Court Opinion

ID: 8766874
Source: CourtListenerOpinion
Date Created: 2022-11-26 12:29:03.213985+00
Date Added: 2024-06-11T17:01:56.701866
License: Public Domain

PLATT, District Judge.
The facts set forth in this complaint upon which the defendants dispute our jurisdiction present a serious situation. There is plainly a controversy in relation to the estate of a bankrupt, and subdivision 7 of section 2 would confer jurisdiction if it were not for the limiting words, “except as herein otherwise provided.” Act July 1, 1898, c. 541, 30 Stat. 546 (U. S. Comp. St. 1901, p. 3421). It is settled law that the exception points to section 23, where the matter-of the jurisdiction of the federal and state courts is taken up. It was decided by the Supreme Court in Bardes v. Bank, 178 U. S. 524, 20 Sup. Ct. 1000, 44 L. Ed. 1175, that such a state of facts as we find herein, even if construed favorably to the plaintiff, would not have *141conferred jurisdiction upon this court, unless the defendants consented thereto. To avoid the force of that ruling, and to promote the orderly and speedy settlement of bankrupt estates, the Congress in 1903 amended subdivision “b” of section 23 by adding:
“Except suits for the recovery of property under section 60, subdivision ‘b,’ and section 67, subdivision ‘(V ” (Act July 1, 1898, c. 541, 30 Stat. 553 [U. S. Comp. St. 1901, p. 3431] as amended by Act Feb. 5, 1908, c. 487, § 8, 32 Stat. 798 [U. S. Comp. St. Supp. 1907, p. 1028]).
The amendment without doubt gives to this court concurrent jurisdiction with the state courts, without the consent of the proposed defendant of any suit which sets forth such facts as will bring it under either of the excepted subdivisions. It is not covered by section 60, subd. “b” (30 Stat. 562, c. 541 [U. S. Comp. St. 1901, p. 3445]). There is no suspicion of a preference to be found in the facts. The language of section 67e (30 Stat. 564, c. 541 [U. S. Comp. St. 1901, p. 3449]) seems to be enough, unless we start with the admitted premise that a trustee must confine his endeavors to gather in the estate of the bankrupt to property over which the bankrupt had obtained title prior to bankruptcy and had disposed of in fraud of the act. The first thought which comes to one as he approaches this inquiry is whether it is right for the federal court to stick in the bark, indulging in refinements and niceties of strict legal definitions. The purpose of the bankruptcy act is to promote equity and fair dealing. In the sense of the act I think that the property for which in this suit recovery is sought was under the domination and control of the bankrupt shortly prior to bankruptcy, and that he transferred it to the defendants, who paid him therefor an inadequate price, well knowing that he was insolvent, and did not intend to pay his debts with the money which they gave him. If the trustee cannot bring a suit somewhere upon such a state of facts, no remedy for the wrong stated exists.
The objection that the bankrupt never gained a title to the property in dispute by reason of the mutual fraud would be pressed in the state court against the trustee as a full defense, and might be more forcible there than here, because the forum selected might not have the equitable powers which Congress has wisely conferred upon us. The parties who were in the first instance deprived of their property by the scheme have come to our court, and, by filing their claims as creditors, have invoked our protection. That action would be used against them, if they individually sought aid in a state court. Can it be possible that the trustee, who is an officer of the court, must be driven away when he comes to us and tells of a grievous wrong done to certain parties who have chosen him as their protector and expect him to obtain relief for that wrong? If it be so, the bankruptcy act is impotent at a vital and crucial point. I, for one, am not willing to admit it. This is the broad view of the matter. A technical examination leads to the same conclusion.
As already suggested, the parties chiefly interested have offered themselves to this court as creditors of the estate. By filing their claims against the bankrupt they have waived their right to dispute the passing of the title in their goods to him prior to bankruptcy. They have done more than that. They have, by affirmative action, ratified *142the original purchase, sale and delivery of those goods, as constituting, ■a valid title thereto in the bankrupt. The only remedy remaining open is for the trustee, whom they have helped to elect and who is sub-rogated to their rights, to find their property if he can, and if, as is the case here, he cannot find it, to seek damages from the parties to whom .it was unlawfully transferred, which, if collected, will inure to the benefit of the injured parties who have sought our aid.
Let the plea to the jurisdiction be overruled.