McGreavey v. Straw

• Decision Date: 07 March 1939
• Citation: 5 A.2d 270
• Parties: McGREAVEY v. STRAW et al.
• Court: New Hampshire Supreme Court

5 A.2d 270

McGREAVEY

v. STRAW et al.

Supreme Court of New Hampshire. Hillsborough.

March 7, 1939.

Transferred from Superior Court, Hillsborough County; Lorimer, Judge.

Action on the case for negligence by Thomas F. McGreavey, individually and as administrator of the estate of his deceased minor son, against William Parker Straw and another, trustees in bankruptcy of the Amoskeag Manufacturing Company at Manchester, for the death of plaintiff's minor son by drowning in a reservoir owned by the bankrupt.Defendant's motion to dismiss for want of jurisdiction was denied, subject to an exception, and case was transferred to the Supreme Court upon their bill of exceptions.

Exception overruled.

Case for negligence resulting in the death of the plaintiff's son, a minor, by drowning.The plaintiff sues both as an individual and as administrator of the estate of the deceased.The drowning was in a reservoir owned by the Amoskeag Manufacturing Company at Manchester.The defendants, trustees in bankruptcy of the Company's property, moved to dismiss for want of jurisdiction.The motion was denied subject to their exception.Transferred by Lorimer, J., upon their bill of exceptions.The facts appear in the opinion.

Sullivan & Sullivan, of Manchester, for plaintiff.

Alvin A. Lucier, of Nashua, for defendants.

PAGE, Justice.

The Amoskeag Manufacturing Company maintained the reservoir for the purpose of fire protection for some of the Company's buildings.On December 24, 1935, the Company filed a petition under section 77B of the Bankruptcy Act, 11 U.S.C.A. § 207, admitting insolvency and seeking to reorganize.The Company was decreed a bankrupt on January 20, 1936, by the United States District Court for the District of Massachusetts.The principal business of the Company had been the manufacture of textiles, but it had very substantial real estate holdings in Manchester.On June 19, 1936, there was a reference to a special master to ascertain and report whether reorganization was possible.Early in July the master found and reported that it was impossible and recommended liquidation forthwith.

On July 21, 1936, the District Court ordered that the estate of the Company be liquidated and appointed Joseph P. Carney and Frederic C. Dumaine temporary receivers.The drowning of the plaintiff's intestate occurred on August 11, 1936.Three days later, the District Court appointed as trusteesthe defendants Straw, Carney and Dumaine.The writ, dated December 20, 1937, alleges that the reservoir and the adjacent land had been permitted to fall into such disrepair as to be dangerous, that this fact was known to the predecessors in office of the defendants, whose servants nevertheless invited and allowed the plaintiff's intestate to go upon the premises, and that the deceased, while in the exercise of due care, and because of the negligence of the defendants' predecessors in office, was drowned.

Upon entry of the writ, the defendants appeared specially and filed their plea to the jurisdiction, on the ground that no suit could be maintained without permission of the bankruptcy court.The defendants moved that the suit be dismissed or the proceedings stayed unless or until such permission should be obtained.The motion was denied on March 19, 1938.

No permission for leave to liquidate the plaintiff's claim in the Superior Court was ever obtained from the District Court of the United States.The defendants were discharged by the latter court on November 17, 1938.

It may be assumed that the funds derived from the liquidation of the bankrupt's assets were fully distributed when the trustees were discharged.It may further be assumed as matter of law, though without decision, that the trustees are no longer more than nominal parties, from whom no execution could be collected.But that does not necessarily deprive the Superior Court of jurisdiction.For the purposes of this transfer only, "it is admitted by the defendants that as Trusteesthey had provided for insurance coverage as respects this accident."

