Edward Murphy v. John Hofman Company

• Decision Date: 04 January 1909
• Docket Number: No. 33,33
• Parties: EDWARD MURPHY, 2d, Plff. in Err., v. JOHN HOFMAN COMPANY
• Court: U.S. Supreme Court

211 U.S. 562

29 S.Ct. 154

53 L.Ed. 327

EDWARD MURPHY, 2d, Plff. in Err.,

v JOHN HOFMAN COMPANY.

No. 33.

Argued December 1, 2, 1908.

Decided January 4, 1909.

Mr. Herbert D. Bailey for plaintiff in error.

[Argument of Counsel from page 562 intentionally omitted] Mr. John A. Barhite for defendant in error.

[Argument of Counsel from page 563 intentionally omitted] Mr. Justice Moody delivered the opinion of the court:

This is a writ of error to review a final judgment of the court of appeals of the state of New York in an action of replevin. The writ was allowed to the plaintiff in error, Murphy, but denied to the party joined with him, by the chief judge of that court while the record was still in its possession and before it had been remitted to the supreme court, in accordance with the practice of the state. A clear understanding of the questions before this court will be aided by a relation of the facts out of which the litigation arose. Such of them as do not bear upon the Federal questions may either be omitted or stated in a very general way.

The Dodge Dry Goods Company, a corporation, had contracted with the John Hofman Company, the defendant in error, for the construction and installation in the store of the Dodge Company of a lot of show cases. Shortly after the installation of the show cases, and before the contract price was paid, proceedings in bankruptcy against the Dodge Company were begun in the district court of the United States, and, on August 18, 1903, Edward Murphy, 2d, the plaintiff in error, was appointed by that court temporary receiver of the property of the alleged bankrupt. Thereupon the Hofman Company took the position that the show cases had never been accepted by the bankrupt, and that, although they had been used for some time in the business, title to them had not passed from the vendor. Accordingly, the Hofman Company, on August 20, 1903, demanded in writing the possession and delivery of the show cases from 'Edward Murphy, 2d, Receiver, etc., of Dodge Dry Goods Company.' Murphy declined to deliver up the property, saying that he was in possession as receiver. The order of the district court appointing the receiver recites the filing of the petition and affidavit, and directs the alleged bankrupt to show cause on the 6th of October, 1903, why a permanent receiver should not be appointed, and then directs that, pending the return of the order, the 'alleged bankrupt be, and it hereby is, enjoined and restrained from making any transfer of any of its property and . . . all persons are enjoined and restrained from instituting and from prosecuting any and all suits and proceedings in any court against said alleged bankrupt and against any of its property . . . that Edward Murphy 2d, . . . be, and he hereby is, appointed temporary receiver of all the property, real and personal, and rights of action and demands due said alleged bankrupt, with power to collect and receive same and continue the business with the present employees.' The order further directs that the receiver shall take immediate possession of the property of the bankrupt and carry on the business. On August 21, 1903, Murphy notified the president of the Dodge Company that he had been appointed receiver, and demanded possession of the property of the alleged bankrupt. The keys of the store were given to the receiver, and he took possession of the property in it, including the show cases, and continued the business. At that time the show cases were filled with goods, and they thenceforth were used by the receiver in the conduct of the business. Nothing at the time was said specifically about them, but shortly afterward the president of the Dodge Company informed the receiver that the title to the store was in the Century Mercantile Company, another corporation, and that, by the terms of the lease to the Dodge Company, the fixtures, including the show cases, became the property of the landlord on the bankruptcy of the tenant. The receiver then entered into negotiations with the counsel of the Century Mercantile Company, and it was agreed that the show cases should be omitted from the receiver's inventory, and the dispute as to the title to them between the receiver and the Century Mercantile Company should be referred to the decision of the bankrupt court. The situation then was this: The receiver was in possession of the stock of goods, engaged in conducting the business, and using the show cases in the business, claiming the right to do so because they were the property of the bankrupt. The receiver had been informed that there were two outstanding conflicting claims to the title of the show cases: first, that of the John Hofman Company, who manufactured and installed them, and claimed that the title had not passed to the bankrupt, but remained in the vendor; second, that of the Century Mercantile Company, who claimed that the title had passed to the bankrupt, and that afterwards, by virtue of the terms of the lease of the store, title had been vested in it. The receiver disputed both claims, and, as we shall see hereafter, the dispute with the Century Mercantile Company was settled by the bankruptcy court in favor of the receiver. The John Hofman Company, however, failed to resort to the bankruptcy court for the adjudication of its claim, and began an action against 'Edward Murphy, 2d, and Century Mercantile Company,' by the service, on the 6th day of October, 1903, of a summons 'to answer the complaint in this action,' together with an affidavit in replevin and a requisition to replevy the show cases and a copy of an undertaking from the plaintiff accepted by the sheriff. It will be observed that Murphy was not described in the summons as receiver. On that day the sheriff went to the store, identified the show cases, and said with respect to each one, 'I replevy this show case.' He was requested by both defendants not to take them away. He did not move them, or lock up the store, or put a keeper in charge, and went away, leaving the show cases exactly as they were when he came in. On the 9th of October, 1903, the judge of the bankruptcy court, on the petition of the receiver, enjoined all further proceedings in the action of replevin until the further order of the court; enjoined the sheriff from executing any requisition in replevin of property in the possession of the receiver, and enjoined the sheriff and all other persons from interfering in any manner with the property then in the possession of the receiver. The John Hofman Company applied for an order vacating this injunction. The application remained pending for a year, owing to the illness of the district judge, and on October 11, 1904, the order of injunction was vacated. Three days later, on October 14, 1904, the sheriff removed the show cases from the store. In the meantime they had been sold at a trustee's sale of the property of the bankrupt.

