Corporate record and stock-books of a corporation adjudicated a
bankrupt pass to the trustee and, where there is no adverse
holding, the bankruptcy court can compel their delivery by summary
proceeding.
In a case in which the original court of bankruptcy can act
summarily, another court of bankruptcy, sitting in another
district, can do so in aid of the court of original
jurisdiction.
The Randolph-Macon Coal Company was a Missouri corporation, and
was duly adjudicated a bankrupt March 26, 1907, in proceedings
instituted in the District Court of the United States, in and for
the Eastern Division of the Eastern Judicial District of Missouri.
Byron F. Babbitt was duly appointed trustee in bankruptcy for the
corporation May 10, 1907, and duly qualified by giving bond on that
day.
He thereafter made demand upon the president of the company for
the delivery to him of the corporate records and stock books of the
bankrupt company, which were kept in the office maintained by the
company in New York City. This request was refused by letter of the
president of the company, dated September 24, 1907, in which he
says that he is advised
"that such records and stock books are not documents relating to
the property of the bankrupt, and therefore you, as trustee in
bankruptcy, are not entitled to their possession."
Thereupon the trustee made application to the District Court in
and for the Southern District of New York, by petition,
Page 216 U. S. 103
for an order directing James T. Gardiner, the president, and
Howard Dutcher, the secretary, of the company, or either of them,
to deliver to him the stock-certificate book, the corporation
minute book, and the stock register of said company, together with
all other records and documents belonging to said company, in their
possession or under their control. Gardiner and Dutcher were within
the jurisdiction of the District Court for the Southern District of
New York, and the books and papers referred to were within their
custody there, and the trustee alleged that the stock-certificate
book, the corporation minute book, and the stock register book were
necessary to the trustee in his administration and settlement of
the affairs of the company.
Thereafter, a hearing was had on the petition, the order to show
cause, and return thereto, and the district judge (Holt, J.)
indorsed on the petition: "I am obliged to deny this motion on the
authority of
In re Von Hartz, 142 F. 726," and ordered
that the motion be denied on the ground that the court was without
jurisdiction to entertain the proceeding or to grant the relief
prayed for, and the district judge also certified that the order
denying the motion and refusing to grant the relief was based
solely on the ground that the court was without jurisdiction
"to entertain proceedings instituted by a trustee in bankruptcy
duly appointed in a bankruptcy proceeding pending in another
district, to compel the officers of the bankrupt to deliver to such
trustee the documents in their possession relating to the business
of the bankrupt."
This appeal was then allowed and duly prosecuted
Page 216 U. S. 105
MR. CHIEF JUSTICE FULLER delivered the opinion of the Court.
Subdivision 1 of § 70 of the Bankruptcy Act of 1898 provides
that the trustee of the estate of a bankrupt shall be vested by
operation of law, as of the date of the adjudication, with the
title of the bankrupt (
a 1) to all "documents relating to
his property," and subdivision 13 of § 1 of the act provides that
"
documents' shall include any book, deed, or instrument in
writing."
Appellees, as officers of the bankrupt company, asserted no
adverse claim, but denied that the corporate records and stock
books were "documents relating to the property of the bankrupt,"
and asserted that therefore the trustee in bankruptcy was not
entitled to their possession.
We have no doubt that the books and records in question passed,
on adjudication, to the trustee, and belong in the custody of the
bankruptcy court, and, there being no adverse holding, that the
bankruptcy court had power, upon a petition and rule to show cause,
to compel their delivery to the trustee.
Bryan v.
Bernheimer, 181 U. S. 188;
Mueller v. Nugent, 184 U. S. 1;
Louisville Trust Co. v. Comingor, 184 U. S.
18;
First National Bank v. Chicago Title & Trust
Co., 198 U. S. 280;
Whitney v. Wenman, 198 U. S. 539.
This brings us to the real question in the case, and upon which
the decision was rendered; namely, whether the District
Page 216 U. S. 106
Court of the United States in and for the Southern District of
New York had jurisdiction to entertain this particular proceeding
and grant the relief prayed for.
In
Ex Parte Martin, 16 Fed.Cas. 874, decided in 1842,
Mr. Justice Story, sitting on circuit, held that the equity
jurisdiction of the district courts under the Bankruptcy Act of
1841 was not confined to cases originally arising and pending in
the particular court where the relief was sought, and where a
creditor living in Massachusetts commenced suits in several states
other than Pennsylvania, where proceedings were pending against the
bankrupt for an adjudication, that an injunction would issue
against the Massachusetts creditor, enjoining him from proceeding
in the suits. Mr. Justice Story said:
"The language of the sixth section of the act is: 'That the
district court in every district shall have jurisdiction in all
matters and proceedings in bankruptcy arising under the act,' the
said jurisdiction to be exercised summarily, in the nature of
summary proceedings in equity. The act then goes on to enumerate
certain specific cases and controversies, to what the jurisdiction
extends (which I deem merely affirmative, and not restrictive, of
the preceding clause), and then it extends the jurisdiction"
"to all acts, matters, and things to be done under and in virtue
of the bankruptcy, until the final distribution and settlement of
the estate of the bankrupt, and the close of the proceedings in
bankruptcy."
