Слике страница

self, and not having the status of an officer of the state court. As against such a custodian, the trustee in bankruptcy is entitled to recover the assigned estate or its proceeds. Davis v. Bohle, 34 C. C. A. 372, 32 Fed. 325. And this niay be accomplished by a summary proceeding. That is, it is not necessary for the trustee to bring a separate, independent, and plenary action against the assignee; but he may file a petition in the court of bankruptcy, as a part of the proceedings in bankruptcy, and obtain an order on the assignee to show cause why he should not be required to surrender and turn over the assigned estate to the trustee in bankruptcy. The rights of the trustee being established to the satisfaction of the bankruptcy court, it may forthwith order the assignee to yield up the property as demanded. Bryan v. Bernheimer, 181 U. S. 188, 21 Sup. Ct. 557, 45 L. Ed. 814; In re Smith (D. C.) 92 Fed. 135. But this cannot be done on a merely ex parte hearing; that is, without process or notice to the assignee. He must at least have the opportunity to be heard. Smith v. Belford, 45 C. C. A. 526, 106 Fed. 658. So also, where an assignee in insolvency, who holds the property under a general assignment which is in itself an act of bankruptcy, makes a sale of the property before a trustee in bankruptcy is appointed, but after and with knowledge of the petition in bankruptcy, his purchaser will have no title superior to the bankrupt's estate; but his equities in respect to the goods or to the money he has paid for them may depend on many circumstances, and can be settled in the court of bankruptcy, which may, if necessary, bring in the assignee. Bryan v. Bernheimer, 181 U. S. 188, 21 Sup. Ct. 557, 45 L. Ed. 814. But where an assignee, appointed in insolvency proceedings under a state law, has taken charge of the debtor's property, sold it, and distributed the proceeds to creditors, acting in all respects in entire good faith and in conformity to the state law and the orders of the state court, and afterwards proceedings in bankruptcy are had and a trustee in bankruptcy appointed for the same debtor, the assignee is not to be held personally liable to the trustee for the value of the property or its proceeds. In such case, the trustee in bankruptcy "must seek his remedy against those who have received payments from the defendant in contravention of the bankruptcy act.”. Cragin v. Thompson, 2 Dill. 513, Fed. Cas. No. 3,320; Jones v. Kinney, 5 Ben. 259, Fed. Cas. No. 7,473.

Under the former bankruptcy law, it was held that an assignee for the benefit of creditors, who was compelled to turn over the property in his charge to a trustee in bankruptcy, appointed after the assignment but before the complete execution of the trust thereunder, should be allowed to retain so much of the estate as would cover costs and expenses properly and necessarily incurred by him in the administration of his trust, and also a reasonable compensation for his services as assignee up to the time of his accounting to the trustee in bankruptcy. Catlin v. Foster, 1 Sawy. 37. Fed. Cas. No. 2,519; Burkholder v. Stump, 8 Phila. 172. Fed. Cas. No. 2,105); In re Lains, 16 N. B. R. 168, Fed. Cas. No. 7,989; Jackson v. McCulloch, 1 Woods, 433, Fed. Cas. No. 7,140; Wald v. Wehl, 18 Blatchf. 495, 6 Fed. 163. Compare In re Stubbs, 4 N. B. R. 376, Fed. Cas. No. 13,557. But the assignee, in such case, was held not entitled to any priority in respect to his claim for compensation, his demands ranking with those of other simple creditors. In re Lains, 16 N. B. R. 168, Fed. Cas. No. 7,989. It was also considered that he would be entitled to an allowance for the fees of his attorney for services properly and necessarily rendered to him in regard to the property, in so far as such services benefited and helped to preserve the estate, and were not hostile to the proceedings in bankruptcy; but no allowance could be made for the services of counsel in opposing the proceedings in bankruptcy or endeavoring to retain possession of the property. Platt v. Archer, 13 Blatchf. 351, Fed. Cas. No. 11,214; Clark v. Marx, 6 Ben. 275, Fed. Cas. No. 2,830. See In re Cohn, 6 N. B. R. 379, Fed. Cas. No. 2,966. In the case, however, of an assignment which was fraudulent and void, it was held that the assignee should not be reimbursed for his expenses incurred under the assignment, nor was he entitled to compensation for his services as assignee; but for such services and disbursements as benefited the general body of creditors, either by reason of the preservation of the fund to their use, by advantageous collection of assets, or by conversion of property into money, he should be allowed what was reasonable and just. Hunker v. Bing (D. C.) 9 Fed. 277.

