Russell v. Cheatham
Russell v. Cheatham
Opinion of the Court
delivered the opinion of the court.
The plaintiff had recovered judgment against the defendant in May, 1842, and on the 20th of April, 1843, an execution was
The second section of the bankrupt act contains an express provision that nothing therein shall be construed to annul, destroy, or impair any lawful rights of married women or minors, or any liens, mortgages, or other securities on property real or personal, which may be valid by the laws of the states respectively, and which may not be inconsistent with the provisions of the second and fifth sections of the act. We of course have no power to construe the act of congress so as to produce collision between the federal and state tribunals, but we must adopt the construction which is given to it by the courts of the United States. The question now before us has received the consideration of the supreme court in several instances, and the decisions seem to settle beyond dispute, not only the validity of
The question was again before the supreme court, and very fully considered in Christy, Ex parte, Ibid. 292, and afterwards in Norton’s Assignee v. Boyd, Ibid. 426. A summary of the points settled in these cases will show the reasons on which the jurisdiction of the federal courts rests, and the extent to which it will be exercised.
Liens under state laws are not to be annulled or defeated, but must be protected. But as the object of the law was to insure a speedy collection of the assets of the bankrupt, and a conversion of them into money to be equally distributed amongst all the creditors, the means must be commensurate to the end. The end could not be attained without giving to the federal courts jurisdiction over liens and incumbrances, as by them property which in justice should be converted into assets, may be locked up to the prejudice of general creditors. Without power to inquire into the validity and extent of such incum-brances, the extent of the assets could not be ascertained. Hence it follows that the assignee may apply to the district court to set aside an incumbrance as invalid, for if it be so, the incumbered property becomes immediately assets. He may seek by proper means to have the amount of the lien ascertained, and to that extent enforced, as the residue becomes assets. On the same principle he may redeem pledged property, and he may call in conflicting claimants to litigate their rights with a view
But it does not follow that this jurisdiction attaches in every controversy to which a bankrupt is party. The act of congress does not necessarily withdraw from the state courts their jurisdiction over the subjects of liens. The interests of general creditors, who claim under the act, must be involved, or the federal courts will not interfere. There must be a necessity for the exercise of such jurisdiction, to protect the rights of creditors who have presented their claims against the estate of the bankrupt. If there is no such necessity — if creditors are in no way concerned in the controversy, the state courts may proceed to enforce the liens according to state laws. In such cases, the exercise of the federal jurisdiction would not lead to a result useful or beneficial to the creditors ; it could bring no assets into the general fund. But when there is a necessity for the interposition of the bankrupt court, it may, through the instrumentality of an injunction on the person, suspend the action of the state courts, and withdraw the subject of controversy for adjudication and settlement, with a view to the interests of creditors; and it is believed that such adjudication would be final. So, if parties voluntarily resort to that court to have their liens adjusted and enforced, then, as the court has jurisdiction of the subject-matter and of the person, its judgments and decrees must be conclusive. The practical operation of the system may seem to some extent to produce collision between the state and federal jurisdictions. This, as far as it goes, cannot be avoided. Both courts have jurisdiction over the subject of liens, but both have not jurisdiction over the subject of bankruptcy, and from necessity the more limited must, to some extent, yield to the more comprehensive jurisdiction, when both are bound by the same laws. Congress had power to enact the bankrupt law, which implied a power to make it efficient; the
Judgment reversed.
Case-law data current through December 31, 2025. Source: CourtListener bulk data.