247 F. 578 | E.D. Tenn. | 1918
The situation under which this petition has been filed is as follows:
Upon an involuntary petition in bankruptcy filed in the United States District Court for the Southern District of New York against the Patterson Lumber Co., that court, on October 5, 1914, appointed receivers of its property. On October 16, 1915, this court, under an ancillary petition, appointed a receiver of the assets of the alleged bank
The holders of the second and third mortgages have joined in the prayer of this petition. Notice of this petition having been given, the trustee in bankruptcy, the trustee under the second and third mortgages, and others have appeared and moved to dismiss Lite petition of the Trust Co. for want of jurisdiction, and have also answered the same.
Prior to the amendment of 1910 there was for a time a diversity of opinion whether a bankruptcy court of primary jurisdiction could directly exercise'its jurisdiction over property situated in another district, or whether such jurisdiction should be exercised through ancillary proceedings in the court of the district in which said property lay; it being questioned whether the court -of bankruptcy of the district in which such property lay could exercise ancillary jurisdiction in aid of the court of primary jurisdiction. However, in Babbitt v. Dutcher, 216 U. S. 102, 30 Sup. Ct. 372, 54 L. Ed. 402, 17 Ann. Cas. 969, and Elkus, Petitioner, 216 U. S. 115, 30 Sup. Ct. 377, 54 L. Ed. 407, it was definitely determined that courts of bankruptcy in other districts had ancillary jurisdiction to make orders and issue process in aid of proceedings pending in the bankruptcy court of primary jurisdiction. It was, however, not held or intimated in either of these cases or in any other adjudicated case, so far as I am aware, that such ancillary jurisdiction extended further than to aid the proceedings in the court of primary jurisdiction and in subordination thereto. Subsequently, by the Act of June 25, 1910, section 2 of the Bankruptcy Act was amended by adding clause 20, specifically authorizing courts of bankruptcy to “exercise ancillary jurisdiction over persons or property within their respective territorial limits in aid of a receiver or trustee appointed in any bankruptcy proceeding pending in any other court of bankruptcy.” Comp. St. 1916, § 9586.
It is earnestly contended in behalf of the Trust Co. that when this ancillary jurisdiction is exercised by a court of bankruptcy under this section of the Act by seizing property within its jurisdiction, as in the present case, such court of ancillary jurisdiction thereby becomes vested with plenary power to determine all questions of priority as to the property seized by it, including the question whether or not a mortgage upon such property should be enforced by the court of bankruptcy itself or permission given to the mortgagee to foreclose the mortgage dehors tire court. In support of this contention the petitioner relies upon Fidelity Trust Co. v. Gaskell (8th Circ.) 195 Fed. 865, 115 C. C. A. 527. In that case, however, the sole question was whether the court of ancillary jurisdiction, having seized certain property as the property of the bankrupt, had jurisdiction to determine the right of an intervenor claiming the property as his own. In deciding this question affirmatively, the court further said that not only is a court of ancillary jurisdiction authorized to determine such adverse claim to the property, but (195 Fed. 873, 115 C. C. A. 527) that the ancillary jurisdiction vested by the amendment of 1910 also included the power to hear and adjudge the claim of intervenors to “legal or equitable liens upon, the property it takes, or holds in its legal custody, by virtue of that jurisdiction, and to send the proceeds to the court of original jurisdiction, or to apply it to the discharge of the claims of intervenors in accord with its decision.” This latter expression of opinion was, however, obviously merely obiter, the case not involving any question of a lien upon property or the disposition thereof in the en
I therefore think it clear that both under the express terms of the amendment of 1910, which merely confers ancillary jurisdiction “in aid of” a receiver or trustee appointed in the court of primary jurisdiction, and the broad rule stated in Lazarus v. Prentice, supra, where the court of ancillary jurisdiction takes possession of mortgaged property in aid of a bankruptcy court of primary jurisdiction, it has no authority to determine, regardless of the court of primary jurisdiction, whether the mortgage upon such property should be enforced through the bankruptcy court or in independent proceedings by the mortgagee or to release the mortgaged premises to the mortgagee for the purpose of such independent foreclosure; such proceeding obviously not being in aid of the receiver or trustee in the court of primary jurisdiction, but in my opinion in derogation of the rights and authority of the court of primary jurisdiction, which is vested with sole authority to determine this question in the administration of the bankruptcy estate, and in derogation of the rights of the trustee appointed by it.
I may add that I do not regard either tire opinion or order of the District Court of the Eastern District of Pennsylvania as in conflict with the view herein expressed, that court not having determined either in its opinion or in its order whether the court “having jurisdiction of the mortgaged premises” was the District Court of New York or this court; while on the contrary a decision of this question was apparently expressly intended to be reserved, as shown by the statement in the opinion of the court that the “tribunal best situated to pass upon the question involved is the court having control of the assets of
An order will accordingly be entered dismissing the'petitions of the Trust Co. and others, and denying leave to file an independent bill, as prayed.