made by the bankrupt, which any creditor could have avoided under the laws of the State, regardless of the time when made and although made more than four months prior to the adjudication of bankruptcy.53 Such trustee may proceed for such purpose by bill in equity, and will not be required to seek his remedy at law.54 Such a suit may be maintained, although neither the trustee nor any creditor has reduced the claim against the bankrupt to a judgment.55 The trustee in bankruptcy of a mortgagor may attack the validity of a chattel mortgage although the claims of creditors are not in judgment.56 The presumption is that the trustee has complied with the provisions of the Bankruptcy Act, and is qualified to act.57 In many cases, the trustee I will be able to sue under section 67e or section 70e. If under

53. Bush v. Export Storage Co., 14 Am. B. R. 138, 136 Fed. 918; In re Rodgers, 11 Am. B. R. 79, 125 Fed. 169, 60 C. C. A. 567; In re Carpenter, 125 Fed. 831; Joseph v. Raff, 82 App. Div. (N. Y.) 47, 81 N. Y. Supp. 546, aff'd 176 N. Y. 611, 68 N. E. 1118; Lewis v. Bishop, 47 App. Div. (N. Y.) 554, 62 N. Y. Supp. 618; Beasley v. Coggins, 12 Am. B. R. 355 (Fla. Sup. Ct.), 57 So. 213; Cox v. Wall, 132 N. C. 730, 44 S. E. 635; In re Mullen, 4 Am. B. R. 224, 101 Fed. 413, 416, where it is said: $ 13 Eliz. makes void as against creditors, conveyances in fraud of creditors, but provides that the operation of the statute shall not extend to any estate conveyed upon good consideration and bona fide. In inserting a like exception in section 70e, I think Congress meant to substantially re-enact the exception placed in the statute of Elizabeth, and not to give to bona fide purchasers for value greater or less rights than those which that statute gives them. The reference to bona fide purchasers in section 70e should, therefore, receive the same

construction that a like reference has received in the statute of 13 Eliz. and its American substitutes." In this case it was attempted to defeat a prior attachment made by the creditor of the fraudulent grantee, who had no notice of the fraud or of the bankruptcy proceedings. The court held that where property conveyed in fraud of creditors is first attached by creditors of the transferee, who have no knowledge of the fraud, such attachment will prevail as against the rights of defrauded creditors of the transferrer, and that, therefore, the attachment could not be defeated, unless notice of the bankruptcy proceedings had been given to the attaching creditor.

54. Beasley v. Coggins, 12 Am. B. R. 355, 57 So. 213; Wall v. Cox, 4 Am. B. R. 659, 101 Fed. 403.

55. Mueller v. Bruss, 8 Am. B. R. 442, 112 Wis. 406; Beasley v. Coggins, supra.

56. Mitchell v. Mitchell, 17 Am. B. R. 382.

57. Breckons v. Snyder, 15 Am. B. R. 112, 211 Pa. St. 176.

the latter, he must bring himself within the elements of pleading and proof recognized by the statutes and decisions of his State.58 The important difference is that, if the suit is based on the State. law, the State statute of limitations applies. Thus, many fraudulent transactions, which could not be brought under section 67e, will be timely if resting on section 70e.59 A mortgagee who knows that the mortgagor is selling mortgaged chattels for his own use, and who consents to his doing so, is not a bona fide holder and the mortgagee's trustee in bankruptcy may avoid the chattel mortgage, and recover the property transferred thereby, or its value.60 The cases turn on the law of the State, some of the doctrines of which are summarized in the cases cited in the note below.61

20. The saving clause. That clause in this subsection is similar to those found in section 67e and section 67f, and is for the same purpose. What has already been said of them will not be repeated here. This saving of the rights of bona fide holders for value is also merely expressive of the law.62 But, after adjudi

58. Halbert v. Pranke, 11 Am. B. R. 620 (Minn. Sup.); In re Gray, 3 Am. B. R. 647; Mueller v. Bruss, supra.

59. Collier, Bankr., 6th ed., p. 613. 60. Skillen v. Endelman, 11 Am. B. R. 766, 39 Misc. Rep. (N. Y.) 261, 79 N. Y. Supp. 413.

