Quaere, and not decided, whether, under § 70
e
of the Bankruptcy Act, the suits therein referred to can be brought
in the bankruptcy court without the consent of the defendant.
See contrary views expressed in
Hull v. Burr, 153
F. 945;
Hurley v. Devlin, 149 F. 268.
Section 70
e of the Bankruptcy Act provides for avoiding
transfer of the bankrupt's property which his creditors might have
avoided, and for recovery of such property or its value from
persons not
bona fide holders for value. It does not,
either with or without consent of defendant, give the bankruptcy
court jurisdiction of a suit to recover property held by defendant
but which, if the allegations of the complaint are true, belonged
to the bankrupt and passed to the trustee.
The bankruptcy court has not jurisdiction of a suit against a
bank to recover securities held by it for indebtedness of the
bankrupt on the ground that the debt had been paid.
The facts are stated in the opinion.
MR. JUSTICE Day delivered the opinion of the Court.
This case presents the single question of the jurisdiction of
the district court of the United States to entertain a suit
Page 216 U. S. 383
brought by Harris, as trustee in bankruptcy, against the First
National Bank of Mount Pleasant, Texas.
The petition alleged that Hargrove, the bankrupt, was indebted
to the defendant bank for an overdraft in the sum of $2,000; that,
to secure the payment of the same, Hargrove delivered into the
bank's possession as collateral security certain notes; that, at
the time of the adjudication in bankruptcy, Hargrove had paid the
overdraft in full.
Further, the petition alleged that, at the time Hargrove was
adjudged a bankrupt, the bank had in its possession two certain
promissory notes which had been signed by one McGee as principal
and by Hargrove as surety. That, prior to the bankruptcy, Hargrove
paid the notes, and thus became entitled to the same. That
defendant refuses to account for said notes, and wrongfully
withholds them from the trustee. The prayer of the petition is that
the bank be required to surrender to the trustee the notes so
pledged as collateral security, and also the notes paid by Hargrove
as surety, or, in default thereof, judgment against the bank in the
sum of $3,500, the value of all the notes. Upon issue made as to
its jurisdiction, the district court held it was without
jurisdiction, and dismissed the suit.
In
Bardes v. First Nat. Bank, 178 U.
S. 524, this Court held that, under § 23 of the
Bankruptcy Act of 1898, the district court of the United States
could, by the consent of the defendant, and not otherwise,
entertain suits by the trustee against third persons to recover
property conveyed by the bankrupt before the institution of
proceedings in bankruptcy.
Subsequently, Congress, by the Act of February 5, 1903, 32 Stat.
797, c. 487, amended certain sections of the Bankruptcy Act. To §
23
b, which provided that suits by the trustee should only
be brought in courts where the bankrupt, whose estate was being
administered by the trustee might have brought them if proceedings
in bankruptcy had not been instituted, unless by the defendant's
consent, these words were added: "
Except suits for the recovery
of property
Page 216 U. S. 384
under section sixty, subdivision b, and section sixty-seven,
subdivision e."
Subdivision
b of § 60 made provision for the recovery
of preferences given by the bankrupt within four months before the
filing of the petition in bankruptcy. To that subdivision these
words were added:
"
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."
Subdivision
e of § 67 made provision for setting aside
fraudulent conveyances, and the recovery of property so conveyed at
the suit of the trustee. To that subdivision these words were
added:
"
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."
A consideration of these amendments, having reference to the
recovery of preferences and of property fraudulently conveyed,
shows that they cannot include the action under consideration here.
Nor is it claimed that they are sufficient of themselves to
authorize the present suit. Reliance is had on the amendment made
by the Act of February 5, 1903, of subdivision
e of § 70.
We give that subdivision, putting the amendment in italics:
"
e. The trustee may avoid any transfer by the bankrupt
of his property which any creditor of such bankrupt might have
avoided, and may recover the property so transferred, or its value,
from the person to whom it was transferred, unless he was a
bona fide holder for value prior to the date of the
adjudication. Such property may be recovered or its value collected
from whoever may have received it, except a
bona fide
holder for value.
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."
It is to be noted that § 70, subdivision
e, is not
mentioned in the
Page 216 U. S. 385
amendment to § 23, enlarging the jurisdiction of the federal
court to entertain suits without the consent of the defendant. And
it has been held that suits under § 70, subdivision
e, can
only be brought in a court of bankruptcy with the consent of the
defendant.
Hull v. Burr, 153 F. 945. The contrary view was
taken in
Hurley v. Devlin, 149 F. 268.
But we do not find it necessary to pass upon that question.
Assuming for this purpose that actions may be brought by trustees
in the courts of bankruptcy in cases coming within the terms of §
70, subdivision
e, without the consent of defendant, we do
not think the present action is one of that character.
That subdivision provides for avoiding transfers of the
bankrupt's property which his creditors might have avoided, and for
recovery of such property, or its value, from persons who are not
bona fide holders for value. In this action, no such
transfer is alleged; no attack is made upon a transfer by the
bankrupt which would have been void as to creditors. The petition
seeks to recover property held by the bank, if the allegations are
true, which belonged to the bankrupt, and consequently passed to
the trustee as the representative of the bankrupt's estate. The
recovery sought is of property held for the bankrupt estate, which
the defendant wrongfully refused to surrender. The district court
was right in denying jurisdiction of the suit, and its judgment
is
Affirmed.