Claflin v. Houseman, Assignee

Decision Date01 October 1876
CourtU.S. Supreme Court

ERROR to the Supreme Court of the State of New York.

This action was brought in May, 1872, in the New York Supreme Court, county of Kings, by Julius Houseman, as assignee in bankruptcy of Comstock and Young, against Horace B. Claflin, under the thirty-fifth section of the Bankrupt Act, to recover the sum of $1,935.57, with interest, being the amount collected by Claflin on a judgment against the bankrupts, recovered within four months before the commencement of proceedings in bankruptcy. The ground of the action, as stated in the complaint, was that they (the bankrupts) suffered the judgment to be taken by default, with intent to give Claflin a preference over their other creditors, at a time when they were insolvent, and when he knew, or had reasonable cause to believe, that they were insolvent, and that the judgment was obtained in fraud of the bankrupt law. The defendant demurred to the complaint, assigning as cause, first, that the court had no jurisdiction of the subject of the action; secondly, that the complaint did not state facts sufficient to constitute a cause of action. Judgment was rendered for the plaintiff on the thirteenth day of January, 1873, and was subsequently affirmed both by the general term of the Supreme Court and by the Court of Appeals. This judgment is brought here by writ of error, under the second section of the act of Feb. 5, 1867 (14 Stat. 385).

Argued by Mr. William Henry Arnoux for the plaintiff in error.

Where Congress has an exclusive right to legislate, the Federal courts have an exclusive power to adjudicate. United States v. Ames, 1 W. & M. 76; United States v. Bailey, 9 Pet. 261; United States v. Cornell, 2 Mason, 91; Osborn v. U. S. Bank, 9 Wheat. 818.

Where a State cannot legislate, its courts cannot adjudicate. United States v. Lathrop, 17 Johns. 4; Martin v. Hunter's Lessee, 1 Wheat. 304; Rose v. Hinely, 4 Cranch, 241; McLean v. Lafayette Bank, 3 McLean, 191; Stearns v. United States, 2 Paine, 311; Shearman v. Bingham, 7 N. B. R. 490.

The jurisdiction of the courts of the United States is exclusive in all cases arising under the Constitution, laws, or treaties of the United States. Const. U. S., art. 3, sects. 1, 2; 2 Story on Const., sect. 1754; Martin v. Hunter's Lessee, supra; Ex parte Cabrera, 1 Wash. C. C. 232; Griffin v. Domingues, 2 Duer, 576; Mannhardt v. Joderstron, 1 Binn. 138; Commonwealth v Kostaff, 5 Serg. & R. 545; Davis v. Packard, 7 Pet. 276; Houston v. Moore, 5 Wheat. 1.

The Bankrupt Act of March 2, 1867, by a just construction of its terms, confers exclusive jurisdiction upon the district and circuit courts of the United States. Goodall v. Tuttle, 7 N. B. R. 193; In re Alexander, 3 id. 6; Shearman v. Bingham, 7 id. 490; Ex parte Christy, 3 How. 292; Mitchell v. Great Milling Works Co., 2 Story, 656; Peck v. Jenness, 7 How. 621; McLean v. Lafayette Bank, 3 McLean, 190; Moore v. Jones, 23 Vt. 746.

The right of an assignee to bring suits for the collection of the assets of a bankrupt is a new right conferred upon him by an act of Congress. Cook v. Whipple, 55 N. Y. 150. Therefore the remedy afforded by the statute is exclusive. Dudley v. Mayhew, 3 N. Y. 15; Jordan Plank Road v. Morley, 23 id. 554; Thurber v. Blanck, 50 id. 80; Hollister v. Hollister Bank, 2 Keyes, 248; Almy v. Harris, 5 Johns. 175; Rex v. Robinson, 2 Burr. 799.

The fact that an assignee in bankruptcy is dependent upon the national tribunals, and independent of those of the States, is conclusive against the jurisdiction of the latter, over statutory actions brought by him as an officer appointed under the laws of the United States. The State courts can neither interfere with, or interrupt, the exercise of the authority with which he is clothed, nor aid in enforcing it. McKim v. Voorhies, 7 Cranch, 279; Slocum v. Mayberry, 2 Wheat. 1; McClung v. Silliman, 6 id. 598; United States v. Barney, 3 Hall's L. J. 128; United States v. Peters, 5 Cranch, 115; McNutt v. Bland, 2 How. 17; Hopkins v. Stockton, 2 Watts & S. 163.

