Operators' Piano Co. v. First Wisconsin Trust Co.

• Decision Date: 26 September 1922
• Docket Number: 3020.
• Citation: 283 F. 904
• Parties: OPERATORS' PIANO CO. v. FIRST WISCONSIN TRUST CO. In re HELLER PIANO CO.
• Court: U.S. Court of Appeals — Seventh Circuit

283 F. 904

OPERATORS' PIANO CO. v. FIRST WISCONSIN TRUST CO. In re HELLER PIANO CO.

No. 3020.

United States Court of Appeals, Seventh Circuit.

September 26, 1922

James Rosenthal, of Chicago, Ill., for plaintiff in error.

Samuel B. Hill, of Chicago, Ill., for defendant in error.

Before BAKER, ALSCHULER, and EVANS, Circuit Judges.

EVAN A EVANS, Circuit Judge.

The parties will be referred to as they appeared in the District Court. Defendant prosecutes this writ of error to review a judgment which plaintiff, the trustee of the bankrupt obtained against it for the value of seven pianos which defendant secured from the bankrupt after adjudication. A jury was waived, and the court made no special findings. Only certain questions of law are therefore presented. Raymer v. Netherwood, 257 F. 284. ^[1] While insisting that its right to question the sufficiency of the evidence to support the judgment in plaintiff's favor has been preserved, our attention has not been directed to the motions or requests which support this contention. We have, however, considered and will dispose of the two alleged errors covered by the assignments, to wit, (a) jurisdiction, and (b) sufficiency of the evidence to support the judgment

Asserting that the amount involved does not exceed the sum of $3,000 exclusive of interest and costs, defendant contends that the federal court had no jurisdiction of the cause. Plaintiff, on the other hand asserts (a) that section 23b of the Bankruptcy Act (Comp. St. Sec. 9607) is controlling, and also (b) that its allegation of the amount in controversy (which exceeds $3,000) must be accepted. Section 23b reads:

'Suits by the trustee shall only be brought or prosecuted in the courts where the bankrupt, whose estate is being administered by such trustee, might have brought or prosecuted them if proceedings in bankruptcy had not been instituted, unless by consent of the proposed defendant, except suits for the recovery of property under section sixty, subdivision b; section sixty-seven, subdivision e; and section seventy, subdivision e.'

Courts have frequently passed upon the effect of the clause 'unless by consent of the proposed defendant,' and construed it as leaving it to the adverse claimant to determine whether he shall try his case in the state or the federal court, except of course in those instances specially mentioned in the section. Such exceptional causes may be tried in the federal court regardless of the consent of the adverse party.

This question of consent arises most frequently perhaps where the trustee or adverse claimant seeks to dispose of a controversy in a summary proceeding. Where the adverse claimant is desirous of securing an early disposition of the controversy, or because of the expense, or for any other reason, desires to settle the matter in a summary proceeding, he is permitted to do so. His appearance and joinder of issue upon the merits, without any challenge of the jurisdiction, evidences consent. His failure to object in fact constitutes consent. In re Rockford Produce & Sales Co., 275 F. 811.

Likewise, where the adverse claimant is himself a petitioner for relief in a summary proceeding, he opens the door to such defenses as the trustee in bankruptcy possesses, and all such issues and all such defenses (including affirmative claims) may be properly litigated in that summary proceeding. For a litigant cannot himself invoke the jurisdiction of the court and the particular form of proceeding (summary as well as plenary) and then object to the disposition of the issues which the respondent (the trustee) may raise either as a defense to his petition or as the basis of a counterclaim. The consent thus given cannot be subsequently withdrawn.

But it is not every issue that may be tried in the United States District Court under section 23b. There is a distinction between the jurisdiction of the bankruptcy court as such and the jurisdiction of the United States District Court in bankruptcy matters. Lovell v. Newman, 227 U.S. 412, 33 Sup.Ct. 375, 57 L.Ed. 577; McEldowney v. Card, 193 F. 475; Mayer v. Cohrs, 188 F. 443.

The jurisdiction of the bankruptcy court administering the bankrupt estate, that is the United States District Court sitting in bankruptcy, has jurisdiction of certain causes independent of the consent of the defendant. It has also jurisdiction dependent upon the consent of the defendant. It is in reference to this latter jurisdiction that the foregoing observations were made. The jurisdiction independent of the consent of the defendant includes the exceptions in 23b, that is 60b, 67e, and 70e (Comp. St. Secs. 9644b, 9651e, 9654e); or in other words, cases where the trustee is attempting (a) to set aside a preference, (b) to set aside a fraudulent transfer made within four months preceding the bankruptcy, and (c) to set aside any transfer that a creditor might have set aside.

Jurisdiction dependent upon consent of the defendant is limited to those actions brought in the District Court sitting in bankruptcy and in a bankruptcy proceeding pending in such court. Bardes v. Bank, 178 U.S. 524, 20 Sup.Ct. 1000, 44 L.Ed. 1175; In re Blake, 150 F. 279, 80 C.C.A. 167; Lovell v. Newman, supra.

In the present case, the jurisdiction of the court is that of the United States District Court, and not of the bankruptcy court. In other words, the bankruptcy proceedings were instituted in the United States District Court for the Eastern Division of Wisconsin, whereas the present action was brought in the United States District Court for the Northern District of Illinois.

Keeping in mind the above distinction, the jurisdiction of the lower court in this action must be determined, not by defendant's consent, but by the test that would have been applied if bankruptcy had not intervened. In other words, the parties must be citizens of different states, and the amount in controversy exceed $3,000. In other words, unless we are satisfied that the amount in controversy exceeds $3,000, exclusive of costs and interest, the defendant's objection to the jurisdiction must prevail.

Examining the declaration, we find that plaintiff has charged damages in the sum of $9,000. Unless it clearly appears that this sum is merely colorable and beyond reasonable expectation of recovery, it must be accepted. Foster on Federal Practice (5th Ed.) p. 28; Smith v. Greenhow, 109 U.S. 669, 3...