Court Opinion

ID: 8639912
Source: CourtListenerOpinion
Date Created: 2022-11-24 19:51:30.232307+00
Date Added: 2024-06-11T16:56:03.991783
License: Public Domain

BLODGETT, District Judge.
This question came before me in the case of the National Insurance Company, which was also a case where a creditors’ bill had been filed in the state court, on which a receiver was appointed and took possession of the assets of the company, and proceedings in bankruptcy were then instituted against the company. I had occasion to investigate the question very thoroughly in that case, and after a very careful examination in the light of the authorities, both in this country and in England. I came to the conclusion that the proceedings in bankruptcy superseded the creditors' bill; and that the receiver in the chancery siiit would be obliged and could be compelled to deliver the property over to the asssignee in bankruptcy, subject, of course, to all the rights which the creditors whom he specifically represented had obtained, and to all the priority which they had obtained by their diligence. I announced my conclusion in that case and the parties acquiesced in it.
This class of cases, of course, brings up the difficult question of collision between the jurisdiction of the several courts, and I see no way to harmonize it except to assume that when proceedings in bankruptcy are properly instituted and take effect, they must of necessity supersede the proceedings on creditors' bills, subject to all the rights which the parties may have acquired by the steps taken. Now, if one creditor obtained a judgment'in *9291S73, that Judgment is ipso facto a lien upon the real estate of the debtor, and if anything is realized out of his real estate this lien would have to be respected. Then if he had acquired possession of any assets through his receiver, undoubtedly to the extent that assets had come into the receiver’s hands, the authorities require the bankruptcy court to respect the lien thereby obtained.
How far we are to go in enforcing what counsel characterize as an equitable lien, simply by their having instituted proceedings in chancery and obtained the appointment of a receiver, is a question upon which I would prefer to reserve an opinion until we come to distribute the estate. That is a question that has never been fairly up. It is presented by Mr. Tenney in this case, he claiming that by their diligence in filing the creditors’ bill, they have acquired a sort of blanket lien on the whole property. It seems to me utterly impossible to carry on the two administrations together; the estate should be administered in one court, and I think the bankrupt court the proper one. The assignee in bankruptcy necessarily, and by operation of law, takes possession of the assets, subject to the existing claims or liens of the creditors in the state courts. And I think that the better authority and the more reasonable doctrine is that the proceedings in bankruptcy supersede all other proceedings for the administration of the assets of the debtor, subject only to priorities which are obtained by any creditors by the use of diligence, which are to be respected and which should be paid in the order of priority, according to whatever rights have been obtained. Now, in this case, the receiver in the state court has obtained no property. The bankrupt reports to this court that he has turned over all his assets of every nature to the marshal of this court, under the warrant of seizure in bankruptcy. Under these circumstances, the bankruptcy court must go on and administer the estate, leaving these judgment creditors to assert their claims and priorities. if any. in this court. The question is not a new one, but has been frequently up, and until it is overruled by the supreme court, I shall insist upon this construction of the law.
Let the rule to show cause be made absolute, and the judgment creditors be enjoined from proceeding in the creditors’ suits in the state courts, reserving all questions as to the priorities which they have there acquired, to be determined by this court hereafter.