Source: http://il.findacase.com/research/wfrmDocViewer.aspx/xq/fac.19551110_0040023.C07.htm/qx
Timestamp: 2016-12-10 11:16:36
Document Index: 151773741

Matched Legal Cases: ['§ 701', '§ 501', '§ 11', '§ 46', '§ 23', '§ 46', '§ 96', '§ 107', '§ 110', '§ 53']

| In re Majestic Radio and Television Corp.
In re Majestic Radio and Television Corp.
IN THE MATTER OF MAJESTIC RADIO AND TELEVISION CORPORATION, BANKRUPT. JOHN E. DWYER, JR., S. HARVEY KLEIN AND DONALD J. WALSH, TRUSTEES, ETC., APPELLANTS,v.CURTIS FRANKLIN, APPELLEE.
The bankruptcy proceeding involved in this case was commenced February 6, 1948, when the Majestic Radio and Television Corporation filed its petition for an arrangement under Chapter 11 of the Bankruptcy Act, 11 U.S.C.A. §§ 701-799. The Bankruptcy Court ordered that the Chapter 11 proceeding be dismissed and that reorganization be had under Chapter 10 of the Bankruptcy Act, 11 U.S.C.A.§§ 501-676. While the case was pending under Chapter 10, the appellee, Curtis Franklin, filed his proof of a general claim for $1,481.99 owed to him by Majestic Radio & Television Corporation for "goods, wares and merchandise sold to the debtor." The court thereafter concluded that reorganization could not be successfully effected. Majestic was adjudicated a bankrupt, and trustees were appointed.
"The courts of the United States hereinbefore defined as courts of bankruptcy are hereby created courts of bankruptcy and are hereby invested * * * with such jurisdiction at law and in equity as will enable them to exercise original jurisdiction in proceedings under this title * * *."
"Cause the estates of bankrupts to be collected, reduced to money, and distributed, and determine controversies in relation thereto, except as herein otherwise provided * * *." 11 U.S.C.A. § 11, sub. a(7).
The words "except as herein otherwise provided" include the provisions of Section 23 of the Bankruptcy Act, 11 U.S.C.A. § 46. Bardes v. First National Bank of Hawarden, 178 U.S. 524, 20 S. Ct. 1000, 44 L. Ed. 1175. Section 23, sub. a provides:
"(a) The United States district courts shall have jurisdiction of all controversies at law and in equity, as distinguished from proceedings under this title, between receivers and trustees as such and adverse claimants, concerning the property acquired or claimed by the receivers or trustees, in the same manner and to the same extent as though such proceedings had not been instituted and such controversies had been between the bankrupts and such adverse claimants."
"(b) Suits by the receiver and the trustee shall be brought or prosecuted only in the courts where the bankrupt might have brought or prosecuted them if proceedings under this title had not been instituted, unless by consent of the defendant, except as provided in sections 60, 67, and 70 of this Act." Bankruptcy Act § 23, sub. b, 11 U.S.C.A. § 46, sub. b.
The excepted sections are not applicable to the facts of this case. Cline v. Kaplan, 323 U.S. 97, 99, 65 S. Ct. 155, 89 L. Ed. 97; Davidson v. Scofield, 10 Cir., 153 F.2d 7; First National Bank of Negaunee v. Fox, 6 Cir., 111 F.2d 810. The only question remaining for the disposition of this case is whether or not Franklin has consented to the jurisdiction of the Bankruptcy Court to determine the claim of the trustees in a summary proceeding or has waived his right to object to such jurisdiction.
Several of the cases cited by the trustees are clearly distinguishable because they involve counterclaims brought under the sections specifically excepted from Section 23 by sub. b of that section, above. Inter-State National Bank of Kansas City v. Luther, 10 Cir., 221 F.2d 382; In re Solar Manufacturing Corporation, 3 Cir., 200 F.2d 327; In re Nathan, D.C., 98 F.Supp. 686. Section 60, 11 U.S.C.A. § 96, allows the trustee to recover money paid or property transferred by the bankrupt as a preference to creditors.Section 67, 11 U.S.C.A. § 107, gives the trustee similar rights as to fraudulent liens and transfers. Section 70, 11 U.S.C.A. § 110, vests the trustee with title to the bankrupt's property, and Subdivision e thereof provides that any transfer made by the debtor which was fraudulent as against or voidable by any creditor should be null and void as against the trustee of the debtor. The trustees here do not claim that their counterclaim falls within any of these exempted sections.
Jurisdiction of Bankruptcy Courts is created and limited by statute. In re Prima Co., 7 Cir., 98 F.2d 952, 956, certiorari denied Keig v. Harris Trust & Savings Bank, 305 U.S. 658, 59 S. Ct. 357, 358, 83 L. Ed. 426; Wheeling Structural Steel Co. v. Moss, 4 Cir., 62 F.2d 37, 39. And Section 23 of the Bankruptcy Act specifically limits jurisdiction over this adverse claimant unless he consents to that jurisdiction. Franklin clearly did not give his express consent, and we hold that the filing of his proof of claim did not constitute his implied consent to be sued on an alleged cause of action arising out of a different subject matter.
The case of Alexander v. Hillman, 296 U.S. 222, 56 S. Ct. 204, 80 L. Ed. 192, relied upon by appellants, is not in point because the proceeding before the court there was one of receivership in equity to which Section 23 of the Bankruptcy Act did not apply.
If mutual debts were involved here, of course, the Bankruptcy Court could off set them, but the question the trustees want adjudicated is whether or not there are mutual debts (i.e., whether Franklin owes anything to the estate) and Section 68 does not give the Bankruptcy Court jurisdiction to determine that question. In re Montgomery Bros., D.C., 51 F.2d 284, 285.
The trustees' argument that Rule 13(b) of the Federal Rules of Civil Procedure, 28 U.S.C.A., providing for "permissive" counterclaims gives the Bankruptcy Court jurisdiction of their counterclaim is without merit. The Federal Rules of Civil Procedure apply to cases in bankruptcy only in so far as they are not inconsistent with the Bankruptcy Act. General Order in Bankruptcy No. 37, 11 U.S.C.A. following § 53. And, of course, the Federal Rules cannot enlarge the jurisdiction of any court. United States v. Sherwood, 312 U.S. 584, 589-590, 61 S. Ct. 767, 85 L. Ed. 1058.
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