In re Dunseath & Son Co.

• Decision Date: 22 March 1909
• Docket Number: 5.
• Parties: In re DUNSEATH & SON CO. et al.
• Court: U.S. District Court — Western District of Pennsylvania

168 F. 973

In re DUNSEATH & SON CO. et al.

No. 5.

United States District Court, W.D. Pennsylvania.

March 22, 1909

John W Dunkle and Carrell & Henkle, for petitioners.

J. M Shields and A. B. Angney, for creditors.

YOUNG District Judge.

This case is here upon the petition of the American Manufacturing Company, a corporation of the state of West Virginia, which recites that it is a creditor and a person interested in the estate of the above bankrupts; that Robert Dunseath individually and the firm of Dunseath & Son Company, on February 9, 1909, filed a petition in the clerk's office of the District Court for the Southern district of New York praying for the adjudication in bankruptcy of Robert Dunseath, individually and the partnership firm of Dunseath & Son Company; that the bankrupts have been engaged in business in the city of New York, in the Southern district of New York; that on February 9, 1909, the United States District Court for the Southern district of New York appointed James O. Tryon receiver, who has duly qualified and given bond as required by the court; that the partnership of Dunseath & Son Company consists of Robert Dunseath, Alfred E. Dunseath, an infant, and George Harvey; that service of the subpoena has not been had on Harvey, and that time will be required to serve him by publication; that pending the appointment of a referee the adjudication and election of a trustee several months will probably elapse; that property consisting of machinery and supplies used in the construction of bridges is located near the town of Donora, in this district; that the assets within this district can now be sold at higher prices than later because of a demand for such material in the construction of a new bridge at Donora; that the expense of caring for the assets pending the election of a trustee could be saved by the appointment of a receiver and the sale of the assets; and that an ancillary receiver should be appointed. The petition filed by James O. Tryon, the receiver appointed by the District Court for the Southern district of New York, was filed with the above-recited petition of the American Manufacturing Company, which recites the same matters, and, in addition thereto, that the assets of the bankrupts located in this district are in the custody of the sheriffs of Washington and Westmoreland counties, both in this district, by virtue of sundry writs of foreign attachments obtained within four months of the commencement of the bankruptcy proceedings, and that said sheriffs refused to deliver the property seized thereunder to the petitioner as receiver, and prays for an order directing these officers to turn over the assets in their custody to the receiver. Service of notice of these applications was accepted by counsel for the attaching creditors.

Two questions are thus presented for our consideration: First. Can the District Court of this district stay the officers of the state court, and order them to surrender the assets of the bankrupts in this district to the receiver appointed in the Southern district of New York, so that they may be preserved until the trustee is elected?

Second. Has a District Court of the United States jurisdiction to appoint an ancillary receiver pending the adjudication of the bankrupts in another district in aid of the proceedings in bankruptcy?

The first question must be answered in the negative. The weight of authority is that the receiver appointed by the District Court of one district cannot maintain an action in the District Court of another district to recover the assets in the hands of strangers. The extraterritorial power of a receiver was carefully considered in the case of Clark v. Booth, 17 How. 327, 15 L.Ed. 164, and it was there decided that the receiver possessed no such power. This case was referred to in the case of Hale v. Allinson, 188 U.S. 56, 23 Sup.Ct. 244, 47 L.Ed. 380, where Mr. Justice Peckham, in commenting on the case of Clark v. Booth, said:

'We do not think anything has been said or decided in this court which destroys or limits the controlling authority of that case.'

In our own circuit Judge McPherson, sitting in the Eastern district of Pennsylvania, in the case of In re National Mercantile Agency (D.C.) 12 Am.Bankr.Rep. 189, 128 F. 639, decided that a receiver in bankruptcy under an order to collect and take possession of all the assets of an alleged bankrupt is not authorized to bring suits in a district other than the one in which he was appointed, and shows that this position is sustained by the highest authority. We must therefore conclude that the receiver in the case at bar cannot maintain a suit in this district. Under the prevailing authorities he certainly cannot by a summary proceeding such as is brought in this case either restrain the state officers or recover the assets of the bankrupts from the hands of strangers. This disposes of the first question.

The second question, viz., Has the District Court of this district jurisdiction to appoint an ancillary receiver in aid of the District Court of the United States for the Southern district of New York, which has taken jurisdiction of the bankrupts' estate? is one of very much more difficulty. We are confronted with these facts. A receiver has been appointed to take possession of and preserve the assets of the alleged bankrupts until a trustee can be appointed. Almost all the assets of the bankrupt are within this district. An adjudication cannot be had and a trustee cannot be elected for a long time because of the impossibility of serving one member of the bankrupt firm. The assets consist of machinery and bridge supplies for which there is now a ready market at good prices because of the building of a bridge at the place where the assets are located. These assets will not only be less salable in the future, but the expense of preserving them by the state officers in custody of them by writs of attachment will...