Clark v. Ewing
Opinion of the Court
This is a hill in equity for relief upon the facts stated in the bill, which are substantially as follows: On or about April 28, 1873, George M. Arnold and George Sisson were adjudged bankrupts by the district court of this
It further appears that the defendant, after the entry of the said judgments, and of the same term when they were entered, applied to said court to set aside said judgments, and allow him to plead, supporting his application by affidavits showing a meritorious defence; that his application was
Complainant now alleges the same matters of defence to said suits at law, and the same reasons for failing to present said defence on the trial of the causes, and insists that the state courts had no jurisdiction of the subject-matter of said suits, and that all which had been done in the state courts in the rendition of said judgment, and in the determination of said several appeals therefrom, was without jurisdiction, and not binding upon the complainant; therefore, he now seeks the aid of this court to relieve him from the effect of the said judgments, invoking in that behalf the second section of the amendment to the bankrupt law, approved June 22, 1874, which reads as follows: “Section 2. That section 1, aforesaid, be and is hereby amended by adding thereto the following words: ‘Provided, that the court having charge of the estate of any bankrupt may direct that any of the legal assets or debts of the bankrupt, as contradistinguished from equitable demands, shall, when such debt does not exceed $500, be collected in the courts of the state where such bankrupt resides, having jurisdiction of claims of such nature and amount.’” And also the sixth clause of section 711 of the Bevised Statutes, which vests in the courts of the
It is urged in behalf of complainant that under the operation of these two statutes the state courts have no jurisdiction whatever in suits brought by assignees in bankruptcy, and that, therefore, all the proceedings against complainant in the state court which he has so far struggled to escape were coram non judice. For several years after the passage of the bankrupt law, and before the adoption of the amendment of 1874, it was an open question whether or not the state courts had jurisdiction of suits of a plenary character brought by an assignee in bankruptcy in due course of the administration or settlement of the estate of a bankrupt; but all doubts upon that question were removed by the decisions of the supreme court of the United States in Lathrop v. Drake, 91 U. S. 516; Eyster v. Gaff, 91 U. S. 521; Claflin v. Housman, 93 U. S. 130; and Cook v. Whipple, 55 N. Y. 150. After the passage of the amendment in question it was held by the supreme court of New York, first department, Olcott v. McLean, 16 B. R. 79, and in Frost v. Hotchkiss, 14 B. R. 443, that said amendment gave the federal courts exclusive juris- ' diction over all actions by assignees in bankruptcy, and that by the said act of June 22, 1874, state courts were ousted of their jurisdiction over such actions pending before them at the time of its passage. This view of the law was also adopted by the learned district judge of Colorado in the case of Hallack v. Tritch, 17 Nat. Bank. Reg. 293, the court following substantially the doctrine of Olcott v. McLean, and saying, in the course of the decision: “From this declaration, that certain suits may be brought-by an assignee in state courts by direction of the bankruptcy court, it results by necessary implication that no other can be so prosecuted— Expressum facit cesswre taciturn. The act of 1867 was silent as to the jurisdiction of, the state courts in this class of actions, and under that act the courts, in virtue of their general authority, could take cognizance of such suits as well as a,ny other. But the act of 1874, by giving this jurisdiction of certain actions, seems to exclude all others, and now it must be
The same conclusion was arrived at by the supreme court of the state of Indiana in Sherwood v. Burns, 58 Ind. 502, and Dodd v. Hammock, 40 Ga., although those courts based their decisions mainly upon the sixth clause of section 711 of the U. B. Revised Statutes, clothing the courts of the United Stales with exclusive jurisdiction of all matters and proceedings in bankruptcy, holding that as this section was adopted after the commencement of that suit it ousted the state court of jurisdiction in a plenary suit brought by an assignee in bankruptcy. The same question arose, however, before the supreme court of Massachusetts, in Goodrich v. Wilson, 119 Mass. 429, in which that court, in an opinion delivered by Chief Justice Gray, held that “the effect of the provisions of the act of congress of 1874 is not to confer or take away jurisdiction of the state courts, but simply to allow the federal courts of original jurisdiction to decline to entertain actions of common law to which the assignee is a party, in which the debt demanded is less than the amount which determines the jurisdiction of those courts in other cases.” The supreme court of New York for the fourth department, in Wente v. Young, 17 N. B. R. 90, a case later than that of Olcott v. McLean, above quoted, held as follows:
“The only effect of that amendment, (June 22,1874,) as we read it, is to permit the federal courts to decline to entertain actions brought to recover legal assets of a bankrupt not exceeding $500 in amount. It does not limit or take away the jurisdiction of the state courts, but it authorizes the federal courts, in their discretion, to relieve themselves of a class of cases which it may be supposed can be more conveniently disposed of in the state courts. Subject to the authority thus conferred, the concurrent jurisdiction of the federal and state courts over all actions brought by an assignee to collect the assets of the bankrupt, whether legal or equitable, and of whatever amount, remains as it was before the amendment. The amendment and the Revised Statutes were passed at the same session, and were approved on the same day, and they
The same question came before the court of appeals of the state of New York, in Kidder v. Horrobin, 72 N. Y. 159, in which that court said: “It is conceded that prior to 1874 state courts had concurrent jurisdiction with the federal courts in actions by assignees in bankruptcy, and cases arising under the bankrupt act. This is conclusively settled by adjudication both in the federal and state courts. It is now accepted as the general rule upon the subject that state courts have concurrent jurisdiction with the federal courts in cases arising under the constitution, laws or treaties of the United States, unless excluded by express provisions, or from the nature of the particular case. By section 1 of the bankrupt act, as originally enacted, March 2,1867, the district courts of the United States were constituted courts of bankruptcy, with original jurisdiction in their respective districts in all matters and proceedings in bankruptcy, and with authority to hear and adjudicate upon the same according to the provisions of the act. The section declares that the jurisdiction shall extend to certain enumerated cases; among others, ‘ to the collection of all the assets of the bankrupt.’ In construing this section it has been held that, as jurisdiction in bankruptcy was statutory, it was necessarily exclusive in the courts which were designated as courts of bankruptcy, and vested with jurisdiction in bankrupt proceedings by the bankrupt act. But it was also held that the declaration in the same section that the jurisdiction of the district courts should extend to the collection of all of the assets of the bankrupt, did not exclude the jurisdiction of the state courts in actions by the assignee to recover the assets of the bankrupt.
