Court Opinion

ID: 8783239
Source: CourtListenerOpinion
Date Created: 2022-11-26 13:26:21.397475+00
Date Added: 2024-06-11T17:02:56.735678
License: Public Domain

HAND, District Judge
(after stating the facts as above). [1] The New York receivers have delivered all the chattels to the trustees. They retain nothing by any possible construction, unless it be the choses in action against Parker and Wilson, in so far as one retains a chose in action by keeping alive an action upon it. What mischief then can the prosecution of the original suit actually do to the bankrupt estate? First, it can purport to determine something in respect of its distribution, which, as the trustees are now parties, might he urged to create an estoppel against them. It is true that the jurisdiction of the bankruptcy court is exclusive, and it is also true that the original suit was nothing hut an effort at sequestration and therefore in rein, and that the assets have now been delivered by the state court, with the questionable exception of the choses in action mentioned. However, it would be absurd to deny that a judgment on its face purporting in any way to adjudge the rights of the receivers or of trustees, or of any creditors, or of the bankrupt, to any of the assets of the bankrupt estate would be a source of embarrassment and perhaps of litigation for the trustees. Second, it might even assume to issue process against the trustees in bankruptcy, in respect of the assets with whose title they are vested by the act of Congress, especially in respect of the choses in action against Parker and Wilson, or to direct that these causes of action should be prosecuted by the receivers and not by the trustees. These, if threatened, would justify the interposition of this court; perhaps there are other acts which might justify it.
[2] On the other hand, is there anything which the state court could do in that suit which would not be in diminution of the powers of the bankruptcy court? Mr. Justice Bischoff has already indicated that it could enter a judgment which adjudged proper the provisional remedies already obtained, and so relieve the plaintiffs from further payment of bond premiums. It might likewise determine the distribution among stockholders of any dividends which should come to the corporation on conclusion of the bankruptcy, if any there should turn out to be. Of course, I am not passing upon the propriety of such a suit as this against a foreign corporation at all, for that is exclusively a matter for the state court. I am only suggesting what, if such a suit is maintainable from any point of view, the state court could do which would not interfere with the jurisdiction of the bankruptcy court. There may be other things which do not now occur to me which the state court might do, if its judgment were limited so as not to attempt any such interference, but it is enough that there is a legitimate scope for its judgment, and that the dean of its bench, Mr. Justice Bjschoif, has already indicated his opinion of what it might do. To stay the suit could only be because "of some distrust in the ability of the state court or its loyalty to the act of Congress. Undoubtedly the very existence of any federal *156court does presuppose that state courts will not be free from local bias, but it is one thing to provide means to litigants for avoiding that bias, and another to intervene for that reason in the very operation of a court already begun. Even the latter power does exist (In re Hecox, 164 Fed. 823, 90 C. C. A. 627; Hooks v. Aldridge, 145 Fed. 865, 76 C. C. A. 409; New River Coal & Land Co. v. Ruffner, 165 Fed. 881, 91 C. C. A. 559), but its existence does not mean it ought always to be exercised, and, in fact, it ought to be very sparingly exercised, rather after the analogy'of habeas corpus (Ex parte Royall, 117 U. S. 250, 6 Sup. Ct. 742, 29 L. Ed. 872). Indeed, nothing more quickly makes contempt for law than to have judges each catching at jurisdiction, and nothing more quickly breeds confidence than if judges really trust in each other. It shows rather a martial than a judicial vigor to assert such a jurisdiction, and, unless it be unavoidable, it ought not to be used. This is what the Supreme Court had in mind, I think, in Re Watts, 190 U. S. 1, on page 35, 23 Sup. Ct. 718) on page 727 (47 L. Ed. 933), when it said:
“It remained for the state court to transfer tlie assets, settle the accounts of its receiver, and close its connection with the matter. Errors, if any, committed in so doing, could be rectified in due course and in the designated way.”
Moreover, even if the state court does not so scrupulously regard the limitation of its own jurisdiction as the trustees think it should, they_ have their appeal, and, if by evil chance that does not serve them, still, since the question is of jurisdiction, the bankruptcy court has an inherent power to protect its own possession and its own suitors, should they be disturbed.
The trustees complain of the expense of the defense, but I cannot avoid that, for it is an expense which arises from the financial entanglements of the bankrupt before bankruptcy. Besides, it ought not to be laborious or expensive to try the cause, in which they have no interest in the issues, but only in the form of the judgment which shall be taken. The state court certainly has the power to close up its own suit and enter a judgment. I could not, even if I would, enjoin such action, because it was possible that it might press its judgment further than it should. No case goes to that length
Motion denied.