By this we understand (1) that, although the insurance company is not a partydefendant, it is represented by counsel in court and cannot object to a present determination of the jurisdictional question; and (2) that, questions of coverage and liability reserved, there is an insurance fund entirely independent of the assets of the bankrupt and not controlled by the bankruptcy court or subject to distribution by that court as an asset of the bankrupt.If these assumptions be true, and the insurance company should be brought in as a party by proper equitable proceedings, the plaintiff could apparently collect any judgment he may obtain, provided only that the court has jurisdiction of the pending action.Bosse v. Wolverine Ins. Co., 88 N.H. 98, 184 A. 359.That being the local law as to the reaching of the fund, it would apparently be sustained in the federal courts.Texas & P. R. Co. v. Johnson, 151 U.S. 81, 14 S.Ct. 250, 38 L.Ed. 81;Texas & P. R. Co. v. Bloom's Adm'r, 164 U.S. 636, 17 S.Ct. 216, 41 L.Ed. 580;Hanlon v. Smith, C.C., 175 F. 192; Chicago, Great Western R. Co. v. Hulbert, 8 Cir., 205 F. 248.This principle, which applies whether or not the claim is presented to the receivership court, and whether the suit is begun before or after discharge of the receivers, has been recognized also by state courts.Denver & R. G. R. Co. v. Gunning, 33 Colo. 280, 80 P. 727;Lassiter v. Norfolk Southern R. Co., 163 N.C. 19, 79 S.E. 264;Kansas City, M. & O. R. Co. v. Latham, Tex.Civ.App., 182 S.W. 717;Hawkins v. St. Louis & S. F. R. Co., Mo. App., 202 S.W. 1060.

In view of the possibility that the plaintiff may enforce a recovery without recourse to the bankruptcy court, it is more than a moot question whether by the entry of the pending action the Superior Court acquired jurisdiction of the defendants.

In so far as bankruptcy courts have exclusive jurisdiction over their appointees, such jurisdiction is based upon the necessities of the case.The proceedings in the bankruptcy court in this instance passed through two successive phases.During the first phase the proceedings were purely equitable proceedings looking towards possible reorganization and the continuance of the business.This phase ended, and the second began, on July 21, 1936, when the bankruptcy court decreed that the trust property be sold in order that there might be a distribution to the parties in interest.Thereafter the necessities of the case demanded that the bankruptcy court look to the preservation of the distributable assets and the largest possible distribution to the creditors.One way of attaining the ends of the receivership in both stages was to protect the property from depletion by such claims as the plaintiff's.It is to be presumed that the temporary receivers appointed on July 21, 1936, procured insurance with that in mind.It is further to be presumed that when the bankruptcy court approved the accounts of the temporary receivers and of the trustees later appointed, the cost of such insurance was likewise approved as a proper expense of administration for the ultimate benefit of the creditors.

But it does not follow that the insurance fund itself was under the exclusive jurisdiction of the bankruptcy court.The court had no necessarily exclusive power of distribution over the fund for the preservation of the equities of the creditors.As far as appears, the plaintiff is the only person other than the insurer who has an equitable interest in the fund.If the receivers had such an interest prior to distribution by the court of the bankruptcy estate, it was an interest derived only from their duty to preserve the whole estate for the creditors.That duty having presumably been discharged by complete distribution under the court orders, it might be argued that the bankruptcy court never had any more than a purely incidental jurisdiction to procure the creation of the fund and its continuance in being until the trustees were discharged and final distribution made to the general creditors; that the action of the bankruptcy court was based upon this assumption; that the bankruptcy court never assumed to have jurisdiction over the fund itself, and as a matter of law could have had no jurisdiction to determine its distribution unless one in the plaintiff's position had chosen as an intervener to claim such jurisdiction.As far as we know, this is the first case to occur in which this line of reasoning could be adopted.The plaintiff has not urged it upon us.Therefore, since the question of jurisdiction may be decided upon narrower grounds, we are content with raising this broader question without deciding it.

The plaintiff's case was briefed in reliance upon section 66 of the Judicial Code,28 U.S.C.A. § 125, originating in section 3 of the Judiciary Act of March 3, 1887.That section reads thus: "Every receiver or manager of any property appointed by any court of the United States may be sued in respect of any act or transaction of his in carrying on the business connected with such property, without the previous leave of the court in which such receiver or manager was appointed; but such suit shall be subject to the general equity jurisdiction of the court in which such manager or receiver was appointed so far as the same may be necessary to the ends of justice."

A number of questions will be raised in connection with the construction of this statute and its application to the facts before us.

I.Does the section apply to suits against trustees in bankruptcy ?

The language is broad enough to include such officers of the court as well as receivers appointed in purely equitable proceedings.Trustees in bankruptcy may not be receivers in the narrow sense, but they do come within the general description of "receivers and managers."Accordingly it has apparently been conceded nearly unanimously that the section applies to suits against...