11, Cahill's Rev. St. Ill. 1929.
In the case of Glover v. Condell, 163 Ill. 566, 45 N.E. 173, 35 L.R.A. 360, it was held that while a quitclaim deed will convey any present interest, it cannot affect by way of release a future contingent interest limited to the surviving members of a class upon the event of the death of one of them without living issue, there being no terms used in the deed which could be construed as referring to future interests. It would seem, by way of inference at least, that if there had been terms used in the deed which could be construed as referring to the future interest, then it would have been sufficient to affect that interest, and the statute itself supports the inference.
If the transfer of such an interest can be eventually effectuated by any act of the bankrupt, whether by estoppel, contract of sale, equitable assignment, or any other means, it certainly comes within the purview of the statute, and the interest passes to the trustee. That there can be an equitable assignment of a contingent remainder is explicitly held by the Illinois decisions, and on that question we know of no conflict in the decisions of that state.
In determining whether or not an equitable assignment of a contingent remainder, upon the occurrence of the contingency, is to be termed "a means of transfer," we are not to be limited to the Illinois law. The federal courts will construe for themselves the meaning of the word "transfer" as used in the statute. To hold otherwise would be to subject the federal statutes to as many different constructions as there are states.
In the case of In re Moore (D.C.) 22 F.2d 432, it was held that a contingent interest assignable in equity comes within the classification of the Bankruptcy Act referring to property which the bankrupt before adjudication "could by any means have transferred"; and the court bases this opinion on the fact that in Maryland it has long been recognized that a contingent remainder is assignable, just as it has been so recognized in Illinois. In the case of Earle v. Maxwell, 86 S.C. 1, 67 S.E. 962, 138 Am. St. Rep. 1012, it is said that a contingent remainder is not technically an estate, but a mere possibility of an estate in the future; and it will pass to a trustee in bankruptcy if by the local decisions an assignment of such an interest by the bankrupt would be good in equity. See, also, 3 R.C.L. 222; Reilly v. Mackenzie, 151 Md. 216, 134 A. 502, 48 A.L.R. 778.
Appellants cite the cases of Spengler v. Kuhn, 212 Ill. 186, 72 N.E. 214, and Raritan Bank v. Huston, 329 Ill. 604, 161 N.E. 141, as holding that a contingent remainder does not pass from the bankrupt to the trustee. In the case of Spengler v. Kuhn, supra, in so far as the decision reveals, this particular question was not discussed by the court, and we do not know whether it was called to the court's attention. It is true that the court held, in effect, that the remainder was contingent and did not pass to the trustee; but the complaint proceeded upon the theory that the remainder was a vested one and not contingent. From the discussion it seemed all the parties assumed that if the remainder was a vested one it passed to the trustee, and if it was contingent it did not so pass. The court could have been very easily led into error by this assumption; but even though the question may have been controverted and a deliberate judgment rendered thereon, the decision is not inconsistent with the other decisions of Illinois which hold that a contingent remainder is assignable in equity. The case of Raritan Bank v. Huston, supra, merely presented the question as to whether the quitclaim deed which was then before the court was sufficient to pass the contingent remainder. The court held it was not. There were no words in the deed expressing any such intention, as required by the Illinois statutes, Cahill's Rev. St. 1929, c. 30, par. 11. The question of equitable assignment was not presented.
It is our opinion that at and prior to the time Elmer E. Landis filed his petition in bankruptcy there were means, recognized by the laws of Illinois, by which he could have transferred the remainder in the land devised to him by his father. This being the case, it is not necessary that we should decide whether the remainder be vested or contingent. City of Denver v. Denver Union Water Co., 246 U.S. 178, 38 S. Ct. 278, 62 L. Ed. 649; Sebree v. Sebree, 293 Ill. 228, 127 N.E. 392.
The order is affirmed.
I am of opinion that bankrupt had a vested interest, but if it is a contingent interest I cannot agree to the proposition that a contingent interest passes to a trustee in bankruptcy. Believing that the interest of the bankrupt was vested, I therefore concur in the affirmance.