no
J'BDEBAL BBPORTEB.
SHAINWALD,
Assignee,
tI. LEWIS.
(District Oourt, D. Nellada.
December 11, 1880.)
739, REv. ST. . While an assignee who has been appointed. by a court of bankruptcyof another district may sue in this court to recover assets from a itranger, such action must be by a plenary suit, and there is nothing in the bankrupt act which takes such a suit out of the provisions of section 739 of the Revised Statutes, although the defendant may have property in this district which is claimed to be assets; and the defendant must be an inhabitant of, or be found in, this district at the time of serving the writ, to give this court jurisdiction. J. SECTION 738, REv. ST., CONSTRUED. This section does not refer to a suit Uke the present, In which the plaintiff saeks, through a receiver, to apply the general property of a defendant to the payment of his debts, but to suits in equity, to enforce some pre-existing lien or claim upon a specific piece of property. ASSIGNEE-BA.NXRUPT ACT-SRCTtON
1
Jame8·L. Crittenden, for plaintiff. Robert M.Clarke, for reeeiver. Philip G. Galpin, for defenaant. HILLYER, D. J. This is amotion to vacate a former order of this court,appointing Ralph L. Shainwald receiver of the property of the defendant, Lewis, in the district(jf· Nevada. The plaintiff is the assignee in bankruptcy of the firm of Sohoenfeld, Cohen & Co., and of Louis S. Sohoenfeld, Isaao Newman, a.nd Simon Cohen, who have been adjudicated bankrupts by the· district court of California. After his appointment as assigueethe plaintiff filed a bill in equity in the districtcourt of the United States for California, against the defendant, Harris Lewis, by whioh he sought to have a certain judgmen.t ootained by:Lewis against the bankrupts set aside on the ground that the judgment was fraudulent. In that suit.the plaintiff obtained a decree setting the said judgment aside, declaring the evidence upon which it was based fraudulent, and the defendant, Lewis, a trustee of all the property acquired by him under said judgment for the"benefit of the creditors of the bankrupt firm and of the assignee. He was also decreed to pay a large amount of money, nearly $100,000, by way of damages, interest, and costs. Upon this
V. LEWIS.
511
judgment an execution was issued to the marshal of CaliforW,a,at:\d by him returned nufl,abona. fo These factsl!>ppear from the bill filed in and it. also on, the face of the bill that Harris: Lewis is a CalUo:mia as well as t1J.e plaintiff i that he has property in Nevada which thepll!>intiff seekstoi.appiy to the satisfaction of his decree, obtained as aforesai;itip.; Califorma. It is further averred in bill, on information and belief, that the defendant, HarrisL,ewis, is sec.rating his prQperty with the view of the plaintiff upon and applying it to the. satisfaction .of. said decree; that said Lewis is possessed and the owner of large l,tnd \1aluable property, real and personal, within. the district of Nevada, and within the jurisdiction of this, court ; that for: .the purpose of hindering,delaying, and defrauding said Lewillo since the Jt!3ndition of said deoree, mak.jng and issuing, ::Ilis notes and other evidences of indebte<!ness, and has. procured a suit or suits to be brought a.gainst .him, and hs. confessed, or intends to conf!'lss, Judgment. against· himself, all for the purpose of p.reventing the plaintiff from obtaining" satisfaction of said judgment and decree ; thl,tt in a other brought as such assignee against the defendan:t, Lewis, in the district court of the district of 9,alifornia, and founded upon said decree, an order was made appointing Ralph L. Shainwald, of the city and county of San Francisco, receiver of. the estate of said de.fend,ant, Ha rrisLewis; that duly qualified and is now acting as such 1t'ec43iver. A. copy of the docree of the district court of California is. made part of the bill, and the prayer is for judgment that "aid Lewis pay the amount thereof, and for an injunction aud a receiver, with the usual powers of a receiver under It creditors' bill.. Upon the filing of this bill, an order for the appointment of a receiver was made, without nptice to the defendant. A special arpearance has been entered bytbe defendant, Lewis, and a motion on behalf of certain creditors is made to vacate the order appointing the receiver, chiefly on the ground that this court has not, and cannot acquire any jurisdiction of the case. the said Lewis being a . . , .')