Thereafter the defendants severally filed answers. Murphy set up in defense that at the time of the service of summons upon him he was in possession of the property as the receiver of the bankrupt; that he remained in possession as receiver until the adjudication of bankruptcy and the appointment of himself as a trustee, and that as trustee, under the order of the bankruptcy court, he sold the property, and the sale was duly confirmed. The issue made by the pleadings was this: The plaintiff in replevin demanded the property in dispute from Murphy as an individual. Murphy, on the other hand, asserted that he had no concern with the property except in his capacity as receiver; that is to say, as an officer of the court of bankruptcy. The burden rested upon the plaintiff to show, first, that the title had not passed from it to the Dodge Company,—a question purely of state cognizance; and, second, that the possession of Murphy of the show cases was not a possession as receiver in bankruptcy,—a question ultimately for Federal cognizance. There was a trial before a jury and a verdict for the plaintiff, without damages, which was successively affirmed by the appellate division of the supreme court and by the court of appeals. Neither court rendered an opinion.

Before going further it is well to ascertain the principles of law which are applicable to the situation. The bankrupt act of 1898 [30 Stat. at L. 544, chap. 541, U. S. Comp. Stat. 1901, p. 3418], as originally enacted, did not confer jurisdiction on the district courts of the United States over suits brought by trustees in bankruptcy to assert title to property as assets of the bankrupt, or to set aside transfers made by the bankrupt in fraud of the creditors or by way of preference, unless by consent of the defendant. Bardes v. First Nat. Bank, 178 U. S. 524, 44 L. ed. 1175, 20 Sup. Ct. Rep. 1000; Frank v. Vollkommer, 205 U. S. 521, 51 L. ed. 911, 27 Sup. Ct. Rep. 596. The act, however, preserves the jurisdiction, otherwise existing by statute, of the courts of the United States, though it is limited to courts where the bankrupt himself could have prosecuted the action. Bush v. Elliott, 202 U. S. 477, 50 L. ed. 1114, 26 Sup. Ct. Rep. 668. But, where the property in dispute is in the actual possession of the court of bankruptcy, there comes into play another principle, not peculiar to courts of...