in bankruptcy cannot be removed from a State court into a Circuit. Court unless the amount involved exceeds $2,000.80 If a suit be transferred from a State court to the Circuit Court on the ground of diversity of citizenship it is placed there as if it had been originally commenced there on the ground of jurisdiction, and not as if had been commenced there by consent of the defendant under this section; the judgment of the Circuit Court of Appeals reversing the judgment of the Circuit Court is, therefore, final.81 In the Circuit Court, the trustee may be either plaintiff or defendant; while, like the adverse claimant, he has the option of proceeding in the State court, or, if the requisite diversity of citizenship and amount in controversy exists, in the Circuit Court. Conversely, the trustee only can sue in the District Court, but only to recover property or annul liens, and suits there need not show diversity of citizenship and $2,000 in dispute.82 Thus, the jurisdiction of the Circuit Court is much more limited than it was under the former law while that of the District Court is not limited to so marked an extent. The Circuit Court may not review a judgment of the bankruptcy court.83 It cannot disturb or interfere with the control of a court of bankruptcy over the property in the possession of the trustees, by injunction or otherwise.84 This clause is intended to prevent the extension of the jurisdiction of the Circuit Court because of the institution of proceedings in bankruptcy. If the suit could have been brought in such court by the bankrupt prior to his bankruptcy, for diverse citizenship, it may be brought there by his trustee, although as between the trustee and the defendant there is no such diversity.85

80. Henrie v. Henderson, (C. C. A.), 16 Am. B. R. 617, 145 Fed. 316; Swofford v. Cornucopia Mines, 15 Am. B. R. 564, 140 Fed. 957, the amount allowed as attorney's fees in an action to enforce a miner's lien should not be added to the amount in controversy so as to permit of its removal

81. Spencer v. Duplan Silk Co., 11 Am. B. R. 563, 191 U. S. 526.

82. Suits laid in the district court by the adverse claimant against the trustee must be under general law and not this section of the bankruptcy law. Consult In re McCallum, 7 Am. B. R. 596.

83. Hatch v. Curtin, 16 Am. B. R. 629, 146 Fed. 200.

84. Treat v. Wooden, 14 Am. B. R. 736, 138 Fed. 934.

85. Bush v. Elliott, 15 Am. B. R. 656, 202 U. S. 477.

66

§ 26. Jurisdiction of District Courts.-The District Courts have, since the act of 1800, always had exclusive jurisdiction of proceedings in bankruptcy." Under the act of 1867, their jurisdiction, while not exclusive, also extended "to the marshaling of assets, "86 and also to "all suits at law or in equity brought by an assignee in bankruptcy against any person claiming an adverse interest, or owing any debt to such bankrupt, or by any such person against an assignee, touching any property or rights of the bankrupt."87 The same general jurisdiction to "cause the estate of bankrupts to be collected and determine controversies in relation thereto " is conferred on the District Court by the present law, with the qualification " except as herein otherwise provided."88 There being no other grant of ordinary jurisdiction to the District Court in the statute, subsection b of section twentythree has been held to be a limitation on that power. 89 The District Court of the domicile of the bankrupt, upon the filing of his petition, takes exclusive jurisdiction of the property of the bankrupt situated anywhere within the United States; it becomes its duty to administer the estate, and distribute the proceeds among the creditors according to their respective rights.90 The filing of the petition is a caveat to all the world and is in effect an injunction and an attachment. Thereupon, in respect to the control and distribution of the bankrupt's estate, the jurisdiction of the District Court is exclusive.91 Prior to the amendment of 1903 the rule was settled that District Courts did not have jurisdiction over a suit brought by the trustee to recover property from a stranger

86. Act of 1867, section 1; R. S., section 4972. See Cook v. Whipple, 55 N. Y. 150; Kelly v. Smith, Fed. Cas. No. 7,675.

87. Act of 1867, section 2; R. S., section 4979; Main v. Glen, Fed. Cas. No. 8,973; In re Sabin, Fed. Cas. No. 12,195.

88. Act of 1898, section 2(7). This jurisdiction was not granted by, and it cannot be revoked, annulled or

impaired by the law or act of any State. In re Dunlop, 19 Am. B. R.

