Glenny v. Langdon

Citation25 L.Ed. 43,98 U.S. 20
PartiesGLENNY v. LANGDON
Decision Date01 October 1878
CourtUnited States Supreme Court

APPEAL from the Circuit Court of the United States for the Southern District of Ohio.

The facts are stated in the opinion of the court.

The case was argued by Mr. S. T. Crawford for the appellant, and by Mr. Stanley Matthews for the appellee.

MR. JUSTICE CLIFFORD delivered the opinion of the court.

District courts of the United States are constituted courts of bankruptcy, and as such they have original jurisdiction in all matters and proceedings in bankruptcy, with power to hear and adjudicate the same according to the provisions of the Bankrupt Act.

Jurisdiction of those courts in that regard extends as well to the collection of all the assets of the bankrupt as to all cases and controversies between the bankrupt and any of his creditors, and to all acts, matters, and things to be done under and in virtue of the bankruptcy, until the final distribution and settlement of the estate of the bankrupt and the close of the bankruptcy proceedings. 14 Stat. 518; Rev. Stat., sect. 4972.

Creditors appoint the assignee; and the provision is, that, as soon as he is appointed and qualified, the judge, or when there is no opposing interest, the register, shall, by an instrument under his hand, assign and convey to the assignee all the estate, real and personal, of the bankrupt, with all his deeds, books, and papers relating thereto, and that such assignment shall relate back to the commencement of the proceedings in bankruptcy, the express enactment being that by operation of law the title to all such property and estate, both real and personal, shall vest in such assignee. Id., sect. 5044.

Explicit, comprehensive, and unqualified as the words of that provision are, still the instrument of assignment is made even more extensively operative by what follows in the same section of the original enactment, which provides that all property conveyed by the bankrupt in fraud of his creditors, . . . and all his rights of action for property or estate, real or personal, and all other causes of action arising from contract or from the taking or detention or injury to the property of the bankrupt, . . . shall, in virtue of the adjudication of bankruptcy and the appointment of his assignee, be at once vested in such assignee. 14 Stat. 523; Rev. Stat., sect. 5046.

Sufficient appears to show that certain debtors of the complainant and other creditors failed in business, and made, under the State law, a general assignment of their property to an assignee for the benefit of their creditors, prior to their being adjudged bankrupts. Pursuant to that assignment the assignee accepted the trust, and converted all of the visible property of the insolvents surrendered to him into money, and made final distribution of the proceeds among the creditors.

Charges of fraud against the debtors are made by the complainant, to the effect that they concealed large amounts of other property from their creditors and from the assignee, as fully set forth in the bill of complainant.

On the 10th of August, 1867, one of the said debtors filed his petition in bankruptcy, and on the 11th of October following, the firm of which the first-named debtor was a partner also filed their petition in bankruptcy; and the firm and each partner were duly adjudged bankrupts, the respondent, J. W. Caldwell, being subsequently appointed assignee in each case. They, the bankrupts, surrendered no property, and made oath that they had none, not excepted from the operation of the Bankrupt Act. Discovery has since been made, as the complainant alleges, that the bankrupts had fraudulently concealed a large amount of property not surrendered to the State assignee, or the assignee in bankruptcy, and that one of the firm made large gains and profits subsequent to the assignment under the State law and prior to the time when the firm was adjudged bankrupt.

Secret and fraudulent devices, as the complainant alleges, were employed by the insolvent debtors to conceal their property from the knowledge of their creditors and the assignee; and he describes the means which led to the discovery of the property, and avers that the respondent assignee was advised of the facts set forth, and that he was requested to adopt means to recover the same, or to allow his name to be used for that purpose, but that he refused so to do.

Both the complainant and respondents are citizens of the same State; but the complainant, being a creditor of the bankrupts, instituted the suit in his own name, claiming the right to do so because the assignee refused to proceed to recover the property, or to allow his name to be used for that purpose. Service was made; and the respondents appeared, and demurred to the bill of complaint, showing, among other things, the following causes: 1. That the complainant has no capacity or right in equity to bring the suit. 2. That the complainant has never proved his claim against the estate of the bankrupts.