61. Cohen v. Wagar, 16 Am. B. R. 381, 183 N. Y. 33, as to sufficiency of complaint in an action to recover moneys collected by a stock association from debtors of the bankrupt; Lesser v. Bradford Realty Co., 15 Am. B. R. 123, 47 Misc. Rep. (N. Y.) 463, as to sufficiency of complaint in action to set aside chattel mortgage made within four months period; Barber v. Coit (C. C. A.), 16 Am. B. R. 419, 144 Fed. 381, holding that under the Ohio statute declaring that a creditor may sue to set aside fraud

ulent conveyances, actual fraud need not be shown; Breckons v. Snyder, 15 Am. B. R. 112, 211 Pa. St. 176, as to sufficiency of evidence in action to recover preferential payments; Durham v. Wick, 14 Am. B. R. 385, 210 Pa. St. 128; Wright v. Skinner, 14 Am. B. R. 500, 136 Fed. 694, as to allegations as to citizenship in bill where jurisdiction depends on diverse citizenship; Horskins v. Sanderson, 13 Am. B. R. 101, 132 Fed. 415, as to jurisdiction over property within the district when the defendant resides elsewhere; Mueller v. Bruss, 8 Am. B. R. 442, 112 Wis. 406, judgment and return of execution unnecessary; In re Mullen, 4 Am. B. R. 224, 101 Fed. 413; In re Phelps, 3 Am. B. R. 396 (N. Y.).

62. In re Mullen, 4 Am. B. R. 224, 101 Fed. 413.

cation, the filing of the petition amounting to constructive notice, there can be no bona fide holder. 63

21. The amendment of 1903.-Here the words added are the same as those added to section 60b and section 67e. Their purpose and effect have been considered in the discussion of those sections.64 The effect of the omission from section 23b of all reference to section 70e has been questioned. It has been held, however, that such omission operates to bring actions under section 70e within the general rule as laid down in section 23b, and that while a bankruptcy court has general jurisdiction over the subjectmatter it can only be exercised under the conditions imposed by section 23b, that is, by the consent of the proposed defendants.65

§ 22. Jurisdiction of courts; statutory provision.-The Bankruptcy Act of 1898 provides as follows:

§ 23. Jurisdiction of United States and State courts.-(a) The United States Circuit Courts shall have jurisdiction of all controversies at law and in equity, as distinguished from proceedings in bankruptcy, between trustees as such and adverse claimants concerning the property acquired or claimed by the trustees, in the same manner and to the same extent only as though bankruptcy proceedings had not been instituted and such controversies had been between the bankrupts and such adverse claimants.

(b) Suits by the trustee shall only be brought or prosecuted in the courts where the bankrupt, whose estate is being administered by such trustee, might have brought or prosecuted them if proceedings in bankruptcy had not been instituted, unless by consent of the proposed defendant, except suits for the recovery of property under section sixty, subdivision b, and section sixty-seven, subdivision e.

*

63. Harrell v. Beale, 17 Wall. (U. S.) 590. Compare In re Lake, Fed. Cas. 7,992.

64. See chapter XXII and chapter XXIII, supra.

65. Skewis v. Barthell, 18 Am. B. R. 429; Gregory v. Atkinson, 11 Am. B. R. 495, 127 Fed. 183.

* Amendment of 1903 in italics.

(c) The United States Circuit Courts shall have concurrent jurisdiction with the courts of bankruptcy, within their respective territorial limits, of the offenses enumerated in this act.

