Mishawaka Woolen Mfg. Co. v. Powell

• Decision Date: 02 March 1903
• Citation: 72 S.W. 723,98 Mo. App. 530
• Parties: MISHAWAKA WOOLEN MFG. CO. v. POWELL.
• Court: Missouri Court of Appeals

72 S.W. 723

98 Mo. App. 530

MISHAWAKA WOOLEN MFG. CO. v. POWELL.

Court of Appeals at Kansas City, Missouri.

March 2, 1903.

BANKRUPTCY—CUSTODY OF PROPERTY—PROCEEDING IN STATE COURTS—JURISDICTION OF BANKRUPTCY COURT—REPLEVIN—PROPERTY IN CUSTODIA LEGIS.

1. Under the sections of the bankruptcy act providing (section 2 [U. S. Comp. St. 1901, p. 3420]) that the district court shall have jurisdiction in bankruptcy proceedings, to appoint receivers to take charge of the property until the qualification of trustees, to cause the estate to be collected, reduced to money, and distributed, and (section 47 [page 3438]) enjoining such duty on the trustees, under direction of the court, and (section 70 [page 3451]) vesting title to the property of the bankrupt in the trustee, who is an officer of the court under section 1, subsec. 18 [page 3419] as of the date of adjudication, property of the bankrupt in the possession of the receiver or trustee is constructively in the possession of the court, and cannot be taken under a writ of replevin issuing out of a state court.

2. The jurisdiction of the United States District Court in bankruptcy, under the bankruptcy act of 1898, is exclusive, and, a trustee being appointed to take possession of the bankrupt's estate, all questions relative to the title of property so taken must be determined in that court.

3. Rev. St. 1899, § 4463 et seq., providing for a writ of replevin, when plaintiff claims to be the owner or entitled to the possession of specific personal property wrongfully detained, do not authorize a sheriff acting under the writ to invade the jurisdiction of the federal court over property in the custody of that court, under bankruptcy proceedings.

Appeal from Circuit Court, Pettis county; George F. Longan, Judge.

Action by the Mishawaka Woolen Manufacturing Company against W. H. Powell, trustee in bankruptcy. From a judgment for plaintiff, defendant appeals. Reversed.

Sangree & Lamm, for appellant. G. W. Barnett and C. E. White, for respondent.

SMITH, P. J.

This is an action of replevin to recover certain personal property, consisting of men's knit, felt, and rubber boots. The plaintiff is a manufacturing company, incorporated under the laws of the state of Indiana. The cause was submitted to the circuit court upon an agreed statement of facts, which was to the effect: (1) That Huyssen & Holm were partners engaged in the boot and shoe business in this state; that they procured the goods described in the plaintiff's petition on a written order, in which, amongst other things, it was recited that "the title and property in all the goods herein mentioned shall remain in the vendor until fully paid for or sold in due course of business by the buyer, and if payment for the same shall not be promptly made when due, or, if at any time before the same shall be fully paid for or sold in the due course of business by the purchaser, the purchaser shall become insolvent or shall, in the opinion of the vendor, be in danger of insolvency, or the vendor, in its judgment, shall for any reason whatever deem itself in danger of losing the price of said goods, then the vendor may at its option reclaim and take possession of so much of said goods as shall then remain in the hands of the purchaser unsold." The order, with the foregoing condition incorporated therein. was not acknowledged and recorded as required by section 3412, Rev. St. 1899. (2) That the goods described in said order were delivered to Huyssen & Holm, and part of them sold and delivered to customers, prior to the time when they made application to become voluntary bankrupts. (3) That Huyssen & Holm filed their petition in the District Court of the United States for the Western District of Missouri to be adjudged bankrupts, and were so adjudged December 1, 1901. (4) That prior to the adjudication in bankruptcy the defendant was appointed by said United States District Court as receiver of the stock of goods, and of the assets of Huyssen & Holm, to preserve the same under the federal bankrupt act, and said goods in dispute, with the other goods, wares, and merchandise in their possession were turned over to him as such receiver by Huyssen & Holm. That afterwards, by its proper order, this defendant was appointed trustee of the estate of said bankrupts by said court. That as such receiver, he took possession of all the stock of goods, wares, and merchandise in the possession of Huyssen & Holm, including what remained of the goods delivered by plaintiff to said Huyssen & Holm, claiming them as a part of the bankrupt estate; and that upon being appointed trustee, under the bankrupt act, of said estate, he turned over to himself all of said goods, wares, and merchandise, and ceased to hold them as receiver, and from thence forward held them as trustee, and claiming them as belonging to the bankrupt's estate, and as subject to disposition under the bankrupt act under the orders of said United States District Court. That afterwards he had all said goods inventoried and appraised as part of the estate, and that afterwards the said United States District Court ordered all said goods, including the goods claimed in this proceeding, sold as part of the bankrupt's estate, to pay claims allowed against the estate, and, in pursuance of said order of sale, bids were advertised for, and afterwards, on the 6th day of January, 1902, when said bids had been opened and said sale about to be consummated, the defendant was served with a writ of summons and order of delivery in this cause, summoning him to appear and answer the plaintiff's petition that day filed in the circuit court of Pettis county, Mo. Thereupon it was by the parties hereto agreed that the defendant might sell the goods replevied, and the proceeds thereof should remain in lieu of said goods in the hands of the trustee, to await the determination of this suit. Upon the facts agreed the finding and judgment were for the plaintiff, and after an unsuccessful motion for a new trial the defendant appealed.