361.

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

90. In re Hobbs, 16 Am. B. R. 544, 145 Fed. 211; In re Granite City Bank (C. C. A.), 14 Am. B. R. 404, 137 Fed. 818.

91. Mueller v. Nugent, 7 Am. B. R. 224, 184 U. S. 1.

92

to the bankruptcy proceeding, unless by the latter's consent. Where the adverse party had consented, the District Courts had jurisdiction.93 Where the holding of the proposed defendant was adverse, such a suit could be brought only in the State court, or in the Circuit Court if the usual facts showing Federal jurisdiction appeared.94

§ 27. Amendment of 1903.-The amendment of 1903 to subsection b of section 23 and the changes made in section 60b, 67c, and 70e restored concurrent jurisdiction, at least as to suits to recover property. Under these sections, which should be read together, since a suit to recover property cannot be brought by a trustee save under one of these sections, the law now is that suits to recover property either preferentially or fraudulently transferred or incumbered, may be laid either in the proper State court or in a District Court, even without the consent of the proposed defendant.96 If brought in a State court, a federal question is presented, which may be certified to the United States Supreme Court.97 If in the District Court, it need not be in the district where the bankruptcy proceeding is pending.98

92. Wall v. Cox, 181 U. S. 244, 5 Am. B. R. 727, 4 Am. B. R. 659, 101 Fed. 403; Hicks v. Knost, 178 U. S. 541, 2 Am. B. R. 153, 94 Fed. 625; Mitchell v. McClure, 178 U. S. 539, 91 Fed. 621; Bardes v. Bank, supra.

93. In re Durham, 8 Am. B. R. 115, 114 Fed. 750; Philips v. Turner, 8 Am. B. R. 171, 114 Fed. 726.

94. Bush v. Elliott, 15 Am. B. R. 656, 202 U. S. 477.

95. If preferentially transferred, it must have been within four months of the bankruptcy (section 60b); if fraudulently, the State statute of limitations controls (section 70e). See Gregory v. Atkinson, 11 Am. B. R. 495, 127 Fed. 183, except as to conveyances or preferences made within the four months' period the

Such

law remains as it was before the amendment. See also Bowman v. Alpha Farms, 18 Am. B. R. 700.

96. Horner-Gaylord Co. v. Miller, 17 Am. B. R. 257; Lawrence v. Lowrie, 13 Am. B. R. 297, 133 Fed. 995.

97. Rector v. City Deposit Bank Co., 15 Am. B. R. 336, 200 U. S. 409, where an action was brought by a trustee to recover what is asserted to be an asset of the bankrupt estate, a federal question is presented, and the denial of the asserted right was a denial of a right or title specially claimed under a law of the United States.

98. See Lathrop v. Drake, 91 U. S. 516. And compare Sherman V. Bingham, Fed. Cas. No. 12,762, with Shearman v. Bingham, Fed. Cas. No. 12,733.

a suit can be brought, under certain circumstances, in the Circuit Court, as has already been shown.99 A trustee in bankruptcy is vested with all the rights and title of the bankrupt, as well as with the rights of his creditors, and when he seeks to enforce rights to recover property in a district outside of the territorial jurisdiction of the court which appointed him, he stands in the position of those whose rights he has acquired and can only resort to the same courts, State or Federal, and is confined to the same remedies, subject to the exceptions made by the amendments of 1903 to sections 23b and 70e.1 The widening of jurisdiction by the amendment of 1903 is probably available only to the trustee. The adverse claimant cannot sue under section 23b in the District Court, nor can he by consent confer summary jurisdiction upon the court to determine the merits of a real adverse claim in property alleged to belong to the bankrupt but in the claimant's possession.3 There is doubt as to the receiver's power to sue at all;* that he can under section 2(7) has already been held and is probably the law. But the trustee is rarely defendant and rarely does he resort to suits other than those specified in the sections already mentioned. "To recover property" undoubtedly includes a suit, the real purpose of which is to annul an incumbrance, other than through legal proceedings. The amendment