Beyond all doubt, the suit in this case is brought to recover property conveyed by the bankrupts in fraud of their creditors, which, by the express words of the Bankrupt Act, vested in the assignee by virtue of the instrument of assignment executed at the time the assignee was appointed.

Jurisdiction of the Circuit Court in the case cannot be sustained upon the ground of the citizenship of the parties, as the record shows that the complainant and respondents are citizens of the same State; nor can it be upheld under the provision of the Bankrupt Act, which provides that the circuit courts shall have concurrent jurisdiction with the district courts of all suits at law or in equity, brought by an assignee in bankruptcy against any person claiming any adverse interest, or by such person against an assignee, touching any property or rights of the bankrupt, transferable to or vested in such assignee, for the plain reason that controversies, in order that they may be cognizable under that provision, either in the circuit or district court, must have respect to some property or rights of property of the bankrupt, transferable to or vested in such assignee; and the suit, whether it be a suit at law or in equity, must be in the name of one of the parties described in the provision, and be against the other, as appears by the express words of the provision. Smith v. Mason, 14 Wall. 431; Morgan v. Thornhill, 11 id. 75.

Nor is there any thing in the case of Clark v. Clark et al. (17 How. 315) inconsistent with the preceding proposition, when that case is properly understood. By the pleadings and proofs, it appears that the debtor had a large claim against Mexico pending before commissioners prior to the time he filed his petition in bankruptcy; that he was adjudged bankrupt before his claim was allowed; that the description of the claim in his schedule of assets was not such as to render it available to his creditors; that the assignee, having been empowered to sell his assets, sold the same to the sister of the bankrupt for a nominal sum, and that she immediately reconveyed the same to her brother; that he, the brother, subsequently prosecuted the claim, and recovered the same to the amount of $69,429.04, which was paid into the national treasury; that his brother, a judgment creditor, for himself and others, filed a bill of complaint here in the Circuit Court against the bankrupt, claiming the fund, the assignee having died before the same was recovered. Immediate steps were taken to procure the appointment of a new assignee, which appointment was made by the proper district court without delay; and the case shows that he forthwith petitioned the Circuit Court here to be admitted a party complainant in the same bill of complaint, and that he claimed the fund. Hearing was had; and the Circuit Court admitted the new assignee as a party complainant, and enjoined the secretary of the treasury not to pay out the fund until the further order of the court, and finally decreed that the fund belonged to the newly appointed assignee. Appeal was taken by the bankrupt, and this court affirmed the decree of the Circuit Court.

Nothing was decided in that case except that the newly appointed assignee was a proper party complainant in the bill filed by the bankrupt subsequent to the decease of the original assignee, and before his place was filled by a new appointment and that the fund belonged to the successor as the representative of the bankrupt estate. Further litigations followed, which show to a demonstration that neither the bankrupt nor any creditor could maintain any such suit. Clark v. Hackett, 1 Cliff. 273; s. c. 1 Black, 77.

Suppose it to be true, as alleged, that the described property and rights of the bankrupts which form the subject-matter of the present controversy were transferred to and vested in the assignee, it by no means follows that the Circuit Court has jurisdiction of the case, or that the complainant can maintain the suit; as it is clear to a demonstration that the instrument of conveyance referred to did not vest the property or any right to recover the same in the complainant or his associate creditors; nor is the claim which he makes to the property in any legal sense adverse to the rights of the assignee. What the complainant claims as against the assignee is that he, the assignee, refused to institute the suit, or to allow his name to be used for the purpose. He claims no interest in the property of the bankrupt adverse to the assignee; and if he did, the claim could not be sustained for a moment, as the entire property is transferred to the assignee, to be converted into money for distribution.

Unless the assignee can collect what is due to the bankrupt, he can never perform the duty assigned to him as the representative of the bankrupt; and the first section of the Bankrupt Act expressly provides that the jurisdiction of the district courts shall extend to the collection of all the...

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