512
FEDERAL REPORTER.
of California, and not found in this district at the time of serving the writ of subprena; and also that it does not appear from the bill that the plaintiff has exhausted his legal remedies in this jurisdiction. Some other grounds were mentioned,-as the want of notice, the insufficiency of the averments in the bill to show a case of urgency, etc.,-but the case must be decided upon the first two grounds named. The subprena has been returned, and shows a service on the defendant in California. This, together with the allegation in the bill that the defendant, Lewis, is a citizen of California, is enough, upon the uniform construction which the eleventh section of the judiciary act, now section 739 of the Revised Statutes, has always received, to deprive this court of jurisdiction, unless, as is most earnestly and strenuously urged, that section does not apply to a suit like the present. It is argued that it does not apply, because this is a suit in equity to enforce a lien or claim against property within the meaning of Rev. St. § 738, and also because this is a matter or proceeding in bankruptcy over which this court has jurisdiction . irrespective of the residence or citizenship of the parties. 1n argument upon this latter proposition, great stress is laid upon the very broad and comprehensive language in which the whole subject of bankruptcies is given to the district courts in sectlOn 4972-especially upon that clause which extends the jurisdiction to the collection of all the assets of the bank. rupt. And it is said, since this is done, there must be power somewhere in the bankruptcy courts to collect al:lsets; i. e., debts due the bankrupt's estate in those cases in which a debtor resides in one district and has property in another. The case at bar is, I take it, substantially such a case, for Lewis, while not originally a debtor of the bankrupts, has been, by the decree against him, turned,into a trustee for the creditors and the assignee and adjudged to pay a large sum as damages for their benefit. It is said again that the district courts are auxiliaries of each other in these bankruptcy matters, and that the proceed. ings in California are a sufficient warrant for proceeding here a.gainst the property of the defendant, Lewis, as has been
SHAINWILD ,tI·· LEW.IS.
5J.3
done,witnout. nndirlg hini (he tieing .non-resident) in this distriot. ,Therefore, it is· from theseprem,. I lses, must be the power; here claimed,that there may be no failure of jUBtiae;-no failure to collect 'all the assets. Counsel :ha.veread much from that line of· decisions which assignee in to sue in mttintains the right of another than the district0f' his ,appointment to recover debts or,.other property. rrTheyfind in the language used by· the colll'tsin deciding those casek, as they think,suppori' for their position. But, when these courts say the powers ruptcy uourts are full' and eomple'tefor all purposes' of the act, they must not be understoodaEl meaning that thettsua! methods of acquiring jurisdiction 'need not be pursned. Assignees may find it necessary Maue in other districts for too recovery' of assets. If so,' the courts of those districts are open to them. Lathrop v. Drake, 91 U. S. 516. In this sense the courts of other districts are auxiliary, not in any sense implying power to ca.rry out and enforce the judgments and orders of one another except upon due process in the particular district. Nowhere do I find any intimation that i.t is not necessary' to acquire jurisdiction of persons and property by the same means employed in other eases. , In the. present instance the district court of this district is open to the assignee for the collection of assets. The court has jurisdiction to hear and determine such a case; but before it will have jurisdiction of this particular defendant he must be duly subprenaed, unless, as contended, there is something in the nature of this suit which renders it unnecessary. What is said in speaking of the general powers of the bankruptcy,courts under the law to act at all, must not be confounded with and applied to their power to proceed in the pa.rticular instance. There may be a general jurisdiction to act, but no jurisdiction in, the particular case owing to a failure to serve process. In Ohaffee v. Hayward, 20 How. 208, it was sought to recover damages for an infringement of a patent by a suit commenced in the district of Rhode island against an inhabitant of Connecticut, and to obtain jurisdiction of thEi defendant by v.5,no.6-33
an
,;F!BJ)ERA:L ;REPORTER.
property iIi Rhode telan'd.' ,The defend. ant pleaded tOe,the juris.diction that he was not an inhabitant 'oLnor, fonnd in Bhode,,Jslandat the time' of the pretended serving:of the writ. Thecoui't; in announcing its decision, .allude .to, :the ,settled .construotion 01 ,the eleventh section of the judi4iary ,aet; on, the person of the defendan,t· am.d't,thM no 'jurisdietion can be attaahing pttlperlu,nf 1t non-resident ·defe.ndant 'pUJ:SU3:1lltito ,lltw"a,nd.,say: is insisted; ;these rulings were had in casell a;risi:agwherethe !juris.dictio!n: d;epelilded on citizenship; whe;re, thj) suit is founded Jon, an ·act ·of 'congre8R; conferring jurisdictWn on the circuitrc<Durlsi6fthe BnitedBtates in snits by'inventors'sgainst tbo8e! ,wJa.JJ,?nfringe their' letters pateD,t" including:,a1Ieases both ill equity arising. under the patent law,iwithout to citizenship of .theparties'Qr the amounh'lncontroversy,'anid therefore the eleventh section of, the judiciary, act did not apply."·: But, the court held that that section "applied in itsfterms to all civil suits; it makes. no, exception, nor can tbe, courts 'make any." " "The judicial power extends, ,to aliJ c1tses in law and equity arising nnde! the conStitution and laws of the United States, ai14! it is pursuant to thisclause0f the constitution that ihe United States courts I are vGsted with. power to' executetb,& laws r,espectingjllventOl's and.pat6l11ted in:velltions; but w:here auitj> are to be ;hronght is left to;the general law, to the of the judiciary act, which requires personal service of process within' ,the district where the suit: ie brought, if the. defendant he an inhabitant ·of another stnte." Theal'gument, then, which would take ,this case out 'of the. operation of section ,739, because jurisdiction ,of bankruptcy: matters is conferred,without regard tathe citizenship or res.. . idence oHheparties; is not. a valid one. That was precisely the argument in the case last cited. Jurisdiction of a suit by' an assigneecin another ,distriot- ensts uride!' the bankrupt law, but how'sel'vice. ofptocess'.shall be made is still latedbY the' former l!1w;Thatthe-defendant, Lewis, heen guilty iotthe grossest 'frauds incdnneciion with tha'
8HAINWiIiDv. i.EWIS.