Under the present statute, since any general assignment for creditors is in itself an act of bankruptcy and constructively fraudulent and in violation of the bankruptcy law, the cases show a tendency to hold that the assignee will not be entitled to any compensation from the estate for his services rendered prior to the filing of the petition in bankruptcy. Wilbur v. Watson (D. C.) 111 Fed. 193; Stearns y. Flick (D. C.) 103 Fed. 919. But compare In re Scholtz (D. C.) 106 Fed. 834. But he should receive an allowance for the actual and necessary expenses incurred in preserving the property while in his possession. In re Tatum (D. C.) 112 Fed. 50; In re Pauly, 1 Nat. Bankr. N. 405. But the latest ruling of the supreme court of the United States appears to unsettle this rule completely; for it is said that an assignee for the benefit of creditors has the right to have his claims for the amount paid to counsel or retained by him on account of commissions as assignee, before the bankruptcy of his assignor, adjudicated in the state court in the customary mode of proceeding; and the bankruptcy court has no jurisdiction to adjudicate finally on the merits of his claim, unless by his consent, and then only by a plenary suit. Trust Co. v. Comingor, 22 Sup. Ct. 293, 46 L. Ed. -, 7 Am. Bankr. R. 421. 7. Practical Effect of Suspension of State Insolvency Laws.

Although there is no dispute as to the general rule above stated, that state insolvency laws are superseded or suspended in their operation by the enactment of a national bankruptcy law, yet there is much uncertainty as to the practical working of this principle, especially where the validity of proceedings under the state law is questioned collaterally. If the bankruptcy law gives to the courts of the United States exclusive jurisdiction of all proceedings for winding up the estate of an insolvent debtor, and suspends the operation of all state laws having the same general character, it would seem that, such a federal statute being in existence, it is the right and duty of state courts to refuse to take jurisdiction of proceedings attempted to be instituted under the state law, and that when an insolvent files a petition in a state court seeking the benefit of that law, the court should dismiss the petition; and it has been so held. Van Nostrand v. Carr, 30 Md. 128, 2 X. B, R. 485. But not all of the state courts agree to this proposition. By some it is held that they will not be ousted of jurisdiction over an insolvency case unless proceedings in bankruptcy are instituted against the same debtor. But they concede that when such a contlict actually arises, then the state court must decline to proceed further with the action pending before it. In re McKee (Ky.) 1 Yat. Bankr. X. 139. On the same line, the federal courts hold that, in a case where proceedings are pending in the two courts under the two statutes, the federal court may stay the action in the state court, or, if an assignee has been appointed under the state law, he may be enjoined from taking possession of the property of the insolvent, or required to surrender it up to the trustee in bankruptcy. Ex parte Eames, 2 Story, 322, Fed. Cas. No. 4,237.

But the really difficult question arises when no proceedings under the bankruptcy act have been taken, so that there is no conflict between courts, but only the mere existence of the bankruptcy act stands in the way of proceedings under the state law. Here we have to inquire whether any validity can be predicated of the action of the state court under the state law, or of the title of the assignee thereunder, or of the title of a purchaser at a sale made by such assignee. Are these proceedings valid, void, or voidable; and if the latter, at whose instance may they be avoided? Some cases have gone so far as to hold that all proceedings under a state insolvency law, the bankruptcy act being in force, are absolutely null and void for all purposes. Martin v. Berry, 37 Cal. 208; Com. v. O'Hara (Pa.) 1 X. B. R. 86. Thus, they rule that a discharge granted to the insolvent under the state law, as the result of proceedings had while the national bankruptcy law was operative and would have been applicable to his case, is entirely inoperative, and constitutes no defense to an action subsequently brought against him by a domestic creditor. Sher's v. Solhinger, 10 Abb. Prac. (X. S.) 287; Cassard v. Kroner (Md.) 4 X. B. R. 569. Decisions are to be found going even much further than this. A case in Massachusetts rules that an assignee under the state law has no title or claim to the property of the debtor such as will enable him to maintain an action for its recovery against a third person, the existence of the bankruptcy law, which would be applicable to the debtor, being a full defense to such an action; and this although no proceedings under the federal statute are ever had against the insolvent. Griswold v. Pratt, 9 Jetc. 16. And see Ketcham v. McNamara, 72 Conn. 709, 46 Atl. 146, 50 L. R. A. 641. Compare Shryock v. Basehore, 82 Pa. 159, 15 N. B. R. 283. Again, it is held that the invalidity of proceedings had under a state insolvency law, including the invalidity of the pretended title of the assignee under such law, by reason of the existence at the time of a national bankruptcy law, may be asserted, with effect, in a contest between attaching creditors and such assignee. Rowe v. Page, 54 N. H. 190; Shryock v. Basehore, supra. Compare Cook v. Rogers, 31 Mich. 391; Reed v. Taylor, 32 Iowa. 209, 7 Am. Rep. 180.