The United States and the States are distinct and independent autonomies in their sovereign capacity, and their laws are foreign to each other, except in their surrendered powers. Ohio L. & T. Co. v. DeBolt, 16 How. 428; Buckner v. Finley, 2 Pet. 590; Bank of Augusta v. Earle, 13 id. 520. Therefore the State courts have no jurisdiction over an action brought by a person acting in a representative capacity, who 6 Barb. 429; Parsons v. Lyman, 20 N. Y. 103; Williams v. Storrs, 6 Johns. Ch. 353; Doolittle v. Lewis, 7 id. 45; Vroom v. Van Horn, 10 Paige, 549; Morrell v. Dickey, 1 Johns. Ch. 153; Brown v. Brown, 1 Barb. Ch. 189; Petersen v. Chemical Bank, 32 N. Y. 21; Matter of Estate of Butler, 38 id. 400; Mosselman v. Caen, 34 Barb. 66; Abraham v. Plestero, 3 Wend. 538; Willetts v. Waite, 25 N. Y. 577; Harrison v. Sterry, 5 Cranch, 299; Johnson v. Hunt, 23 Wend. 87; Hoyt v. Thompson, 5 N. Y. 340; Peale v. Phipps, 14 How. 368; Orr v. Amory, 11 Mass. 25; Booth v. Clark, 17 How. 322.

Submitted on printed arguments by Mr. B. F. Lee for the defendant in error.

MR. JUSTICE BRADLEY delivered the opinion of the court.

The point principally relied on by the plaintiff in error is, that an assignee in bankruptcy cannot sue in the State courts.

It is argued that the cause of action arises purely and solely out of the provisions of an act of Congress, and can only be prosecuted in the courts of the United States, the State courts having no jurisdiction over the subject. It is but recently settled that the several district and circuit courts of the United States have jurisdiction, under the bankrupt law, of causes arising out of proceedings in bankruptcy pending in other districts. There had been much doubt on the subject, but it was finally settled at the last term of this court in favor of the jurisdiction. Lathrop, Assignee, v. Drake et al., 91 U. S. 516. Had the decision been otherwise, as for a long period was generally supposed to be the law, assignees in bankruptcy, if the position of the plaintiff in error is correct, would have been utterly without remedy to collect the assets of the bankrupt in districts other than that in which the bankruptcy proceedings were pending. Neither the State courts nor the Federal courts could have entertained jurisdiction. The Revised Statutes, whether inadvertently or not, have made the jurisdiction of the United States courts exclusive in 'all matters and proceedings in bankruptcy.' Sect. 711. Whether this regulation will or will not affect the cognizance of plenary actions and suits, it is not necessary now to determine. At all events, the question of such cognizance must be met in this case; and, being important in the principles involved, would require much deliberate consideration, had it not been already in effect decided by the court.

In the opinion of the court, in Lathrop, Assignee, v. Drake et al., it was taken for granted, and stated, that the State courts had jurisdiction (p. 518); but as the question was not directly involved in that case, it was more fully considered in Eyster v. Gaff et al., 91 U. S. 521, and it was there decided that a State court is not deprived of jurisdiction of a case by the bankruptcy of the defendant, but may proceed to judgment without noticing the bankruptcy proceedings, if the assignee does not cause his appearance to be entered, or proceed against him if he does appear. If there were any thing in the Constitution to incapacitate the State courts from taking cognizance of causes after the bankruptcy of the parties, as the constitutional argument of the plaintiff in error supposes, the proceedings in bankruptcy would ipso facto determine them. But on this subject, in Eyster v. Gaff et al., the court say: 'It is a mistake to suppose that the bankrupt law avoids, of its own force, all judicial proceedings in the State or other courts the instant one of the parties is adjudged a bankrupt. There is nothing in the act which sanctions such a proposition.' Again: 'The debtor of a bankrupt, or the man who contests the right to real or personal property with him, loses none of those rights by the bankruptcy of his adversary. The same courts remain open to him in such contests, and the statute has not divested those courts of jurisdiction in such actions. If it has, for certain classes of actions, conferred a jurisdiction for the benefit of the assignee in the circuit and district courts of the United States, it is concurrent with, and does not divest that of, the State courts.' pp. 525, 526.

The same conclusion has been reached in other courts, both Federal and State, which hold that the State courts have concurrent jurisdiction with the United States courts of actions and suits in which a bankrupt or his assignee is a party. See Samson v. Burton, 4 Bank. Reg. 1; Payson v. Dietz, 8 id. 193; Gilbert v. Priest, 8 id. 159; Stevens v. Mechanics' Savings Bank, 101 Mass. 109; Cook v. Whipple, 55 N. Y. 150; Brown v. Hall, 7 Bush, 66; Mays v. Man. Nat. Bank, 64 Penn. 74. There are contrary cases, it is true, as Brigham v. Claflin, 31 Wis. 607 Voorhees v. Frisbie, 25 Mich. 476, and others; but we think that the former cases are founded on the better reason.

The assignee, by the fourteenth section of the Bankrupt Act (Rev. Stat. sect. 5046), becomes invested with all the bankrupt's rights of action for property, and actions arising from contract, or the unlawful taking or detention of or injury to property, and a right to sue for the same. The actions which lie in such cases are common-law actions, ejectment, trespass, trover, assumpsit, debt, &c., or suits in equity. Of these actions and suits the State courts have cognizance. Why should not an assignee have power to bring them in those courts, as well as other persons? Aliens and foreign corporations may bring them. The assignee simply derives his title through a law of the United...

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