Source: https://supreme.justia.com/cases/federal/us/225/205/
Timestamp: 2019-04-23 02:10:47+00:00

Document:
Section 7 of the Court of Appeals Act of 1891, as amended April 14, 1906, 34 Stat. 116, c. 2627 provides for an appeal to the circuit court of appeals from certain interlocutory decrees of the circuit court, and in this respect establishes an exception to the general rule in federal courts that an appeal lies only from a final decree.
Where the jurisdiction of the circuit court is invoked not solely on the ground of diverse citizenship, but also because the case is one arising under an act of Congress, an appeal lies from the circuit court of appeals to this Court, and by § 6 of the Act of 1891, the time within which to take the appeal is one year; the limitation of thirty days under § 7 applies only to appeals to the circuit court of appeals from the circuit court.
A distinct purpose of the Bankruptcy Act is to subject the administration of estates of bankrupts to the control of tribunals having authority and charged with the duty of proceeding to final settlement and distribution in a summary way, as are bankruptcy courts.
to money and its distribution, preferences, and priorities to be accorded to claims, and supervision and control of the trustee.
The circuit court cannot entertain a bill in equity which invokes a reconsideration of the referee's order allowing claim as preferred and of determination of the bankruptcy court as to rights of holders of claims and as to charges that the trustee was speculating in claims; those matter are for the bankruptcy court, and fall within it exclusive jurisdiction; nor can it surrender it control thereover or confide them to another tribunal.
A bill in equity attempting to seek an adjudication on matters within the exclusive jurisdiction of the bankruptcy court cannot be sustained as to matters dependent upon the principal matter alleged and which could not have been made the subject of a separate bill within the jurisdiction of that circuit court.
The facts, which involve the distribution of funds in the hands of a trustee in bankruptcy of a government contractor, are stated in the opinion.
Guaranty Company, is a Maryland corporation; three of the defendants, the Second National Bank of Parkersburg, the Farmers & Mechanics National Bank of the same place, and the Nicolette Lumber Company, are citizens of West Virginia, resident in the district in which the suit was brought; seven of them, Jacob Eichel and Laura Eichel, his wife, the City National Bank of Evansville, the First National Bank of Evansville, the Citizens National Bank of Evansville, the First National Bank of Rockport, and the Farmers Bank of Rockport, are citizens and residents of Indiana; another, the Riter-Conley Company, is a Pennsylvania corporation; and M.J. Bray, the trustee of the bankrupt's estate, who was sued in that capacity and also as an individual, is a citizen and resident of Indiana. the bankrupt, the Evansville Contract Company, was no Indiana corporation. Of course, the national banks are federal corporation, but their citizenship and places of residence are, for jurisdictional purposes, as just stated. Act August 13, 1888, 25 Stat. 433, c. 866, § 4.
The jurisdiction of the circuit court was invoked on the ground of diversity of citizenship, and on the further ground that the case was one arising under the Act of Congress of August 13, 1894, 28 Stat. 278, c. 280, amended February 24, 1905, 33 Stat. 811, c. 778, and the right to bring the suit in that district against the defendants who were not resident therein was rested upon § 8 of the Act of March 3, 1875, 18 Stat. 472, c. 137, on the theory that the suit was one to enforce a lien and claim upon personal property within the district -- that is, upon the fund in the hands of the trustee, which he then had on deposit in the two Parkersburg banks. Section 23a of the Bankruptcy Act was also relied upon as sustaining the jurisdiction.
Fidelity & Guaranty Company in adjusting such loss or in completing said contract, as conclusive evidence against it, its successors and assigns, of the fact and extent of its liability under said obligation to the said the United States Fidelity & Guaranty Company. And it does further agree, in the event of any breach or default on its part in any of the provisions of the contract hereinbefore mentioned, that the United States Fidelity & Guaranty Company as surety upon the aforesaid bond shall be subrogated to all its rights and properties as principal in said contract, and that deferred payments and any and all moneys and properties that may be due and payable to it at the time of such breach or default, or that may thereafter become due and payable to it on account of said contract, shall be credited upon any claim that may be made upon the United States Fidelity & Guaranty Company under the bond above mentioned."
which were unsecured creditors having claims aggregating $115,000, overcame its objection and secured its express consent to the order by executing to it a bond in the sum of $75,000, whereby they undertook to indemnify and hold it harmless from all liability accrued or to accrue by reason of its suretyship. The terms of this bond were such that the liability of the banks thereunder was to be several, not joint, and was to be confined to specified proportions of its penalty.