But all these positions are controverted by authorities of equal importance. Numerous cases hold that proceedings may be had, and jurisdiction exercised, under the state laws, until their authority is called in question by the bankruptcy courts; that judicial action taken, and titles accruing, under the insolvency laws are voidable at the most; and that they are not to be avoided unless proceedings in bankruptcy are instituted, and then only at the instance of the trustee in bankruptcy. Reed v. Taylor, 32 Iowa, 209, 7 Am. Rep. 180; Cook v. Rogers, 31 Mich. 391; Ebersole v. Adams, 10 Bush, 83; Maltbie v. Hotchkiss, 38 Conn. 80, 9 Am. Rep. 364. In one of the cases it was said: "So far as the state insolvency laws may prevent or even impede the operation of the bankruptcy law, they must yield to it in order that it may accomplish its object of establishing a uniform system of bankruptcy throughout the United States; but while the state laws thus yield, they are not entirely abrogated. They exist and operate with full vigor until the bankruptcy law attaches upon the person and property of the bankrupt, and that is not until it is judicially ascertained that the petitioner is a person entitled to the benefit of the bankruptcy law by his being declared a bankrupt by a decree of the court. Before that time, upon a sound construction of the bankruptcy act, it does not necessarily come in conflict with the insolvency laws of the state.” Ex parte Ziegenfuss, 24 N. C. 463. Notwithstanding the existence of a bankruptcy law which would be applicable to the case (it is held in another decision), the parties interested may, by consent, use the state law as a means of collecting and distributing the debtor's estate. Should procredings in bankruptcy be instituted, and the federal court claim the administration of the estate, the state courts would yield; but in the absence of such a claim, the mere fact that a federal law is in existence, under which proceedings might be taken, is no objection to the jurisdiction of the state court. Malthie v. Hotchkiss, 38 Conn. 80, 9 Am. Rep. 364.

Finally, a case may arise where the debtor refuses to file his voluntary petition in bankruptcy, and yet refrains from committing any act of bankruptcy on which his creditors could proceed. Here there is no possibility of conflict between courts; and it is held that proceedings under the state law, even though compulsory in their nature, may be sustained, for the purpose of securing an equal distribution of the debtor's property among his creditors. Appeal of Geery, 43 Conn. 289, 21 Am. Rep. 653. In this connection it is important to remember that state insolvency laws, though suspended, are not annulled, by the bankruptcy law. For proper purposes and within a limited range, they may continue operative. Thus, for example, where the insolvency laws of a state give priority of payment out of insolvents' estates to a certain class of debts, the same debts will be entitled to priority of payment out of the estate of a bankrupt, under that clause of the statute which gives priority to "debts owing to any person who by the laws of the states

is entitled to priority." Bankr. Act 1808, $ 64b; In re Worcester Co., 42 C. C. A. 637, 102 Fed. 808. 8. Pending Proceedings under State Lau's.

The concluding sentence of the bankruptcy act of 1898 is as follows: “Proceedings commenced under state insolvency laws before the passage

[ocr errors][ocr errors]

of this act shall not be affected by it.” The effect of this is that the bankruptcy law does not deprive the state courts of the jurisdiction necessary to the final administration of the estate of an insolvent against whom (or by whom voluntarily) proceedings under the state insolvency law had been instituted before the passage of the national law; but the state court may proceed with the case to its final conclusion, and its action in the matter will be as valid as if no bankruptcy statute had been enacted. Meekins v. His Creditors, 19 La. Ann. 497; Martin v. Berry, 37 Cal. 208; Lavender's Lessee v. Gosnell, 43 Md. 153; Longis v. His Creditors, 20 La. Ann. 15; In re Holmes, Fed. Cas. No. 6,633; In re Horton, Fed. Cas. No. 6,708. But it is only as to pending cases that the state law remains operative; as to all others it is suspended. Hence when such a law provides that the insolvent, on being convicted of fraud, shall be "forever" deprived of the benefit of laws passed in favor of insolvent debtors in the state, the most that can be adjudged against an insolvent in this situation is to deprive bim of the benefit of the particular state law under which the proceedings are had, that is, to deny him a discharge. Longis v. His Creditors, 20 La. Ann. 15. It has been held that the pendency of proceedings under a state insolrency law is not necessarily a bar to an adjudication of bankruptcy against the same debtor, but that the trustee in bankruptcy will take title only to such property as has been acquired or earned by the bankrupt between the institution of the insolvency proceedings and the filing of the petition in bankruptcy. In re Mussey, 2 Nat. Bankr. N. 113, per Olmstead, referee. Notwithstanding the pendency of proceedings in insolvency, a debtor's voluntary petition in bankruptcy may be entertained, although he has contracted no new debts, when it appears that one or more of the creditors scheduled by the bankrupt are citizens of other states than that in which the insolTency proceedings were instituted. Id. (D. C.) 99 Fed. 71. In another case, where proceedings in insolvency against a partnership and the individuals composing it were begun in a state court before the passage of the bankruptcy act, and remained pending at the time one of the partners was indiFidually adjudged bankrupt, but no discharge had been granted or applied for under the state law, it was held that a debt of the partnership was provable in the bankruptcy proceedings, notwithstanding the fact that it had been proved and allowed in the insolvency proceedings and that there were assets of the firm for distribution in the state court; but such debt could not share in the individual assets of the bankrupt until his separate creditors had been paid. In re Bates (D. C.) 100 Fed. 263.