"Now, this language is exceedingly broad and general, and it is
not in terms, or by fair implication, necessarily confined to cases
of bankruptcy originally instituted and pending in the particular
district court where the relief is sought. On the contrary, it is
not unnatural to presume that, as cases originally instituted and
pending in one district may apply to reach persons and property
situate in other districts, and require auxiliary proceedings
therein to perfect and accomplish the objects of the act, the
intention of Congress was that the district courts in every
district should be mutually
Page 216 U. S. 107
auxiliary to each other for such purposes and proceedings. The
language of the act is sufficiently comprehensive to cover such
cases, and I can perceive no solid ground of objection to such an
interpretation of it."
Section 1 of the Bankruptcy Act of 1867, and § 2 of the
Bankruptcy Act of 1898, are substantially identical as to the
jurisdiction of the district courts sitting as courts of
bankruptcy, as will appear from the following comparison:
Section 1 of the Bankruptcy Act of 1867.
"That the several district courts of the United States be, and
they hereby are, constituted courts of bankruptcy, and they shall
have original jurisdiction in their respective districts in all
matters and proceedings in bankruptcy, and they are hereby
authorized to hear and adjudicate upon the same according to the
provisions of this act. . . ."
"And the jurisdiction hereby conferred shall extend. . . ."
"To the collection of all the assets of the bankrupt . . . and
to all acts, matters, and things to be done under and in virtue of
the bankruptcy, until the final distribution and settlement of the
estate of the bankrupt, and the close of the proceedings in
bankruptcy."
Section 2 of the Bankruptcy Act of 1898.
"That the courts of bankruptcy as hereinbefore defined,
viz., the district courts of the United States in the
several states, the Supreme Court of the District of Columbia, the
district courts of the several territories, and the United States
courts in the Indian Territory and the District of Alaska, are
hereby made courts of bankruptcy, and are hereby invested, within
their respective territorial limits, as now established, or as they
may be hereafter changed, with such jurisdiction at law and in
equity as will enable them to exercise original jurisdiction in
bankruptcy proceedings, in vacation, in chambers, and during their
respective terms, as they are now or may be hereafter
Page 216 U. S. 108
held, to . . . (7) cause the estates of bankrupts to be
collected, reduced to money, and distributed, and determine
controversies in relation thereto, except as herein otherwise
provided; . . . (15) make such orders, issue such process, and
enter such judgments in addition to those specifically provided for
as may be necessary for the enforcement of the provisions of this
act; . . ."
"Nothing in this section contained shall be construed to deprive
a court of bankruptcy of any power it would possess were certain
specific powers not herein enumerated."
In
Sherman v. Bingham, 3 Cliff. 552, Fed.Cas. No.
12,762, Mr. Justice Clifford, sitting on circuit, and construing
the act of 1867, reversed the judgment of the district court, which
held that an assignee in bankruptcy of a person declared a bankrupt
in one district court could not maintain an action to recover
moneys paid the defendants, residents of another district, in the
district court of such district. And Mr. Justice Clifford said:
"District courts have original jurisdiction in their respective
districts in all matters and proceedings in bankruptcy, and the
argument is that, inasmuch as the jurisdiction must be exercised in
the district for which the district judge is appointed, the
district court, sitting as a court of bankruptcy, cannot exercise
jurisdiction in any case except in the district
Page 216 U. S. 109
where the bankruptcy proceedings are pending; but § 1 of the
Bankrupt Act contains no such limitation, nor does it contain any
words which, properly considered, justify any such conclusion."
"General superintendence and jurisdiction of all cases and
questions under the act are conferred upon the several circuit
courts, except where special provision is otherwise made by the
first clause of § 2 of the act; but the subsequent language of the
same clause makes it clear that the jurisdiction conferred by that
clause can only be exercised within and for the district 'where the
proceedings in bankruptcy shall be pending.' No such limitation,
however, is found in the clause of § 1 conferring jurisdiction upon
the district courts as courts of bankruptcy. Judges of the district
courts must sit undoubtedly in the districts for which they are
respectively appointed, and no doubt is entertained that the
process of the court in proceedings in bankruptcy cases is
restricted to the territorial limits of the district; but the
language of § 1 of the Bankrupt Act describing the jurisdiction of
the district courts, sitting as courts of bankruptcy is that they
shall have original jurisdiction in their respective districts, 'in
all matters and proceedings in bankruptcy,' showing unquestionably
that they can only sit and exercise jurisdiction in their own
districts; but the limitation that the proceedings in bankruptcy
must in all cases be pending in that district is not found in that
clause of § 1 of the act. On the contrary, the same section
provides that the jurisdiction conferred -- that is, the
jurisdiction of the several district courts -- shall extend to all
cases and controversies arising between the bankrupt and any
creditor or creditors who shall claim any debt or demand under the
Bankruptcy Act, and also to the collection of all the assets of the
bankrupt, to the ascertainment and liquidation of the liens, and
other specific claims thereon, to the adjustment of the various
priorities and conflicting interests of all parties, and to the
marshaling and disposition of all the different funds and assets,
so as to secure the rights of all
Page 216 U. S. 110
parties, and the due distribution of the assets among all the
creditors, and to all acts, matters, and things to be done under
and in virtue of the bankruptcy."