towards the Jjythe is'establiehedby the decree of thE! district, court of Oitlifornia; but, und'er the ilifluence'of' a wislJ:< and mclihati6ilto punisbthose frauds,''ve must be careful that weiddnot late principlesbf law eesential: to the :of jUsticei. The defendant, Lewis, has a tight to irisist,that he be brought " .. r, _ _..,,": into court as the law provides, and' riot· othe1'W'is9.' If he sue'ceeds in escaping with ..it will not be: first time that adherence toestablislied legal rtiles has resulted enabling bad>men to gain "a temporary advantage.Thls motion, however, is made on. 'behalf of the creditors & Co., who may haveatldast ttD. equity ",{th,the dreitL itars by'the assignee. toth:e ahegations of the bill, the prop:ertynowiniquestion) is the prop" erty of Lewis, and does' hdtti.ppear t<VbeallY llartof goods fraudulently acquired by tlie bankrupts and Lewis from: the ereditorsof the former:' ' Nor is it alleged to'have'been acquired with the funds been elared a trustee, if that could alter t'iieease; The poweiso'f cali courts of bankhitptcy in the coUedtioIn)f exercised pursuant to law,' and whene'V'erW 116C'esl saryfor the' aesignee to sue ft stranget to'thtl'bailkruptcy eeeding he mustproctleclagainsthimTas' atiyt>ther plitintift ina like t(y :thli.tiist'o'say; 'bili plenary suit at law: or:iil" equity'. : bankrupt law:whieh deptiveB':parties'claitilihg proper((of which they are ii p6sseasion :ofthetisuaPpro6'esses 6fthl:i1aw iii defence of tHelr :8'0 held' bankrllIitc" court took prtipertj by a' stftrimary' pri:l&l:iss' ;6\1ii 6r'the'harl:ds of one who claimed the }l.ight'bffY6s§e'ssibb 'Ufi'dar d' Hen. alld ; Md¥" admitted the shdnv. Knox,llpWalttJlSftl· !)jiJ io,,,r;iq .",j " ,',I SO, where one claims the absolute property in tlia :liiigiite,;thk .elairh in a plenary suitait
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by obtaining, judg:,, af? the plaintiffis 'seeking to do. Thed.Eilcree will be. is no to the of thEjl, opurtprononncing it; .but Lewis, a·;tlgh¥: ,to· make. ,qefencej no· personal untp)ur is serve,d with process. The. property can uEiver beapplie,d tot4e pay..tp.ent oitha in haa·);leep: reduced to jwigmentin does not tliis court. Ath assertlqn that 11, thing make it,80j nor. caIl;, any prima facie spowing be so plain that a will 6e justified,il,l(proceEjding.to dlltermine a in the absence of to him. in-the. bill touching the ceedings in 'California but the defendant has a rigpt t. 0, be heard upon th·at. I{ellas a tight to insist, that he be with prOCeB,'haud. then he has a right to answer deny allegl1tions of t4e bill.. To pr0geed. after he has ob-jectedhis, and. the service on him out of ,this . district, would be /J.plain case of usurpation,. as it seems ,to Ole, th fact that there is property h81'e spbject to the l jurisdjction oqhis jnstifies further proceedings. $uch justification must found, if at all, in section 738 of the Revised Statlttes otthe Vnited States. That section proy;ides: II When: any defendant in a [suit.in equity to enforce any legal or equitable lien or claim against real or personal property within the district where the suit is brought, is not aq inhabitant of nor found within said district, and does not v01untarily appear thereto, it$hall be lawful for the court to make an order directing such absent defendant to appear/' etc. Upon proof of the service of the order the court is authorized to proceed ,to the hearing and adjudication of the suit, to affect the property of the absent defendant in the district only. ' .In my judgment this section was only intended to reach those suits in equity in which it was sought to enforce some pre-existing lien or claim, legal or equitable, upon or to some specific property, real or personal,and not cases in which it is sought to reach and appropriate the general property of a
Qply:.
