In re Dempster

• Decision Date: 26 July 1909
• Docket Number: 92,2,947.
• Citation: 172 F. 353
• Parties: In re DEMPSTER. v. WATERS-PIERCE OIL CO. et al. DEMPSTER
• Court: U.S. Court of Appeals — Eighth Circuit

172 F. 353

In re DEMPSTER.

DEMPSTER v. WATERS-PIERCE OIL CO. et al.

Nos. 92, 2,947.

United States Court of Appeals, Eighth Circuit.

July 26, 1909

On April 10, 1908, a petition in involuntary bankruptcy was filed in the District Court for the Southern District of New York, against the Hudson Valley Lead Company, a corporation organized under the laws of that state, asking that it be adjudged bankrupt upon its confession in writing that it was insolvent and unable to pay its debts. The following day the court appointed Harry Arnold receiver of the property of the corporation and authorized him to conduct its business. The principal estate of the bankrupt was a lead mine and machinery and other property used in working the same situated in Southern Missouri. A few days prior to the filing of the petition in bankruptcy namely, March 25, 1908, the appellant, Dempster, recovered a judgment against the bankrupt in the circuit court of Madison county, Mo., for $11,380.23, upon which execution was issued and levied upon a large amount of the company's real and personal property. The sale was advertised to take place April 17th, and if carried out would have completely disrupted the business of the corporation and greatly impaired the value of the estate. On April 16th the creditors (among others the Waters-Pierce Oil Company) who filed the petition in bankruptcy in New York and the receiver presented a 'petition' in the United States District Court for the Eastern District of Missouri, setting forth the proceedings in the New York court, the seizure of the property under the execution, and the imminence of the sale. It further stated that the sale would result in a preference to Dempster, and waste and destroy the estate of the bankrupt. This petition was not a bill in equity, and prayed for no subpoena or answer. It pertained to no suit or proceeding pending in the court where it was filed, but was in effect a motion made in no cause before the court. It prayed (1) for the appointment of an 'ancillary' receiver to take possession of the estate in Missouri; and (2) for an injunction restraining Dempster and the sheriff from selling the property on the execution. No notice was served upon Dempster or the sheriff, but the bankrupt appeared by counsel and consented that the relief asked for be granted. On the same day, April 16th, an ex parte order was made in accordance with the prayer of the petition. The sheriff, upon this order being presented to him, turned the property over to the receiver.

June 19th Dempster applied to the trial court to vacate its order because made without jurisdiction, and for a return of the property to the sheriff. Before this date the corporation had been adjudicated a bankrupt in the original proceeding in New York and a trustee had been duly elected and qualified. He appeared and answered the petition, not only setting up the adjudication and his own election, but further stating that Dempster had appeared repeatedly in the federal court of New York, and among other things had petitioned that court to transfer the proceeding to the United States Court for the Eastern District of Missouri. The matter came on to be heard on petition and answer, and evidence adduced by the parties. The court entered an order that the receiver appointed in the District Court in Missouri turn over to the trustee in bankruptcy appointed in the proceeding in New York 'all the property of the bankrupt taken possession of by the receiver, but without prejudice to the rights of Dempster to claim and enforce in any court of competent jurisdiction any right or lien to which he may be entitled by reason of the judgment heretofore rendered in the circuit court of Madison county, Mo. ' It was further ordered that the injunction against Dempster and the sheriff, restraining them from interfering with the possession of the ancillary receiver, be continued as to the possession of the trustee. A review of this order is sought both by appeal and petition.

H. J Cantwell and John C. Brown, for appellant.

E. D. Anthony, for appellees.

Before VAN DEVANTER, Circuit Judge, and RINER and AMIDON, District judges.

AMIDON District Judge (after stating the facts as above).

The appellant mainly contends that the written admission of the corporation that it was insolvent and unable to pay its debts was collusive, and that the adjudication in bankruptcy in New York was without authority of law. This is a collateral attack upon the judgment of the New York court, which cannot be permitted. When the petition in bankruptcy in that court was filed, it was a caveat to all the world, and the appellant here was thereby made a party to that proceeding. If in his judgment is was without authority of law, or the petition was collusive, it was his duty to appear in that court and contest the proceeding, and, if dissatisfied with the judgment, seek his redress by appeal.

He cannot be heard to raise the question collaterally in another court.

We are of the opinion, however, that the entire proceeding in the trial court was coram non judice. It was definitely decided in this circuit in the case of In re Granite City Bank, 137 F. 818, 70 C.C.A. 316, that under the present bankruptcy law 'there are no such things in bankruptcy proceedings as courts of primary and ancillary jurisdiction. ' The court in which the petition is filed has plenary jurisdiction in bankruptcy throughout the United States. Within that limit all the estate in the possession of the bankrupt or held by another as his property is brought immediately within the custody of the court and made subject to its protection. The filing of the petition is an attachment of the estate, and an injunction restraining any act which will interfere with its administration in bankruptcy. This jurisdiction is national, and takes no account of districts or states. In re Wood and Henderson, 210 U.S. 246, 28 Sup.Ct. 621, 52 L.Ed. 1046; In re Williams (D.C.) 123 F. 321, approved by the Circuit Court of Appeals of the Second Circuit, in the case of In re Von Hartz, 142 F. 726, 74 C.C.A. 58. See, also, In re Williams (D.C.) 120 F. 38; In re Schrom (D.C.) 97 F. 760. Any proceeding necessary for the protection of the estate had in any other district must take the form of a plenary action at law or suit in equity. A petition or motion, such as was presented to the trial court, can only be made in an action, suit, or proceeding pending in court. The appointment of a receiver or the issuance of an injunction can only be made in some cause properly before the court. Inasmuch as there was no cause or bankruptcy proceeding pending in the Eastern District of Missouri to which the petition or motion here under review could be attached as a provisional remedy, the trial court was wholly without jurisdiction to entertain the motion.

A contrary conclusion is reached in the cases of In re Benedict (D.C.) 140 F. 55, and In re Dunseath & Son Co. (D.C.) 168 F. 973, where the authorities are reviewed. The decisions there relied on, however, are misapprehended. Sherman v. Bingham, Fed. Cas. No. 12,762, and Lathrop v. Drake, 91 U.S. 516, 23 L.Ed. 414, were both plenary suits. The former was an action of assumpsit, instituted by declaration and summons, to recover money wrongfully received from the bankrupt. The latter was a suit in equity, instituted by bill and subpoena, to set aside a fraudulent preference. The question raised in these cases was whether under Bankr. Act March 2, 1867 (14 Stat. 517, c. 176), United States courts had jurisdiction of a plenary action brought by the trustee in any district other than that in which the petition was filed, and it was decided that such jurisdiction existed. Such suits are spoken of by the court as ancillary; but the word 'ancillary,' as there used, simply means that the suits are in aid of the court of bankruptcy in collecting the assets of the estate. They lend no countenance to the filing of a petition or motion in a court where no cause is pending.

Under the present bankruptcy law the trustee is vested with all the property belonging to the bankrupt, and may pursue any remedy available to the owner of property.

If the property has been reduced to possession, the court of bankruptcy can grant him full relief in the exercise of its summary jurisdiction. If it is held adversely, he can only recover it by plenary action or suit. The only court in which he can proceed by petition or motion is the court in which the proceeding is originally instituted. In re Williams (D.C.) 123 F. 321; Ross-Mecham Foundry Co. et al. v Southern Car & Foundry Co. (D.C.) 124 F. 403; In re Von Hartz, 142 F. 726, 74...