Voorhies v. Frisbie

• Decision Date: 15 October 1872
• Citation: 25 Mich. 476
• Court: Michigan Supreme Court
• Parties: William T. Voorhies, Assignee of William C. Bennett, a Bankrupt, v. Abijah H. Frisbie and another

25 Mich. 476

William T. Voorhies, Assignee of William C. Bennett, a Bankrupt, v. Abijah H. Frisbie and another

Supreme Court of Michigan

October 15, 1872

Heard July 13, 1872

Appeal in Chancery from Clinton Circuit.

Court erred in granting a decree, and the decree reversed, with costs of both courts, and the bill dismissed without prejudice to such other proceedings as complainant may be advised to pursue.

Spaulding & Cranson and D. C. Holbrook, for complainant.

Walbridge & Selden, for defendants, were stopped by the court.

OPINION

Campbell J.

The bill in this cause was filed by an assignee in bankruptcy, to set aside a conveyance alleged to have been made by the bankrupt in fraud of the bankruptcy. By some apparent misunderstanding, the defendants' default was taken, and the circuit court, acting within a discretion which we can not review, refused to open it. The case, therefore, comes before us on the sufficiency of the bill.

The bill would be fatally defective under any circumstances not dependent on the bankruptcy proceedings. It is not only entirely lacking in direct allegations which would make out a fraud against creditors, but it does not show that any creditor had taken such steps as would--apart from the bankrupt law--give him any right to complain of the fraud, if existing. The only question presented, is whether the assignee in bankruptcy could resort to the Circuit Court of Clinton County, to obtain relief against a conveyance alleged to have been made in fraud of that statute.

It can not be questioned that the bankrupt law is as binding in one court as in another, and a title obtained by valid proceedings under it, must be respected. In private hands it would be, like any other vested right enforced in any court having cognizance of such property rights, without any necessary regard to its origin, as a land title derived from a patent, for purposes of jurisdiction, stands on the same footing in all courts, in real actions, with a private grant or inheritance.

But the right of an assignee in bankruptcy to apply to a State court to have a conveyance set aside as fraudulent, is claimed by defendants to stand on different grounds, and we think correctly.

The fact that the fraud charged is not a fraud against our State laws, is not decisive. It is not uncommon to seek redress in a forum where parties can be found, for actual frauds committed elsewhere, not being merely statutory. And as the bankrupt law must bind all tribunals in this country, acts committed against it could not be recognized as lawful whether affirmative relief could be granted against them or not. The difficulty arises from other considerations, involving the danger of a conflict of jurisdictions, if State courts should attempt to adjudicate upon the peculiar class of cases to which the present controversy belongs. Upon cases not involving similar difficulties we express no opinion.

By the first section of the bankrupt act, the courts of the United States are vested with very full and complete jurisdiction, not only to determine the liabilities of the bankrupt, but also to try the conflicting claims of all parties, debtors and creditors, to provide for collecting all the assets, ascertaining and liquidating all liens, and regulating everything necessary to be done in the premises until the proceedings are closed. The second section also makes express provision for suits at law, or in equity, brought by the assignee against any person claiming an adverse interest.

In Exparte Christy, 3 Howard, 292, the plenary power of the courts of the United States, under similar authority of the bankrupt law of 1841, was very thoroughly discussed, and in some cases, at least, jurisdiction was asserted, to control parties litigating in State courts; an interference not lawful in ordinary cases, and which depends on the exclusive character of the bankruptcy power, vested in the general government under the constitution. No express decision was made as to whether the jurisdiction of the United States was exclusive, and in a subsequent case, in the same volume, that point was also reserved: Norton's Assignee v. Boyd, 3 Howard, 426. It would make no great difference in those courts, whether action should be had in the State courts or not, when they have so large a control over the litigants as practically to reach the proceedings. But it is a very serious question, whether an independent court can be said to have jurisdiction, when subject to such interference; and quite as serious a question, whether it is proper to exercise it, if theoretically existing.

It can not be doubted, that there is power in Congress to make jurisdiction exclusive over suits arising under the laws of the United States, where the proceeding is a direct one to enforce peculiar rights originating under the statute, and not within any other law. The right to assail the conveyance in question, is purely statutory, upon the case made by the bill. It is also in the nature of a penal enactment, in creating a forfeiture and disability enforceable in favor of the assignee. It is generally understood to be settled law, that no court will take jurisdiction for the sole purpose of enforcing the penal consequences imposed by any other authority which has its own courts to enforce them: The Antelope, 23 U.S. 66, 10 Wheat. 66. It was held in Gelston v. Hoyt, 16 U.S. 246, 3 Wheat. 246, that a State court can not lawfully assume any such jurisdiction under the laws of the United States. In those cases where it is loosely said there is a concurrent jurisdiction over certain crimes, it is only because the same act may violate the laws of both jurisdictions. Thus, in Fox v. Ohio, 5 Howard, 410, it was held that passing counterfeit money might be thus punishable, but it was never supposed that a State could punish it under an act of Congress, or as anything but a State offense. We have refused to enforce the penalties of foreign usury laws not avoiding the contract, although if the...