of 1903, conferring jurisdiction upon courts of bankruptcy in common with State courts for the recovery of property fraudulently transferred by the bankrupt under section 70e must be read in connection with section 23b, and when so read means that jurisdiction over the subject matter of section 70e is conferred upon the bankruptcy court, but can be exercised only upon the

99. Section 26, supra; Bush v. Elliott, supra.

1. Hull v. Burr, 18 Am. B. R. 541. 2. Viquesney v. Allen (C. C. A.), 12 Am. B. R. 402.

3. In re Teschmacher & Mrazay, 11 Am. B. R. 547, 127 Fed. 728.

4. Boonville Bank v. Blakey, 6 Am. B. R. 13, 107 Fed. 891. But see In

re Fixen & Co., 2 Am. B. R. 822, 96 Fed. 748.

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

6. Note the use of the word "incumbrance" in section 67e. Compare Chapman v. Brewer, 114 U. S. 158. See Real Estate Trust Co. v. Thompson, 7 Am. B. R. 520, 112 Fed. 945.

condition imposed by section 23b, of securing the consent of the proposed defendants." A District Court may not entertain a plenary suit in equity to annul a cancellation of a mortgage, made by the bankrupt to himself as executor under a will, brought by beneficiaries, where the general creditors of the bankrupt have no interest.8 Where neither of the parties was a party to the bankruptcy proceeding, this section confers no jurisdiction." If the property in controversy is not a part of the bankrupt estate and may not be distributed in the proceeding, the controversy cannot be determined therein.10 In whichever court the suit is laid, it at once becomes subject to the rules and practice there followed.11

28. Summary jurisdiction.—The amendments of 1903 have not changed the effect of present precedents against the exercise of jurisdiction summarily. If the party proceeded against is an adverse claimant," he should not, under the present law, be asked to respond to a petition, order to show cause, or motion, any more than he was under the law of 1867, as it was interpreted by the courts.12 If the party is in possession adversely of the property

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

8. Brumley v. Jones, 15 Am. B. R. 578, 141 Fed. 318, 72 C. C. A. 466. Compare Horner-Gaylord Co. v. Miller, 17 Am. B. R. 257.

9. Henrie v. Henderson, 16 Am. B. R. 617, 145 Fed. 316.

10. Matter of Girard Glazed Kid Co. (2), 14 Am. B. R. 485, 136 Fed. 511.

11. Collier Bankr., 6th ed., p. 286. 12. Eyster v. Gaff, 91 U. S. 521. Compare Burbank v. Bigelow, 92 U. S. 179; Smith v. Mason, 81 U. S. 419; Marshall v. Knox, 83 U. S. 551; also In re Cohn, 3 Am. B. R. 421, 98 Fed. 75; In re Baudouine, 3 Am. B. R. 651, 101 Fed. 547; In re

Franks, 2 Am. B. R. 634, 95 Fed. 635; In re Kelly, 1 Am. B. R. 306, 91 Fed. 504; In re Rockwood, 1 Am. B. R. 272, 91 Fed. 363. Cases contra, like In re Francis-Valentine Co., 2 Am. B. R. 522, 94 Fed. 793, are omitted, because, since the amendatory act of 1903, the reasoning of Bardes v. Bank and the analogies of the whole statute are against them. But when the claimant also is a bankrupt, summary jurisdiction exists. In re Rosenberg, 8 Am. B. R. 624, 116 Fed. 402. See also cases decided by the Supreme Court under the present law cited in subsequent notes to this section. See also In re Tune, 8 Am. B. R. 285, 115 Fed. 906, as to when summary jurisdiction should be assumed and when not.