Court Opinion

ID: 6378854
Source: CourtListenerOpinion
Date Created: 2022-06-24 23:58:13.623867+00
Date Added: 2024-06-11T15:50:16.995416
License: Public Domain

Van Dusen, J.,
dissenting. — -Depreciation charges are not “temporary with-holdings of earnings,” if made properly. They are supposed to represent actual physical deterioration and obsolescence — a permanent loss which cannot be made up by “necessary repairs and upkeep.” In theory, and approximately in practice, when a building has been 100 per cent, depreciated it is worthless. If, then, the ground and the old building together sell for more than the cost of the two together, this does not show that “there was no loss through depreciation.” Either too much depreciation has been charged or there has been a gain in the market value of the land, or both. In the first case, income ought to have restored to it the amount improperly charged, if it can be ascertained; in the second case, there has been a capital gain.
In the present case, the stipulation only tells us that income for some years was put into a “construction account” to which “necessary repairs and upkeep” were charged, and when this was abandoned, an account entitled “reserve against depreciation” was set up. We do not know the rate of depreciation or whether it was the proper rate. If it was a proper depreciation, then there is nothing to restore to income. In income tax practice depreciation on buildings is deducted annually. When a sale is made, the capital gain is calculated on the basis of the depreciated value. There is no attempt to readjust the income returns for the years in which depreciation has been claimed.
The burden was on the life tenant to pick out earnings, or earnings improperly put into depreciation which should have gone into surplus, and as he has not given us sufficient facts to enable us to revise the company’s figures, the exceptions on this point should be sustained. It is not clear to me even that the construction account was a depreciation account.
The jurisdiction of the bankruptcy court to administer the bankrupt’s property and to ascertain, foreclose and marshal liens upon it is not exclusive in the sense that admiralty jurisdiction is exclusive, for example. The jurisdiction is exclusive at the option of the bankruptcy court and its officers. Mortgages are foreclosed in the state courts, although the real owner is bankrupt, leave being given by the bankruptcy court. This practice is recognized in Isaacs, Trustee, v. Hobbs Tie & Timber Company and Straton et al. v. New, Trustee, et al., and it occurs every day. The trustee in bankruptcy may become a party to the foreclosure or to any suit already pending in the state courts at the time of the *182bankruptcy. When he does so, he is bound by the decree: Davis v. Friedlander, 104 U. S. 570. In this case the trustee in bankruptcy has voluntarily come in and made his claim, and has won it, and he makes no request that the matter be remitted to the bankruptcy court. We may take it, I think, that the bankruptcy court consents. As the matter is within our general jurisdiction: Dundas’s Appeal, 73 Pa. 474; I do not think we should abandon the responsibility of deciding it of our own motion without some intimation from the bankruptcy court or its officers that they renounce their victory and assert their right to litigate in their own court. At least we should give the parties an opportunity to get leave of the bankruptcy court to proceed with this litigation.
But I do agree that if I had been requested at the audit by the representative of the bankrupt estate, the controversy should have been turned over to the bankruptcy court except as to the Mogee claim. That court will not interfere in a suit pending at the time when the bankruptcy petition was filed: Straton et al. v. New, Trustee, et al. In the exhaustive note to that decision at 75 L. Ed. 1060, I do not find any case like this. The facts out of which this controversy arose occurred at Anna Taggart’s death, after the bankruptcy, and I do not think it can be regarded as a suit pending at that time.
In any event, the Mogee exceptions should be dismissed without qualification. They held an absolute assignment, and the question is as to the scope and meaning of the assignment, and is, therefore, a question of title. The bankruptcy court does not draw to itself all disputes about all property which the bankrupt ever owned. See Eyster v. Gaff et al., 91 U. S. 521. We have decided against the assignee, with undoubted jurisdiction to do so, and there is no occasion to give him a chance to litigate the question over again in the bankruptcy court.