In
Lathrop v. Drake, 91 U. S. 516, the
question of the ancillary jurisdiction of the district court under
the Act of 1867 was considered, and the decision in
Sherman v.
Bingham approved. Mr. Justice Bradley, delivering the opinion,
said:
"Their jurisdiction is confined to their respective districts,
it is true, but it extends to all matters and proceedings in
bankruptcy without limit. When the act says that they shall have
jurisdiction in their respective districts, it means that the
jurisdiction is to be exercised in their respective districts. Each
court, within its own district, may exercise the powers conferred;
but those powers extend to all matters of bankruptcy, without
limitation. There are, it is true, limitations elsewhere in the
act; but they affect only the matters to which they relate. Thus,
by § 11, the petition in bankruptcy, and, by consequence, the
proceedings thereon, must be addressed to the judge of the judicial
district in which the debtor has resided, or carried on business,
for the six months next preceding, and the district court of that
district, being entitled to and having acquired jurisdiction of the
particular case, necessarily has such jurisdiction exclusive of all
other district courts, so far as the proceedings in bankruptcy are
concerned. But the exclusion of other district courts from
jurisdiction over these proceedings does not prevent them from
exercising jurisdiction in matters growing out of or connected with
that identical bankruptcy, so far as it does not trench upon or
conflict with the jurisdiction of the court in which the case is
pending. Proceedings ancillary to and in aid of the proceedings in
bankruptcy may be necessary in other districts where the principal
court cannot exercise jurisdiction, and it may be necessary for the
assignee to institute suits in other districts for the recovery of
assets of the bankrupt. That the courts of such other districts may
exercise jurisdiction in such cases would seem to be the
necessary
Page 216 U. S. 111
result of the general jurisdiction conferred upon them, and is
in harmony with the scope and design of the act. The state courts
may undoubtedly be resorted to in cases of ordinary suits for the
possession of property or the collection of debts, and it is not to
be presumed that embarrassments would be encountered in those
courts in the way of a prompt and fair administration of justice.
But a uniform system of bankruptcy, national in its character,
ought to be capable of execution in the national tribunals without
dependence upon those of the states, in which it is possible that
embarrassments might arise. The question has been quite fully and
satisfactorily discussed by a member of this Court in the First
Circuit in the case of
Sherman v. Bingham, 7 Bank.Reg.
490, and we concur in the opinion there expressed, that the several
district courts have jurisdiction of suits brought by assignees
appointed by other district courts in cases in bankruptcy."
The same question was considered in
Goodall v. Tuttle,
Fed.Cas. No. 5,533, 10 Fed.Cas. 579, which arose under the act of
1867, and the same conclusion reached, as also in
M'Gehee v.
Hentz, Fed.Cas. No. 8,794, 16 Fed.Cas. 193, and
In re
Tifft, Fed.Cas. No. 14,034, 23 Fed.Cas. 1,213. On the
authority of these decisions, it must be and is conceded that,
under the Bankruptcy Acts of 1841 and 1867, ancillary jurisdiction,
both in summary proceedings and in plenary suits, existed in all
district courts within their respective districts, and the question
really is whether the provisions of the Act of 1898 are to the
contrary, or, as appellee's counsel puts it, show an intention on
the part of Congress to restrict such jurisdiction so as to cut off
the inferences drawn from the language of the earlier acts.
But neither the act of 1867 nor the act of 1898 expressly
confers or expressly negatives ancillary jurisdiction in courts
other than the court of adjudication. The provisions as to summary
jurisdiction in the two acts are substantially identical, and it
appears to us should receive the same construction.
Page 216 U. S. 112
In re Benedict, 140 F. 55;
In re Peiser, 115
F. 199;
In re Sutter Bros., 131 F. 654;
In re Nelson
Company, 149 F. 590.
It is, however, urged that the act of 1898 contains restrictive
provisions as to the jurisdiction of both the circuit and district
courts which weaken the force of the reasoning of the decisions
based upon the general language of the earlier statutes.
