89 F. 691 | N.D. Cal. | 1898
(after stating the facts). The national bankruptcy act establishes a uniform system, and regulates, in all their details, the relations, rights, and duties of debtor and creditor. It should be interpreted reasonably and according to a fair import of its terms, with a view to effect its objects and to promote justice. Black, Bankr. 271; In re Muller, Fed. Cas. No. 9,912; Silverman’s Case, Fed. Cas. No. 12,855. The district courts are made courts of bankruptcy, and are invested with such jurisdiction at law or in equity as will on-able them io exercise original jurisdiction in bankruptcy proceedings. Black, Bankr. 6-10; In re Miller, 6 Biss. 30, Fed. Gas. No. 9,551; In re Bowie, Fed. Cas. No. 1,728. The various provisions of the act of July 1, 3898, relating to tlie jurisdiction of the bankruptcy court, are set forth in the statement, and need not be here repeated. The act was approved July 1, 1898. It provides that:
“This act shall go Into full force and effect upon its passage; provided, however, fhai 4 4 4 no petition for involuntary bankruptcy shall bo filed within four months of the passage thereof.”
It will thus be seen that the law is in full force and effect, but no proceedings can be instituted thereunder by petition in cases of involuntary bankruptcy until four months after the passage of the act. The question therefore arises whether in the meantime the district court, as a court of bankruptcy, upon the state of facts alleged in the bill, and not denied in the answer, has jurisdiction to issue an injunc
“Looking at the first section of the bankrupt act, it is difficult to imagine how a. more unrestricted jurisdiction over matters in bankruptcy could have been granted. All the assets and all the parties in interest are to he brought before the court:, priorities adjusted, liens ascertained and liquidated, and the different funds and assets marshaled and distributed. The grant of these powers carries with it the right to employ such process, mode of procedure, and remedies as are indispensable io make the grant effectual. In this case the real estate levied on is assets, and power to collect the assets is given. But this power is of no avail in this proceeding, unless the court can preserve the assets until the question of bankruptcy is determined.”
The same quest.ion was again presented in the same court in the case of In re Mallory, and an elaborate opinion was prepared by the district judge in support of the views expressed by him in the Lady Bryan Min. Co. Case. In this case an appeal was taken to the circuit court, Justice Field presiding, and was there affirmed. In re Mallory, 1 Sawy. 88, 98, Fed. Cas. No. 8,991. With reference to the jurisdiction of iiie district court in bankruptcy proceedings, Judge Giles, in Re Bowie, Fed. Cas. No. 1,728, said:
“This court has, by virtue of file first section of the bankrupt act of 1867 (14 Stat. 517), full and adequate jurisdiction over all matters relating to the settlement of the bankrupt estate, either at law or in equity, by way of petition or bill: and fhat whenever a case is presented which shows that the relief sought by the petition is absolutely necessary to protect the interest of the general creditors, and to save from sacrifice the estate of the bankrupt, such relief will bo granted.”
The act of 1867 provided:
“Sec. 50. And be it further enacted, that this act shall commence and take effect as to the appointment of the officers created hereby, and the promulgation of rules and general orders, from and after the dote of its approval: provided, that no petition or oilier proceeding under this act shall be filed, received, or commenced before the first day of June, anno Domini, eighteen hundred and sixty-seven.”
In Bank v. Campbell, 14 Wall. 87-94, the court said:
“We are of opinion that the proviso to the fiftieth section of the bankrupt act, which declares that no petition ox* other proceeding under it shall be commenced before the 1st day of June, 1867, is limited in its effect to such commencement, and that any act done after its approval, March 2, 1867, in fraud of the purpose of the statute, was within its prohibitions.”
The jurisdiction of the district court to issue an injunction in such cases, as well as in a case like the present, grows out of the administration of the law, which gives to courts of bankruptcy, under certain circumstances, authority to take such steps and exercise such power as may be necessary in order to protect the rights of all the creditors.
The statute of 1898 declares that acts of bankruptcy by a person shall consist, among other things, of his having “suffered or permitted, while insolvent any creditor to obtain a preference through legal proceedings, and not having at least five days before a sale or final disposition of any property affected by such preference vacated or discharged such preference.” It is therefore unnecessary upon this motion to discuss the question as to the sufficiency or effect of certain allegations in respondents’ answer. It is enough to say that the levy made upon the property, and the issuance of an execution upon the judgment, etc., might, if the sale of the property is unrestrained, result in giving a preference to the Donohoe-Kelley Banking Company over the other creditors of the Francis-Valentine Company. This is of itself sufficient to authorize the court to issue an injunction to preserve the property until such time as the rights of all the parties may be heard and determined in the bankruptcy court. It will be for the court in such proceedings to determine whether or not, upon the facts which may be presented, the Francis-Valentine Company should be adjudged a bankrupt, and, if so, whether or not the attachment lien of the Donohoe-Kelley Banking Company is a valid lien upon the property of the bankrupt. Moreover, no answer has been filed by the Francis-Valentine Company, the alleged insolvent, and one of the respondents in this suit. As is said in 2 High, Inj. § 1532:
“Courts of equity are usually more strict in requiring a positive denial from all the defendants before dissolving an injunction granted on the ground of fraud, than in ordinary cases. And, where the bill implicates two defendants in the same charge of fraudulent conduct, the court will require the answer of both defendants before granting a motion to dissolve.” Price v. Clevenger, 3 N. J. Eq. 207.
The contention of respondents’ counsel that this court cannot exercise any jurisdiction in the premises, unless the bankruptcy proceedings are pending in the court, cannot be sustained. An examination of the authorities cited clearly shows that the cases where such language was used have no application to the case at bar. Take In re Richardson, 2 Ben. 517, Fed. Cas. No. 11,774, for example. There bankruptcy proceedings had been commenced and were pending in Louisiana, where the petitioners resided. They brought suit in New York, in the district court, for an injunction to stay'proceedings in a suit of the state court of New York until the “close of the bankruptcy proceedings in Louisiana”; and the court properly held that it had no jurisdiction, because no such power was conferred on any district court, except that one “in which the bankrupt proceedings were pending.” Here all parties are residents of this district, and the bankruptcy proceedings can only be commenced and prosecuted in this court. This is not a creditors’ suit, and hence does not come within the rule announced in the authorities cited by respondents’ counsel, that a creditor at large, before judgment, is not entitled to the inter
It is not necessary to review at: length the authorities which hold that the assignee or trustee in the bankruptcy proceedings is authorized 1o bring and maintain suits concerning the rights of property belonging to the debtor. It is enough to say that no trustee has been appointed, or can be appointed, until after the proceedings in bankruptcy have been commenced. But all the authorities which discuss this question are to the effect, as stated in Bump, Bankr. (10th Ed.) 229, that, before the appointment of an assignee (or trustee), proceedings for an injunction to protect the property of the bankrupt may be instituted by the bankrupt or the petitioning creditor. After an assignee or trustee has been appointed, he is the only person who could institute such, proceedings on behalf of the bankrupt estate. Whenever the proceedings sought to he enjoined are prosecuted for the purpose of enforcing a valid lien, and were instituted before the commencement of proceedings in bankruptcy, the courts, in granting or refusing an injunction, are governed by the same principles that regulate their action in the liquidation of liens, and will only interfere when it clearly appears that such interference will benefit the creditors generally. The motion to dissolve is denied.