“The first section of the bankrupt act was amended by the act of congress, approved June 22, 1874, by.adding thereto
“It is also claimed that the state courts are deprived of jurisdiction of action by assignees in bankruptcy, to recover debts due to the bankrupt, by section 711 of tho Eevised Statutes of the United States, which declares that the jurisdiction vested in the courts of the United States in the cases and proceedings mentioned in the section shall bo exclusive of the courts of the several states. This declaration is followed by a specification of eight classes of cases, of which the sixth is ‘ of all matters and proceedings in bankruptcy.’ The argument is that a suit brought by an assignee in bankruptcy, to collect a debt due to the bankrupt, is a matter and proceeding in bankruptcy, and that the jurisdiction of the state courts is therefore excluded. We not think that a suit brought for this purpose, is a matter or proceeding in bankruptcy, within the meaning of section 711. * * *
“It may be difficult to make a complete definition of what are matters and proceedings in bankruptcy within section 711, but it may be stated, in general terms, that they are the matters and proceedings which pertain to the special and peculiar jurisdiction of the federal courts as courts of bankruptcy. The adjudication of the bankruptcy; tho appointment of assignees and other agents for tho administration of the system; the vesting of the title to the bankrupt’s property in the assignee; the marshaling and distribution of the assets;
With the exception of the case of Hallack v. Tritch, decided by Judge Hallett, from which I have quoted, no decision has come to my knowledge by a federal court construing the effect of the amendment of 1874; and it is to be noted that the learned judge in that case apparently based his decision mainly upon the authority of Olcott v. McLean. This case may be considered as overruled by the subsequent cases in the same state, and especially by the exhaustive decision of the court of appeals in Kidder v. Horrobin, which I have just cited. A careful examination of the statute itself, and of the condition of the bankrupt law as expounded by the courts at the time of the enactment of this amendment, leads me to
It follows necessarily from this conclusion that the suits in question were lawfully and properly brought in the state court; that the complainant has had his day in that court; that he has appealed both to the law and equity side of that court for relief, and been denied the relief to which he asserts himself entitled, and I do not think that this court should now attempt to review the action of the state court in that behalf. In the chancery suit in the state court the complainant set forth at length the nature of his defence and the reasons why he was unable to present the same to his suits at law. The learned judge of the state court, Mr. Justice Mulkey, in the opinion of the court affirming the judgment of tho court below, says: “Assuming, as we must then, that the charges in the bill are true, it is quite manifest that the appellant had a good and meritorious defence to each of the actions in which these judgments were obtained. So far from appellant being indebted to Arnold & Sisson, or their assignee, at the time these judgments were obtained, the bill clearly show's they were indebted to him to the amount of several hundred dollars. It follows, therefore, it would be inequitable and against conscience to enforce their payment; but this alone, as we have just seen, does not warrant a court of equity in interfering to prevent the consummation of such wrong,” The court then goes into an analysis of the allegations in the hill, and determines that the complainant and his attorney were guilty of such negligence in the conduct of the common-law cases as to preclude him from invoking relief from the judgments in the
It may also well be doubted whether the complaina.nt should be allowed at this late day to come into this court and ask ¡for the relief which he now seeks, after having experimented with the state courts to the end of the litigation, and in each ■stage of it been denied the relief which he here demands. If, after the rendition of the judgments at law, the defendant in these judgments and the complainant here had seen fit to go ■into the equity side of the United States district court, which court had the control of the assignee in bankruptcy and could direct what proceedings he should or should not prosecute, and represent the dilemma in which he had been placed by reason of the sickness and death of his attorney, and the danger of his being subjected to the payment of an unjust judgment, that court might, in the exercise of its equity powers, have inquired into the equities between the parties and considered all the claims which the complainant had for relief, and given the complainant such redress as he seemed entitled to; but this complainant chose his own forum. He acquiesced in the assertion on the part of the assignee that the state courts had jurisdiction of the persons and the subject-matter, and chose to litigate the questions involved in the controversy ■in that forum; and now, having been worsted in that encounter, he should not be heard in this court to review or examine into, or reverse the adverse rulings there made against him.
The demurrer to the bill is, therefore, sustained, and the bill dismissed for want of equity.
Reference
- Full Case Name
- Clark v. Ewing, Assignee
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