Subdivision 7 of § 2 of the act of 1898 confers power to
"cause the estates of bankrupts to be collected, reduced to
money, and distributed, and determine controversies in relation
thereto, except as herein otherwise provided."
And it is said that the following provisions of § 23 should be
regarded as coming within the exception and operating to restrict
the jurisdiction:
"
(a) The United States circuit courts shall have
jurisdiction of all controversies at law and in equity, as
distinguished from proceedings in bankruptcy, between trustees, as
such, and adverse claimants, concerning the property acquired or
claimed by the trustees, in the same manner and to the same extent
only as though bankruptcy proceedings had not been instituted, and
such controversies had been between the bankrupts and such adverse
claimants."
"
(b) 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 § 60, subdivision
b, and § 67, subdivision
e."
Section 60, subdivision
b, refers to preferences given
within four months before the filing of the petition in bankruptcy,
and provides that they may be recovered by the trustee, and
further:
"And, for the purpose of such recovery, any court of bankruptcy,
as hereinbefore defined, and any state court which would have had
jurisdiction if bankruptcy had not intervened, shall have
concurrent jurisdiction. "
Page 216 U. S. 113
Section 67, subdivision
e, provides that conveyances in
fraud of creditors shall be null and void, and that it shall be the
duty of the trustee to sue to recover the property conveyed, and
that,
"for the purpose of such recovery, any court of bankruptcy, as
hereinbefore defined, and any state court which would have had
jurisdiction if bankruptcy had not intervened, shall have
concurrent jurisdiction."
But the general jurisdiction was not restricted by these
provisions, though they operated to mitigate the rigor of the rule
laid down in the
Bardes case.
There are two classes of cases arising under the act of 1898,
and controlled by different principles. The first class is where
there is a claim of adverse title to property of the bankrupt,
based upon a transfer antedating the bankruptcy. The other class is
where there is no claim of adverse title based on any transfer
prior to the bankruptcy, but where the property is in the physical
possession of a third party or of an agent of the bankrupt, or of
an officer of a bankrupt corporation, who refuses to deliver it to
the trustee in bankruptcy.
In the former class of cases, a plenary suit must be brought,
either at law or in equity, by the trustee, in which the adverse
claim of title can be tried and adjudicated.
In the latter class, it is not necessary to bring a plenary
suit, but the bankruptcy court may act summarily, and may make an
order in a summary proceeding for the delivery of the property to
the trustee, without the formality of a formal litigation.
The former class falls within the ruling in the case of
Bardes v. Hawarden Bank, 178 U. S. 524, and
in the case of
Jaquith v. Rowley, 188 U.
S. 620, which hold that such a suit can be brought only
in a court which would have had jurisdiction of a suit by the
bankrupt against the adverse claimant, except where the defendant
consents to be sued elsewhere.
In the latter class of cases, a plenary suit is not necessary,
but the case falls within the rule laid down in
Bryan v.
Bernheimer, 181 U. S. 188, and
Mueller v. Nugent, 184 U. S. 1,
Page 216 U. S. 114
which held that the bankruptcy court could act summarily. The
question was not discussed as to whether a court other than the
court of adjudication could exercise this summary jurisdiction.
The precise question before us on the present appeal is whether,
in a case in which the original court of bankruptcy could act
summarily, another court of bankruptcy, sitting in another
district, can do so in aid of the court of original
jurisdiction.
Judge Holt, after expressing an opinion upholding ancillary
jurisdiction, felt compelled to decide otherwise in this case, on
the authority of
In re Von Hartz, 142 F. 726, decided by
the United States Circuit Court of Appeals for the Second Circuit.
It appears from the statement of the case in the opinion of the
court in the matter of
Von Hartz that the proceeding was a
summary application, in which the appellant had been directed to
turn over to the trustee in bankruptcy a policy of life insurance
upon the life of the bankrupt, which "had theretofore been assigned
by Von Hartz to appellant." It was not stated in the opinion
whether the assignment was prior or subsequent to the proceedings
in bankruptcy. If prior thereto, then neither the court where the
bankruptcy proceedings were pending nor any other court could grant
a summary order disposing of the title of the adverse claimant
claiming title to the policy by assignment. That could only be
determined in a plenary suit, and would fall within the rule in the
Bardes and
Jaquith cases. But if the assignment
was subsequent to the bankruptcy proceedings, then it would be a
nullity, and would be disregarded by the bankruptcy court, and
possession could be given to the trustee by a summary order, as in
the
Bryan and
Mueller cases.
There is no decision of this Court adverse to the ancillary
jurisdiction of the district courts, as asked to be exercised in
this case.
Upon the whole, we are of opinion that the District Court for
the Southern District of New York had jurisdiction of the
Page 216 U. S. 115
petition below and to grant the relief therein prayed for, and
therefore we
Reverse the order of that court denying the petition, and
remand the cause for further proceedings in conformity with
law.