Ull1 de .ayanah!l:l. in·.this, ,district
SRAINWALD
V.' LEwIs.
defendant to the payment of his By the 'words or lien ot'claiW:'against real or persona1 ihtendedto' reach case in which, 'there beaoy 80rt'of charge upon a 'piece :of ble of being enforce'a by acotiri. o(equity;This' to my mind from the sectiOn as it standsij, bu,t I6Qk to the act w,hieh was evidently as a substitute for se6tio)1 738,: 'all doubt ptessions as were obscure' iIi the section former made c l e a r . ' , "that when JIi any Sectibn 8 of ;the act of suit commenced in any circuit court of the, United States to enforce any lega1'or equitable upon, ,or "to, ,to i'efnove any encumbrance or lien or cloud upon; the title real or personal property within the district, ,; etc.;' following the language substantially of section 738, with a provision that the adjudication shall only affect the property "which shall have been the subject of the suit." Nothing, it seems to me, can be plainer' than this. In ease the absent defendant· does not appear, it is only the property "which shall have been the subject of the suit" which i,s to be affected. I must hold there is nothing in these sectiona. which helps. the, plaintiff here. Indeed, this latter,section limits the jurisdiction, such as it is, to suits in the circuit court. Having reached the couclllsion that since ,the apto the jurisdiction this pearance of the defendant to there is no I;leed to gO.OJa< and court cannot decide the other 'points made on the motion; But· I am conto me the assignee is not strained to say that it has in a position to maintain' this bill, which is a bill, he not having exhausted his legal remedy in this jurisdiction. That he has a legal remedy on the California judgment seems plain. An action will lie at law upon it, a judgment .can be obtained here, and an execution can be issued against the property of the defendant now in the hands of the receiver j' that is, there is no legal impediment to such a. course. Whatever difficulties arise to prevent a successful pursuit of legal remedy corrie from the fact that Lewis is not a resident.
ot.
518
.
REPORTER.
,But for that fa<;t a suit,atrlawwould liEl against Lewis,with agaius't this very .. As I no,w look at this case, stripped of its surroundings of bankru'ptcy Itnd fraud in it,becomes. an an assignee to ,availhimsAlf of the of.a Qourt of Elquity .for the purpose the generalproperty of a defendant, instance", to of his debts,a thing which, so' fa! as lam ' has never been done. r regret that, moved by a to aid the creditors .who been defrauded by the bankrupts and this defendant, Harris Lewis, I have made an order,which, :ppon)ull'consideration, cannot stand. ' .. .' Let an order be entered;vacating the ord!')r of November 22,1880; appointing R. L. Sb,ainwald' receiver in this case, and also dismissing the plaintIff's bilL
In re L
MAHONEY
and ,
RIDDLE.-
(DiBt1'iee Oourt, E. D. PennsyZfJanirt. BANKRUPTCy-ApPOINTMENT OF -DOUBTFUL RIGHT
January14,1881., UNADMINISTERED ASSETS
oF' ASSIGNEE 'TO HEcoVER."-Where, after the death of an assignee in bankruptcy, ·evidence of the existence of administered assets is produced, the coqrt :w!U APpoint new notwithstanding his right to recover such assets may be doubtful, depending upon several disputed questions of law and fact. 2.BAME.-The firm of A" B, & O. dlgsolved, O. becoming partner. A. filed> a petition in bankruptcy in Pennsylvania under the ballkrupt law. of 1841, O.lIUQsQquent1.Y'ftlejl a, petition in New Orleans. O.'s a$signee sold the firl)1 Beforet¥ce dissolutiOn the firm had Qommenced an attachment suIt in Philadelphia againsi a debtor and'had slllrimoried abahiUlsgarilishee. This suit was never tried and no proeeedings in it were had for 34 years, When A.'s assignee having diedthefil'11l filed a petition for the arJ>ointnl of a new assignee to carry nt suit. Held, i :that the petition should be granted, arii! \hatthe" questions 9.f law and , fact on which: the right of the assignee to recover woufd depena, could ,,' not properly be. ()on"iPertld;up<in' this apPlJ,catiQu; " .I ' " "
:'In:' Ballkrrt ptd:rr
! , ,; i
T., I; I '.;
' ) , ." ;.q "!'Heported by( Frank P, , Prichard, Esq,' ' . '" PhUadelpl;1ia· hal'. pf the ; '.' ' '," ' ,! ," . .I.. ',; i .