68

§ 23. Jurisdiction of courts generally. This section, other than its last subsection, has to do only with suits at law or in equity outside the bankruptcy proceeding proper;66 subsection b only with suits by, not against, the trustee.67 Practice under sec tion twenty-three is, therefore, regulated, if in equity, by the Equity Rules, if in law, by the State procedure as supplemented or modified by Federal rules applicable to such cases." The former law gave concurrent jurisdiction to the Circuit and District Courts of both law and equity actions, as distinguished from proceedings in bankruptcy per se, where the assignee (trustee) was plaintiff or defendant.69 It was also the settled doctrine of the courts that the statute meant that, when the holding of a third party against the assignee (trustee) was adverse, a summary remedy within the bankruptcy proceeding was not proper, but resort must be had to a plenary suit.70 The law of 1898, as originally enacted, evidenced an intention to transfer all controversies, other than those strictly within the bankruptcy procedure, as, for instance, a contest on a proof of debt, to the State tribunals. Such was the purpose as indicated by the debates in Congress accompanying its passage,71 and such seems the literal meaning of the words. The amendatory act of 1903 has, however, re-enacted the doctrine of concurrent jurisdiction, at least as to all suits by the trustee to recover property fraudulently or preferentially transferred or encumbered within the four months period.

24. Jurisdiction of suits to recover property.-The contro

66. Bardes v. Bank, 178 U. S. 524, 4 Am. B. R. 163.

67. In re McCallum, 7 Am. B. R. 596, 113 Fed. 393.

68. Collier, Bankr., 6th ed., p. 280. 69. Claflin v. Houseman, 93 U. S. 130; Lathrop v. Drake, 91 U. S. 516; Olney v. Tanner, 10 Fed. 101. So

under the law of 1841. McLean v. Lafayette Bank, Fed. Cas. 8,885; Hallack v. Tritch, Fed. Cas. 5,956; Brown v. White, 16 Fed. 900..

70. Moyer v. Dewey, 103 U. S. 301; Glenny v. Langdon, 98 U. S. 20; Eyster v. Gaff, 91 U. S. 521.

71. But see In re Murphy, 3 Am. B. R. 499.

versy as to the property forum for suits or proceedings to recover property brought by the bankrupt's trustee, prior to the amendatory act of 1903, was settled in May, 1900, by the Supreme Court.72 To meet the reasoning of that decision the Bankruptcy Act was amended in section 23b, section 60b, section 67e and section 70e, and that case became no longer controlling.73 The broad and elastic phrasing of subdivisions (7) and (15) of section 274 is, now, no longer limited by section 23b, and it is well settled that courts of bankruptcy as such have, within their respective territorial limits, ample, though, as to suits, not exclusive, jurisdiction to do everything "which may be necessary for the enforcement of the provisions of the act."75

77

§ 25. Jurisdiction of the Circuit Courts.—If (a) diverse citizenship or a controversy where the amount in dispute exceeds $2,00076 arises, between (b) the trustee and an adverse claimant,7 concerning (c) property acquired or claimed by the trustee,78 an appropriate suit, (d) either in law or equity, can be laid in the Circuit Court; but not otherwise.79 A suit by a trustee or receiver

75. See discussion of the subject under sections 26-30, infra. For the general question of jurisdiction prior to the amendatory act of 1903, see Bardes v. Bank, supra.

76. See act of March 3, 1887, 25 Stat. at Large, 433.

77. See, for cases on meaning of "adverse claimant," infra.

78. Compare Leroux v. Hudson, 109 U. S. 468; Schott v. Hudson, 109 U. S. 477. And see Bachman v. Packard, Fed. Cas. No. 709.

79. Goodier v. Barnes, 2 Am. B. R. 328, 94 Fed. 798. Compare Chattanooga Bank v. Rome Iron Co., 3 Am. B. R. 582, 99 Fed. 82. Observe, also, for transfer of cases from the district court to the circuit court, thus giving the latter the former's jurisdiction in certain contingencies. R. S., sections 601, 637.