Court Opinion

ID: 6122859
Source: CourtListenerOpinion
Date Created: 2022-02-04 20:09:10.210906+00
Date Added: 2024-06-11T08:23:57.509911
License: Public Domain

Smith, J.:
The several members of the court concur in the opinion that this case should be affirmed, unless it is to be held that the judgment recovered in the Justice’s Court is void, by reason of want of jurisdiction in the State courts to entertain a suit brought by an assignee in bankruptcy to recover assets belonging to the bankrupt’s estate, A majority of the court are of the opinion that the Justice’s Court had jurisdiction to render the judgment.
Whatever power congress may possess, under the Constitution of the United States, to confer upon the federal courts exclusive jurisdiction of matters in bankruptcy, and whatever actions and *222proceeding snob, matters may include, it is well settled that prior to the adoption of the Code, known as “ The Revised Statutes of the United States,” which was approved on the 22d of June, 1874, the courts of’ the several States had jurisdiction to entertain actions brought by assignees appointed by the federal courts in bankruptcy, to collect assets belonging to the estates of their bankrupts. (Cook v. Whipple, 55 N. Y., 150; Eyster v. Gaff and others, 91 U. S. R., 521.)
It is insisted by the appellant’s counsel that certain provisions of the Revised Statutes have the effect to divest the State courts of their jurisdiction to entertain actions of that description. It is not claimed that the revision contains any express enactment to that effect, but that the result contended for is necessarily to be implied from certain provisions contained in the statutes as revised. Section 711, which is most relied on, provides that “ the jurisdiction vested in the courts of the United States, in the cases and proceedings thereinafter mentioned, shall be exclusive of the courts of the several States; ” and it then proceeds to enumerate eight classes of cases to which its provisions apply, the sixth of which is, “ all matters and proceedings in bankruptcy.” That section does not aid the aj^pellant, unless the words, “ all matters and proceedings in bankruptcy,” as used therein, were intended to include actions brought by assignees, to collect the assets of bankrupts. We do not think that was the intention. On the contrary, we regard the section as merely declaratory of the law as it had been laid down by the courts, State and federal, and as it existed at the time of the revision. Prior to, and at that time, the federal courts had exclusive jurisdiction in each of the eight classes of cases mentioned in section 711, including matters and proceedings in bankruptcy, strictly so called; but actions by assignees to collect the assets of the bankrupt were not included in that category, but were regarded as ancillary to, and in aid of, the proceedings in bankruptcy, and in respect to them the State courts and the Federal courts had concurrent jurisdiction.
But it is contended that section 4972 of the revision defines the term, “ all matters and proceedings in bankruptcy,” as used in section 711. We do not so understand it. That section is not new. It is almost a literal transcript of section 1 of the act of 1867 (chapter 176), ruder which the concurrent jurisdiction of the State *223and federal courts was judicially recognized and affirmed. The section does not profess to define the meaning of the words in question. It declares to what cases the jurisdiction conferred upon the district courts, as courts of bankruptcy, shall extend, including, among others, “ the collection of all the assets of the bankrupt,” but it does not declare that in all cases to which the jurisdiction is so extended it shall be exclusive. That the provision of the section relating to the collection of assets was designed to extend the jurisdiction of district courts to eases not strictly embraced within the words, “ all matters and proceedings in bankruptcy,” is reasonably to be inferred, not only from the language of the section itself, but also from the consideration that, unless so designed, the provision was wholly unnecessary, for, by a previous section (section 503, subd. 18), the district courts were vested with original jurisdiction in “ all matters and proceedings in bankruptcy,” in their respective districts. Section 4972 includes not only matters of which the district courts, as courts of bankruptcy theretofore had exclusive jurisdiction, but also those in respect to which a concurrent jurisdiction was possessed by the State courts. Except for its provisions giving the district courts jurisdiction to collect the assets of the bankrupt, and to determine controversies between the bankrupt and his creditors, it may well be doubted whether the district courts would have had jurisdiction of an action by the assignee to collect a debt due to the bankrupt, when both parties were citizens of the same State ; as was said by Grover, J., in Whipple v. Cook (supra), of the similar provisions in the act of 1867. We find nothing in the language of the Revised Statutes which, in our judgment, warrants the conclusion that they were intended to take away or impair the jurisdiction of the State courts, in actions of the nature above stated, as it existed at the time of their adoption.
The appellant also relies on the act of 1874 (page 178, § 2) which amended section 1 of the act of 1867, by adding to it the following words: “ Provided, that the court having charge of the estate of any bankrupt may direct that any of the legal assets or debts of the bankrupt, as contradistinguished from equitable demands, shall, when such debt does not exceed $500, be collected in the courts of the State where such bankrupt resides, having jurisdiction of claims of such nature and amount.” The only effect *224of that amendment, as we read it, is to permit the federal courts to decline to entertain actions brought to recover legal assets of a bankrupt, not exceeding $500 in amount. It does not limit or take away the jurisdiction of the State courts, but it authorizes the federal courts, in their discretion, to relieve themselves of a class of cases which, it may be supposed, can be more conveniently disposed of in the State courts. Subject to the authority thus conferred, the concurrent jurisdiction of the federal and State courts over all actions brought by an assignee to collect the assets of the bankrupt, whether legal or equitable, and of whatever amount, remains as it was before the amendment. The amendment and the [Revised Statutes were passed at the same session, and were approved on the same day, and they are tobe read together, so far as they are in pari materia. It seems, to us their obvious meaning is, that the federal courts have exclusive jurisdiction of all matters and proceedings strictly in bankruptcy; that they have concurrent jurisdiction with the State courts of actions which are plenary or ancillary to the proceedings in bankruptcy, among which are actions by assignees to collect the assets of their bankrupts; and that as to such actions, they may, in their discretion, direct them to be brought in the State courts, when the subject of the action is of a legal nature, and does not exceed $500 in amount.
If congress has power, under the Constitution, to divest the State courts of them jurisdiction over a class of ordinary common-law actions, by reason of the fact that one of the parties has, or claims, title to the subject-matter of the action, through an adjudication in bankruptcy (a point which it is not necessary to consider in this case), it is but reasonable to expect that the intent to exercise the power will be expressed in direct and unambiguous language, and will not be left to doubtful construction.
Wc have not overlooked the decisions of our brethren in the first and second departments, in the eases of Frost v. Hotchkiss (1 Abb. N. Cas., 27) and Olcott v. Maclean (10 Hun, 277), holding that the State courts have not jurisdiction in actions of this nature.
In Frost v. Hotchkiss no reasons are given for the decision, except that an opinion is expressed that the jurisdiction was taken away by the United States [Revised Statutes ; while in Olcott v. Maclean, the conclusion of the learned judge who wrote the opinion is based *225entirely upon the effect of the amendment of 1874. They .are the only cases in this State of which we are informed, in which the question has been passed upon. As they appear to have proceeded upon different grounds, we have felt it our duty, in consideration of the importance of the question, to treat it as res nova. The views we entertain are in accordance with those of the Supreme Court of Massachusetts, in the case of Goodrich v. Wilson (119 Mass., 429). The judgment should be affirmed.
Mullin, P. J., concurred.