(113 Fed. 1.)

YORK et al.
(Circuit Court of Appeals, Fourth Circuit. February 4, 1902.)

No. 415.

Several insurance companies separately issued policies on the same property of V., providing for proportional liability only for any loss, and V. brought separate actions at law thereon against them in a state court. The state court refused a motion to transfer the cases to the federal court; but in all of them, except one, in which there was involved less than $2.000, the amount necessary to give the federal court jurisdiction, complete records were seasonably filed in the federal court, which refused m tions to remand. Held, that a bill in the federal court to enjoin further prosecution of the actions at law there or elsewhere, and to have the liability of the insurers determined and adjusted in equity under such bill, was ancillary to the actions at law, so as to be

maintained without regard to the citizenship of the parties. 1 1 Supplementary and ancillary proceedings and relief in federal courts, see note to Toledo, St. L. & K. C. R. Co. v. Continental Trust Co., 36 C. C. A. 195.


Equity has jurisdiction, on the ground of inadequacy of remedy at law, to enjoin separate actions by insured against several insurers, and have their liabilities determined under the bill; their defenses being the

same, and their liabilities, if any, proportional. 3. EQUITY-MULTIFARIOUSNESS.

A bill by certain insurers to restrain separate actions at law by insured against them and other insurers on their policies, . under which their liability, if any, is proportional, and to which actions the same defense is interposed, and to have their liabilities determined in equity under the bill, is not multifarious; all the insurers having a common

interest in defeating the claims of the insured. 4. FEDERAL Courts—JURISDICTION-AMOUNT INVOLVED.

Where separate actions at law by insured against insurers on policies to which the same defense is interposed, and under which the liability, if any, is proportional, are removed to the federal court, with the exception of one in which the amount involved is not enough to give it jurisdiction, prosecution of this action, as well as of the others, may be enjoined by a bill in the federal court to have the liabilities of insurers determined and adjusted by such court as a court of equity under such bill.2

Appeal from the Circuit Court of the United States for the District of South Carolina, at Charleston.

H. A. M. Smith, for appellant.
Augustine T. Smythe and Alexander C. King, for appellees.

Before GOFF, Circuit Judge, and JACKSON and PURNELL, District Judges.

JACKSON, District Judge. This case is now heard upon an appeal from the circuit court of the United States for the district of South Carolina. 109 Fed. 681.

109 Fed. 681. A bill was filed by the Home Insurance Company of New York and the German-American Insurance Company of New York against the Virginia-Carolina Chemical Company and 14 insurance companies, who were made defendants to the bill. The defendant the Virginia-Carolina Chemical Company had prior to the filing of this bill instituted actions at law in the court of common pleas of Charleston county, S. C., against each and all of its codefendants. Motions were made in each case before that court to transfer the several cases to the circuit court of the United States for the district of South Carolina, which were overruled, and the court retained the cases. Notwithstanding the refusal of the court of common pleas to transfer the several cases, the plaintiffs in this action, under the act of congress, seasonably took out the records in each case and filed them in the clerk's office of the United States court for the district of South Carolina, to be further proceeded therein before the circuit court of the United States. The object and purpose of this bill is to restrain the defendant insurance companies from the prosecution of these suits on the law side of the United States court, as well as elsewhere, to avoid a multiplicity of suits, and to have the cases all heard before

2 Juristliction of circuit courts as determined by amount in controversy, see notes to Auer v. Lombard, 19 C. C. A. 75, and Shoe Co. v. Roper, 36 C. O. A, 459.

« ПретходнаНастави »