The defense pleaded and relied on by the defendant in his answer was that at the time of the commencement of the action the property, the possession of which it was thereby sought to recover, was in the custody of the law, and under the control of the United States District Court, and that therefore the state court, in which the action was brought, was without jurisdiction. And so the question thus presented is whether or not the replevied property was in custodia legis, or whether or not such property may be taken from the custody of the trustee under the writ of replevin issuing out of a state court.

Whether or not the property at the time was in custodia legis must be determined with reference to the bankruptcy act of 1898. By section 2 [U. S. Comp. St. 1901, p. 3420] of that act, the District Courts of the United States are made courts of bankruptcy, with such jurisdiction at law and in equity as will enable them to exercise original jurisdiction in bankruptcy proceedings; to adjudge persons bankrupt; to allow and disallow claims against bankrupt estates; to appoint receivers to take charge of the property of bankrupts after the filing of the petition and until the trustee is qualified; to cause the estates of bankrupts to be collected, reduced to money, and distributed, and to determine the controversies in relation thereto; and to appoint and remove trustees, etc. By subdivision "b" of section 50 [page 3440] trustees, after their appointment, are required to give bond conditioned the same as that required of referees. Such trustees are officers, within the meaning of the bankrupt act. Section 1, subd. 18 [page 3419]. By section 47 [page 3438] amongst other duties enjoined on trustees is that to collect and to reduce to money the property of the estate of which they are trustees, under the direction of the court, and to report to the court in writing the condition of estates and the amounts of money on hand, and such details as may be required by the court, etc. By section 70 [U. S. Comp. St. 1901, p. 3451] the trustee of an estate, upon his appointment and qualification, is vested by operation of law with the title to the property of the bankrupt as of the date he was adjudged a bankrupt, and with that to property which, prior to the filing of the petition, he could by any means have transferred, or which might have been levied upon or sold under judicial process against him, etc.

It will be seen from an examination of the various sections of the bankrupt act that a scheme is therein provided whereby the estate of a bankrupt is by the United States District Courts, through the various officers named in the act, to be taken into custody and fully administered by it for the benefit of all the creditors proving their claims, in accordance with their respective rights and privities. The several officers therein named who, under the orders and directions of the court, are to conduct the administration of such estates, are but the arms of the court, to be used by it in effectuating and carrying out the scheme so provided by the act.

The manifest purpose of the act was to provide for the discharge of honest debtors, who have become insolvent, from their obligations, and for the distribution among their creditors of the money arising from the sale of their property. To accomplish this double purpose, the District Courts are by the act invested with a very broad and comprehensive jurisdiction. Under the act, none of the officers therein named can, during the administration of the bankrupt's estate, take a step in respect to it without the direction or approval of the bankruptcy court. Whether the officer in custody of the property of the bankrupt be a marshal, receiver, trustee, or what not, such custody is that of the court whose representative and substitute he is, so that it will not do to say that the property of the bankrupt in process of administration is not...