Lion Bonding Surety Co v. Karatz Department of Trade and Commerce of Nebraska v. Hertz

• Decision Date: 11 June 1923
• Docket Number: Nos. 574,467,s. 574
• Citation: 43 S.Ct. 641,262 U.S. 640,67 L.Ed. 1151
• Parties: LION BONDING & SURETY CO. v. KARATZ. DEPARTMENT OF TRADE AND COMMERCE OF NEBRASKA et al. v. HERTZ et al
• Court: U.S. Supreme Court

262 U.S. 640

43 S.Ct. 641

67 L.Ed. 1151

LION BONDING & SURETY CO.

v KARATZ.

DEPARTMENT OF TRADE AND COMMERCE OF NEBRASKA et al.

v. HERTZ et al.

Nos. 574, 467.

Submitted on Moti n to Modify Decree May 21, 1923.

Decided June 11, 1923.

Mr. Bruce W. Sanborn, of St. Paul, Minn., for the motion.

Messrs. O. S. Spillman, of Pierce, Neb., and John F. Stout, Halleck F. Rose, Arthur R. Wells and Paul L. Martin, all of Omaha, Neb., opposed.

Mr. Justice BRANDEIS delivered the opinion of the Court.

The decision in these cases rendered April 23, 1923, reversed the decrees with costs and directed that the bills be dismissed. Before the mandate issued Hertz and Levin, the receivers appointed by the federal court for Minnesota, applied for modification of the decrees. They ask approval of the disbursements for expenses of the receivership paid by them out of moneys realized from assets of the Lion Bonding & Surety Company. They ask approval of charges made by counsel employed in certain ancillary proceedings which these counsel propose to deduct from funds collected in another district. They ask that payment be directed of other additional expenses incurred in connection with the original receivership and the ancillary receiverships, aggregating $3,384.55. They also ask that they and their general counsel be paid compensation for services rendered during the two years which have elapsed since their appointment as receivers. The amounts involved in these several requests aggregate nearly $30,000. There are still some assets of the corporation within the district of Minnesota and in two other districts in which Hertz and Levin were appointed ancillary receivers. The aggregate value of these assets appears to be less than the aggregate amount now claimed. The receivers pray for a general direction that payment be made out of funds of the insolvent estate now being administered by the state court.

The receivers also call attention to the fact that the time allowed creditors for filing claims under the decree of the Nebraska court elapsed May 1, 1922; that many creditors filed their claims only in the federal court; that these claims will be barred from sharing in the distribution to be made, unless an order is entered allowing such claims to be filed in the state court; and they ask that this court direct the Department of Trade and Commerce of Nebraska to take such proceedings in the state court as may be necessary to secure to such creditors the right to share in the assets of the corporation.

This court is without power to grant any part of the relief sought. The District Court was without jurisdiction as a federal court to appoint receivers in, or otherwise to entertain, the Karatz suit. For this reason, among others, the Hertz suit, a dependent bill, was dismissed. As the lower federal courts lacked jurisdiction, they are necessarily without power to make any charge upon, or disposition of, the assets within their respective districts.¹ Even where the court which appoints a receiver had jurisdiction at the time, but loses it, as upon supervening bankruptcy, the first court cannot thereafter make an allowance for his expenses and compensation. He must apply to the bankruptcy court.² Where a case is dismissed for want of jurisdiction as a federal court, there is not even power to award costs against the defeated party.³ The case at bar is unlike Palmer v. Texas, 212 U. S. 118, 132, 29 Sup. Ct. 230, 53 L. Ed. 435, upon which the receivers rely. In that case the costs and expenses of a receiver erroneously appointed by the federal court were directed to be paid out of funds realized in that court. There the Circuit Court had jurisdiction as a federal court; but the decree appointing the receiver was reversed, because it was erroneous.

Obviously, this court has no power to direct the Department of Trade and Commerce of Nebraska to apply to the state court for the order allowing creditors to prove their claims in that court. Our jurisdiction is limited in this proceeding to the correction of the errors committed by the lower federal courts...