Opinion ID: 1504496
Heading Depth: 1
Heading Rank: 3

Heading: Questions of Jurisdiction.

Text: We are next met by the contention of appellants that the trial court, in passing upon the question whether the Kentucky State Telephone Company was merely an agency and instrumentality of the Municipal Telephone & Utilities Company, exercised summary jurisdiction and thereby committed error. The argument in support of this contention contained in the brief of appellants sometimes seems to be directed to the jurisdiction exercised by the bankruptcy court in making the order of July 8; sometimes to the jurisdiction exercised in making the order of August 15. So far as the argument is directed against the order of July 8, it may be quickly disposed of. Nowhere in the petition of intervention is there any allegation that the bankruptcy court, in making the order of July 8, exercised summary jurisdiction; and, in so doing, erred. No such ground was urged as a basis for modification of the order. It is more than doubtful whether such ground could have been properly urged in the court below on the hearing of the petition in intervention. But conceding, without deciding, that it could have been urged, it is clear in our judgment that, not having been urged in the court below, it cannot be urged on this appeal. A hearing as to the merits of the order of July 8 was all that was asked by the interveners in their petition; and such a hearing was therefore all to which they were entitled. The interveners, having been allowed to come into the bankruptcy proceeding, are not, simply because of that fact, at liberty to attack the jurisdiction of the bankruptcy court to make orders which were entered prior to the intervention; no such purpose having been indicated in the petition of intervention, and no claim being made that fraud was practiced to induce the court to make such prior orders. Such limitation on interveners' action is independent of the provision of Federal Equity Rule 37. 17 Am. & Eng. Encyc. of Law (2d Ed.) 185; 11 Encyc. Pl. & Pr. 509; 21 C. J., p. 346, § 349; Swift v. Black Panther, etc., Co., 244 F. 20, 29 (C. C. A. 8); Commercial Electrical Supply Co. v. Curtis, 288 F. 657 (C. C. A. 8). In the Commercial Electrical Supply Co. Case, this court said (page 659 of 288 F.): It is the general rule that one who voluntarily intervenes in a suit in equity thereby becomes a party to the suit, is in the same situation, bound by the same orders and decrees, and subject to the same estoppels, as though he had been a party from the commencement thereof. We shall accordingly not further consider interveners' attack upon the jurisdiction of the bankruptcy court to make the order of July 8, 1931. But another contention of appellants is that the bankruptcy court exercised summary jurisdiction in hearing the petition in intervention and in denying the same by the order of August 15, 1931, and thereby committed error. The intervening petition alleges that the controversy presented by the said petition can be litigated only in a plenary suit in the court having the actual custody and right to possession of the mortgaged property (evidently meaning the Kentucky state court); yet the interveners, in their petition, did not ask of the bankruptcy court in Missouri leave to bring a plenary suit in the Kentucky state court against the receiver in bankruptcy to have determined the right of such receiver to the possession of assets standing in the name of the Kentucky State Telephone Company; nor did the interveners ask the bankruptcy court in Missouri to direct its receiver to bring a plenary suit in the state court of Kentucky to determine his right to the possession of the assets standing in the name of the Kentucky State Telephone Company. [1] Instead of making such requests, the interveners assert in their petition that they should be allowed to present fully herein [evidently meaning the bankruptcy court] the facts in connection with the ownership of property in the conduct of business by said Kentucky State Telephone Company. The prayer of the intervening petition was framed accordingly. The relief prayed is consistent with and could result only from a determination of the merits of the pleaded adverse claim and adverse possession. The court could not grant the relief prayed without determining whether or not the property and assets of the Kentucky State Telephone Company were a part of the estate of the alleged bankrupt. The interveners voluntarily submitted this issue to the bankruptcy court. It was in view of such a state of facts that the bankruptcy court proceeded to hear the evidence and decide the controversy. The bankruptcy court had jurisdiction to proceed. Section 2(7) of the Bankruptcy Act confers jurisdiction upon courts of bankruptcy to cause the estates of bankrupts to be collected    and determine controversies in relation thereto, except as herein otherwise provided. 11 USCA, § 11(7). The general exception to the above broad grant of jurisdiction is contained in section 23 of the Act (11 USCA, § 46) which governs controversies    between trustees as such and adverse claimants concerning the property acquired or claimed by the trustees. Paragraph a. This section (paragraph a) provides that the United States district courts shall have jurisdiction over such controversies 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; and (paragraph b) such shall be brought only where the bankrupt might have done so unless by consent of the proposed defendant and except for the recovery of property affected by voidable preferential judgments or preferential or fraudulent transfers (sections 60b, 67e, 70e, Bankr. Act, 11 USCA §§ 96b, 107e, 110e). In the excepted instances, concurrent jurisdiction is given to any court of bankruptcy as defined in this title, and any State court which would have had jurisdiction if bankruptcy had not intervened. Construing these various statutory provisions as to the court wherein, and the character of proceeding (summary or plenary) whereby, the title to and rights in property adversely claimed may be adjudicated, several rules have been definitely stated: First, the bankruptcy court always has jurisdiction, as a preliminary inquiry, to determine its own jurisdiction to proceed to examine and decide, in a summary proceeding, the merits of an adverse claim; second, the bankruptcy court has jurisdiction to examine and decide adverse claims if it has possession of the disputed property. If the preliminary examination as to the existence of jurisdiction develops that such possession is present, the bankruptcy court can determine the merits in the summary proceeding before it; if such examination develops that such possession is not present, the bankruptcy court can proceed no farther, but must leave the merits to be determined in a plenary action brought in a court designated in sections 23, 60b, 67e, or 70e, of the Bankruptcy Act, as may be applicable. Taubel, etc., Co., v. Fox, 264 U. S. 426, 44 S. Ct. 396, 68 L. Ed. 770; Priest v. Weaver, 43 F.(2d) 57 (C. C. A. 8); Bee Bldg. Co. v. Daniel (C. C. A. 8) 57 F.(2d) 59. Whether consent, under section 23b of the Bankruptcy Act, 11 USCA § 46(b), of an adverse claimant can confer jurisdiction over subject-matter upon the bankruptcy court is doubtful. Some of the authorities bearing upon the question are collected in the footnote. [2] We do not find it necessary to pass upon the question at this time. In the instant case, the bankruptcy court examined the question whether it had jurisdiction to hear and determine the merits of interveners' controversy, and determined that it had such jurisdiction, basing its conclusion upon a finding that it was in possession of the property in dispute. The appellants do not challenge the jurisdiction of the bankruptcy court to examine as to its own power to determine the merits of their claim; but appellants do challenge the finding that the bankruptcy court had such possession of the property in dispute as to give that court jurisdiction to proceed.