283 F. 374 | 7th Cir. | 1922
The trustee in bankruptcy of the estate of one Henderson filed his petition in the United States District Court for the Eastern Division of the Northern District of Illinois, the court of adjudication, against the Board of Trade of the City of Chicago, herein called Board, and subsequently brought in as parties, by amendment, the creditors of Lipsey & Co., herein called Creditors, praying that the Board be required by some appropriate order to recognize the rights of the trustee, as such, in and to Henderson’s membership. On a rule to show cause, after pleas to the jurisdiction were overruled, a full answer by the Board was filed, and adopted by the Creditors. Other than as covered by the petition, as amended, and the answers, there are no material facts, and on the pleadings the matter was heard and decided.
The Board was created by a special charter from the state of Illinois, and conducts an exchange in Chicago, where its members trade in farm and other products. It adopted the rules shown in the margin.
Whether Henderson traded on the Board’s exchange for his personal account does not appear, but he did not leave personal debts to other members growing out of trades on the exchange. Being an executive officer of Lipsey & Co., a corporation, he did make trades on the exchange for that corporation. Lipsey & Co. is insolvent, but not in bankruptcy, and its creditors, who became such through unsettled trades made for it on the exchange by Henderson, are here, as the Board’s coappellants, contesting the trustee’s rights.
Two jurisdictional questions are raised: First, that the matter in dispute presents a “controversy,” within the meaning of section 23
“(6) Bring in and substitute additional parties in proceedings in bankruptcy when necessary for tbe determination of a matter in controversy; (7) cause tbe 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.” Section 2, Bankruptcy Act (Comp. St. § 9586).
The words “otherwise provided” refer to section 23 of the Bankruptcy Act. Bardes v. Hawarden Bank, 178 U. S. 524, 535, 20 Sup. Ct. 1000, 44 L. Ed. 1175. Those are really venue sections, in no sense limiting the very broad jurisdiction of the bankruptcy court, save only in regard to controversies to recover property or establish property rights between the trustee and parties who are strangers to the bankruptcy proceeding and who (1) have possession of the property, claiming ownership thereof or a lien thereon, or (2) who deny owing any money claimed by the trustee. In all such cases, not within the exceptions of section 23b, suits after bankruptcy may be brought only in those court where they might have been brought had bankruptcy not intervened.
Section 23b makes four exceptions to section 23a as to where actions may be brought by the trustee, viz.: With consent of the proposed defendant, and also under the circumstances stated in sections 60b, 67e, and 70e (Comp. St. §§ 9644, 9651, 9654), the trustee may bring actions in the District Court or in a state court. Bardes v. Hawarden Bank, 178 U. S. 524, 20 Sup. Ct. 1000, 44 L. Ed. 1175; Babbitt v. Dutcher, 216 U. S. 102, 30 Sup. Ct. 372, 54 L. Ed. 402, 17 Ann. Cas. 969; Weidhorn v. Levy, 253 U. S. 273, 40 Sup. Ct. 534, 64 L. Ed. 898, It should he noted that, when Bardes v. Hawarden Bank was decided, sections 23a and 23b of the Bankruptcy Act of 1898 were in force, and the words “Circuit Courts” were found in section 23a, and the only exception in section 23b was as to cases where consent of the proposed defendant was had as to the place where the suit was brought. When Babbitt v. Dutcher was decided, section 23b had been amended so as to add, as exceptions to the general provision of section 23b, suits arising under the circumstances stated in sections 60b and 67e. When Weidhorn v. Eevy was decided, section 23a had been amended by substituting the word “District” for the word “Circuit,” and section 23b by adding
The rules show that, when an application has been posted ten days, if no objection is made, it is assumed that there are no outstanding claims, and the right to transfer becomes absolute without action by the Board. There is no pretense that any right exists in either the Board or any creditor after transfer of a membership. It necessarily follows that any claim under any rule made by the Board, or by any creditor of Henderson, under the circumstances here shown, could have been defeated by Henderson after sale, and consequently action by the trustee would lie in the court of adjudication under sections 23b and 70s. At the time the operation of the law passed the title to the trustee, Henderson could have transferred all his rights. ' No creditor had any right, except to object before transfer. The Board could only discipline its members. When the law passed his rights to the trustee, Henderson ceased to be a member, and was of course not thereafter subject to discipline by the Board.
“Necessarily tlie District Court lias in eases of this kind jurisdiction to ascertain these facts” (whether the adverse claim is real or merely colorable, etc.) “and if in a given case this question of fact is found against the trustee, the court may go no further.”
The decree of the court below, sustaining the trustee’s petition, is affirmed.
Sec. 23. (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 section sixty, subdivision b; section sixty-seven, subdivision e; and section seventy, subdivision e. (c) The United States Circuit Courts shall have concurrent jurisdiction with the courts of bankruptcy, within their respective territorial limits, of the offenses enumerated in this act.
Sec. 70e. The trustee may avoid any transfer by the bankrupt of Ms 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. E"or the purpose of such recovery any court of bankruptcy as herein-before defined, and any state court which would have had jurisdiction if bankruptcy had not intervened, shall have concurrent jurisdiction.
23 Sup. Ct. 200, 47 L. Ed. 313.
<gz=For other eases see same topic & KEY-NUMBER in all Key-Numbered Digests & Indexes