Court Opinion

ID: 6852119
Source: CourtListenerOpinion
Date Created: 2022-07-23 20:37:21.552007+00
Date Added: 2024-06-11T16:05:05.275006
License: Public Domain

MORTON, Circuit Judge
(dissenting).
The essential facts are simple. In an equity receivership pending in the District Court, the receiver was authorized to sell the property in his custody for payment of the expenses of the receivership and 30 per cent, of all claims which might be filed by a certain date and allowed by the court. To secure payment according to the agreement, the buyer, Dempsey, gave a bond with sureties in the sum of $100,000 running to the United States. Raphael was one of the creditors. He appeared in the receivership proceedings and proved his claim; and it was allowed for $35,000. Dempsey defaulted on his payments. Raphael obtained leave of the District Court to sue Dempsey and his sureties on the bond in the state court. Suit was accordingly brought there' by Raphael in the name of the United States of America, on his relation, as plaintiff, and was prosecuted nearly to final judgment. The property of the defendants was attached in that suit and is still held under the attachment. After Raphael’s suit had been begun the receiver brought suit on the bond by a supplementary bill in the District Court, in the name of the United States, and a final judgment was entered therein against Dempsey and his sureties for $33,026, which includes the amount due to all creditors including Raphael.
After obtaining this judgment the receiver moved in the District Court that the leave theretofore granted to Raphael to sue in the state court he revoked and further proceedings therein by him be enjoined, except the entry of judgment. From the allowance of this motion and the granting of the injunction, the present appeal was taken.
The suit on the bond is clearly within the general jurisdiction of the federal courts. The Judicial Code (section 24 [28 USCA § 41]) provides: “The district court shall have original jurisdiction as follows: First. Of all suits of a civil nature, at common law or in equity, brought by the United States, or by any officer thereof authorized by law to sue,” etc. It is well settled that on bonds taken in the name of the United States there is jurisdiction under this statute. Howard v. United States, 184 U. S. 676, 22 S. Ct. 543, 46 L. Ed. 754; U. S. F. & G. Co. v. Kenyon, 204 U. S. 340, 27 S. Ct. 381, 51 L. Ed. 516 The contrary view was followed in United States v. Sheridan (C. C.) 119 F. 236; United States v. Barrett (C. C.) 135 F. 189, which were overruled by the Kenyon decision.
The suit by the receiver and his recovery of a complete judgment covering the claims of all parties under the bond greatly changed the situation from what it was when leave to sue in the state court was granted to Raphael. It became a question whether one creditor should be allowed to press his claim in competition with the receiver who was acting for all creditors and for the estate. In forbidding him from doing so, 1 think the District Judge was plainly right. The contrary view leads to the curious spectacle of one creditor being permitted to compete against the receiver and ihe other creditors, to obtain a preference to which he is not entitled, through the means which were adopted to safeguard the payment of the purchase price for which the receivership property was sold. Raphael’s complaint against the injunction order is that it deprives him of this advantage and puts him on an equality with the other creditors — which I think is where ho belongs, while my brethren apparently think him entitled to his preference.
I also differ from my brethren in their construction of the bond, as being suable by individual creditors for their own benefit. It is conditioned only that Dempsey shall fulfill his contract with the receiver; there is nothing in it about creditors or their claims. In my opinion it was suable only on the relation of tho receiver by whom it was taken and with whom the contract which it secured was made. The present bond differs from those given to protect materialmen, in that a receiver is here interposed between the creditors and the obligors. Even as to bond.; of this general character, expressly conditioned on the payment of specified claims, 1 am aware of no case in which they have been held to create such individual rights of action as are here approved. When one creditor sues on them it must be on behalf of all. Under the majority decision, Dempsey’s default in payment under his contract set up a free-for-all on the bond, open to all creditors with allowed claims — for. it is not to be supposed that the court would grant leave to sue to one and refuse it to another — in which the prize, *22the assets of the obligors, goes to the quickest and smartest. It seems to me an unfortunate, as well as an erroneous, result.
Notwithstanding the dictum m the Howard Case, supra, there is, I think, grave doubt whether the state court had any jurisdiction of the suit on’the bond in the name of the United States. The words “Of all suits,” in section 24, have usually been understood as conferring exclusive jurisdiction. In the entire history the Massachusetts Supreme Judicial Court (according to the table of eases in the digest) only one action, not resting on some special statute, has ever been brought in the name of the United States, U. S. v. Commissioner of Banks, 254 Mass. 173, 149 N. E. 883 — a claim on a check taken by the United States which was drawn on a state trust company which failed and was being liquidated under direction of the state court. The Dempsey bond and all proceedings on it were, essentially, parts of the .liquidating receivership in the District Court. The whole thing ought to have been retained there. The order permitting suit in the state court, if it amounted to anything, was ill advised. The District Judge was right in recognizing that fact and revoking the order.