original claimants. Later Frey assigned these claims to Laura Eichel, wife of Jacob Eichel, the cost to her being $27,037.39, although the face value was $35,663.82. She acquired them with money obtained from Bray under an arrangement whereby both were to share in the profits realized upon their ultimate payment. These transactions, it is alleged, were in pursuance of a wrongful conspiracy between Bray, Frey, and Jacob Eichel, were in violation of their fiduciary relations to the estate, and were had with the purpose of making Bray the real but secret owner, the name of Laura Eichel being used as a mere cover; and it is also alleged that some of these claims are excessive and unjust, that others are not for labor or materials, and that Bray, Frey, and Jocob Eichel wrongfully procured or acquiesced in their allowance as preferred claims so that Bray and his associates might profit thereby.
assigned to her as before stated; and in August, 1907, like actions were commenced on these claims in the circuit court of the United States for the Western District of Pennsylvania. Both sets of actions are still pending, and it is alleged that they were brought at the instance of Bray and were really for his use and benefit. These actions were not confined to claims arising under the contracts which were to be performed in that district, but included claims arising under the other contracts which were to be performed elsewhere.
would have against such fund; (2) that Bray and the Eichels are not entitled to be paid on any claim held by them, or any of them, more than the sum actually paid therefor; and (3) that the surety company is entitled to have these matters, as also its liability as a surety and the liability of the several indemnitor banks on their bond to it, litigated and determined in one comprehensive suit.
actions against the surety company then pending in the courts, federal and state, in Pennsylvania, and from beginning any other like action against it. All the defendants, save the Riter-Conley Company and the Nicolette Lumber Company, appealed to the circuit court of appeals, which reversed the interlocutory decree and directed that the injunction be dissolved and the bill dismissed, without prejudice, upon the ground that the circuit court was without jurisdiction to entertain it. 170 F. 689. The case is here on the appeal of the surety company.
whereunder the bonds upon which the complainant was surety were given, a further appeal to this Court was rightly allowed under § 6 of the Act of March 3, 1891, supra, the amount in controversy being in excess of $1,000, exclusive of costs. Henningsen v. United States Fidelity & Guaranty Co., 208 U. S. 404; Howard v. United States, 184 U. S. 676, 184 U. S. 680. The time prescribed in that section for taking such an appeal is one year, and this appeal was taken within that time. The thirty-day limitation in § 7 applies only to appeals thereunder to the circuit court of appeals. These views make it necessary to deny a motion to dismiss by which the appellees challenge the jurisdiction of this Court.
the present plenary bill in equity it is sought to take from the bankruptcy court the adjudication of the claims in question and the decision of what priority shall be accorded to them. The circuit court of appeals holds that this cannot be done consistently with the Bankruptcy Act, and the correctness of its holding is the principal question presented by this appeal.
"with such jurisdiction at law and in equity as will enable them to exercise original jurisdiction in bankruptcy proceedings, . . . to"
"(2) Allow claims, disallow claims, reconsider allowed or disallowed claims, and allow or disallow them against bankrupt estates;"
"(6) Bring in and substitute additional persons or parties in proceedings in bankruptcy when necessary for the complete determination of a matter in controversy;"
"(7) Cause the estates of bankrupts to be collected, reduced to money and distributed,and determine controversies in relation thereto, except as herein otherwise provided;"
other persons to all lawful orders, by fine or imprisonment or fine and imprisonment;"
"(15) Make such orders, issue such process, and enter such judgments in addition to those specifically provided for as may be necessary for the enforcement of the provisions of this act."
"Nothing in this section contained shall be construed to deprive a court of bankruptcy of any power it would possess were certain specific powers not herein enumerated."
"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."
"Claims which have been allowed may be reconsidered for cause, and reallowed or rejected in whole or in part, according to the equities of the case, before, but not after, the estate has been closed."
We think it is a necessary conclusion from these and other provisions of the act that the jurisdiction of the bankruptcy courts in all "proceedings in bankruptcy" is intended to be exclusive of all other courts, and that such proceedings include, among others, all matters of a administration, such as the allowance, rejection, and reconsideration of claims, the reduction of the estates to money, and its distribution, the determination of the preferences and priorities to be accorded to claims presented for allowance and payment is regular course, and the supervision and control of the trustees and others who are employed to assist them.
contingent liability of the indemnitor banks to the complainant, and an injunction against the prosecution of the actions against it in Pennsylvania, and against the institution of other like actions, must fall with the rest of the bill. They were brought into it in a secondary and dependent way, and could not then have been made the subjects of a separate bill in that jurisdiction. Further discussion of them is therefore unnecessary.

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