State Bank of Chicago v. Cox

• Court: U.S. Court of Appeals — Seventh Circuit
• Citation: State Bank of Chicago v. Cox, 143 F. 91 (7th Cir. 1906)
• Decision Date: 02 January 1906
• Docket Number: 1,184.
• Parties: STATE BANK OF CHICAGO v. COX.

143 F. 91

STATE BANK OF CHICAGO v. COX.

No. 1,184.

United States Court of Appeals, Seventh Circuit.

January 2, 1906

This is a suit in assumpsit, by the trustee in bankruptcy, to recover assets of the bankrupt which were appropriated by State Bank of Chicago, plaintiff in error, through attachment and garnishee process, pending the proceedings in bankruptcy; and the writ of error is from the judgment, upon verdict, for $2,692.36 against the bank. The bankruptcy proceedings were in the District Court of the United States for the Western District of New York, against Muskoka Lumber Company, a New York corporation, upon petition for involuntary bankruptcy filed August 20, 1901; and adjudication as a bankrupt was entered May 1, 1902. On August 21, 1901, the plaintiff in error commenced attachment proceedings against the bankrupt in the circuit court of Cook county, Ill., under which property of the bankrupt was seized and certain of its creditors were served with garnishee process. The John S Owen Lumber Company followed with another attachment, through the same attorneys, returnable at the same term, and thus became a prorating attachment creditor under the Illinois statute. Section 37, c. 11, 1 Starr & C.Ann.St. 1896 (2d Ed.). Through the attachment on the part of the plaintiff in error the sheriff collected $286.13 and the garnishees paid $2,014.52. Of this aggregate it appears that the share actually received was $1,902.78; the remainder being costs and pro rate share of the other attaching creditor. The trustee in bankruptcy brought the present action, against the plaintiff in error alone, May 11, 1903, no claim having been filed or appearance entered on its part in the bankruptcy proceedings, and various questions of pleading were raised which involve no substantial controversy not otherwise presented for review, aside from jurisdictional features which are referred to in the opinion. Upon issues joined, with the substantial facts undisputed, the case was tried and resulted in a verdict, directed by the court, against the plaintiff in error for the entire amount so realized and interest, without deduction for the share of the prorating attachment.

Lewis W. Parker, for plaintiff in error.

Wm. Ritchie, for defendant in error.

Before GROSSCUP, BAKER, and SEAMAN, Circuit Judges.

SEAMAN Circuit Judge (after stating the facts).

Error is assigned for want of jurisdiction in the Circuit Court-- that the requisite amount was not involved in the controversy-- and the right to entertain the suit must be ascertained before inquiry is open upon the merits. The declaration contains the common counts and a special count, and each states the amount and value involved to be $5,000. In the special count it is averred, in substance, that the plaintiff in error caused the seizure of money and goods of the bankrupt and appropriated to its own use the money and proceeds of the goods of the value and to the amount of $5,000, and recovery of that amount is sought as for an implied promise to pay the trustee thereupon. The bona fides of the valuation and claim exceeding $2,000 for the principal sum recoverable is not only manifest in the contentions on the trial, but the right to such money was upheld in the rulings of the trial court and directed verdict. Thus the utmost of jurisdictional tests, under all the authorities, is fairly met, and it is immaterial to that inquiry whether the plaintiff succeeds or fails in such recovery. Barry v. Edmunds, 116 U.S. 550, 561, 6 Sup.Ct. 501, 29 L.Ed. 729; Schunk v. Moline, Milburn & Stoddard Co., 147 U.S. 500, 504, 13 Sup.Ct. 416, 37 L.Ed. 255; Scott v. Donald, 165 U.S. 58, 89, 17 Sup.Ct. 265, 41 L.Ed. 632; Kunkel v. Brown, 39 C.C.A. 665, 667, 99 F. 593; Turner v. Southern Home Building Ass'n, 41 C.C.A. 379, 386, 101 F. 308; Board of Commissioners v. Vandriss, 53 C.C.A. 192, 198, 115 F. 866.

The questions arise for review therefore: (1) Whether the trustee in bankruptcy establishes a right of recovery; and, if so (2) whether the true measure of damages was awarded. As the material facts are undisputed, the inquiry is within narrow compass, if not otherwise free from difficulty.

1. Upon the first question the contentions are twofold: (1) That under the present bankruptcy act (Act July 1, 1898, c. 541, Sec. 70, 30 Stat. 565 (U.S. Comp. St. 1901, p. 3451), the trustee is vested with title to the property of the bankrupt, 'as of the date he was adjudged a bankrupt,' so that he cannot recover for property theretofore attached and sold; and (2) that in any view, if such attaching creditor obtained no greater percentage than other creditors of like class, the proceeds were not recoverable as a preference. The attachment processes under consideration were instituted in Illinois on the day following the commencement of the bankruptcy proceedings in New York, but both attachment and appropriation of the proceeds were prior to the adjudication of bankruptcy, and the first-mentioned proposition is thus fairly involved.

The general purposes and scope of bankruptcy enactments, to take and administer all of the assets of the bankrupt for pro rata distribution to the unsecured creditors, is well recognized. In conformity with this view the provisions of the present act, alike with those of the former acts, are uniform-- from section 1, cl. 10 (30 Stat. 544-- (U.S. Comp. St. 1901, p. 3418), to and including section 70, cl. 5, in fixing the date when the petition was filed as the time bankruptcy jurisdiction is established over the property then possessed by the bankrupt, as the date from which the sequestration of property becomes operative and with reference to which the validity or invalidity of the various transactions affecting the estate must be ascertained. As well remarked by Mr. Chief Justice Fuller, speaking for the Supreme Court, in Mueller v. Nugent, 184 U.S. 1, 14, 22 Sup.Ct. 269, 46 L.Ed. 405:

'It is as true of the present law as it was of that of 1867 that the filing of the petition is a caveat to all the world, and in effect an attachment and injunction (Bank v. Sherman, 101 U.S. 403, 25 L.Ed. 866), and on adjudication title to the bankrupt's property became vested in the trustee (

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