Peck v. Jenness

| Superior Court of New Hampshire | Jul 15, 1845

Parker, C. J.

Several objections have been raised to the pleas filed in the original action, which we do not find it necessary to consider. They have been urged with great force and ability, and some of them would seem to be fatal, unless the replications are construed as admitting the validity of the discharge generally, by praying judgment against the property. The plaintiffs were entitled to such a j ndgment, only upon the ground that the defendants had a discharge in bankruptcy, and that such special judgment was necessary to enable them to avail themselves of their lien or security upon the property attached. Perhaps, under this state of the pleadings, the alleged defects in the pleas, if they exist, should be regarded as omissions in matters of form, of which the plaintiffs can not take advantage in this case; but the consideration of these questions may be waived.

We have already settled, so far as our decision can settle the question, not only that an attachment upon mesne process constitutes a lion by the laws of this State, but that it is also a lien or security upon property, within the saving clause of the second section of the bankrupt act of August 19, 1841. It is not necessary, therefore, to enter into a further discussion of that subject; but we may remark that were further matter in support of that conclusion desirable, it is found in the additional authorities to which we have been referred by the industry and research of the counsel for the defendants in error in the present case. Without pursuing that part of the subject farther, we proceed to consider whether the rejoinder, which sets forth an order of the district court upon the sheriff, to deliver up the property to the assignee, takes this case out of the principle of the cases decided in this State.

The rejoinder does not state that there has been any compliance with the terms of that order, and it may, therefore, be inferred that the pi’operty attached is still in the hands of the sheriff, and in the custody of the laws of the State.

Since the decision of Kittredge v. Emerson, the case Ex parte City Bank of New-Orleans (reported 7 Law Nep. 558), has been determined in the Supreme Court of the United States, and the plaintiffs in error rely upon the opinion delivered in that case, as sustaining the present suit. That case settles nothing in relation to attachments or liens. There is nothing in it in conflict with our decision in Kittredge v. Warren, nor with so much of the opinion we expressed in Kittredge v. Emerson, as relates to those subjects. Assuming the doctrine of those cases, that an attachment is a lien or security upon property within the proviso of the second section of the bankrupt act, to be correct, it is not perceived how the order of the district court, unexecuted, could affect the right or the duty of the State court to render judgment and enforce the security. The property remained in the hands of the sheriff, under the attachment, and the court had the power to render a judgment which would preserve and give effect to the security which the creditors had obtained by it.

The abstract of the case Ex parte City Bank of New-Orleans contains these propositions : “ The jurisdiction conferred on the district courts by the sixth section of the bankrupt act, over all eases and controversies between the bankrupt and his creditors, and between the creditors and the assignee, is not limited to creditors who prove their debts in bankruptcy, but extends to all whose debts constitute present subsisting claims, capable of being asserted in any form under the bankruptcy.” “ The district courts possess full jurisdiction-to suspend and control proceedings in the State courts, instituted by any creditor or party adversely interested, to enforce his rights or obtain remedial redress against the bankrupt or his assets, by acting upon the parties through the instrumentality of an injunction or other remedial proceedings in equity, upon application by the assignee, and a proper case for such interference made out.” “ The prosecution or defence of any such proceedings in the State courts is placed under the discretionary authority of the district courts.” 7 Law Rep. 558, 554-.

Assuming the doctrine thus quoted to be sound, and that the district court may control proceedings in the State courts, the order set forth in the rejoinder does not attempt so to do, unless it be supposed that the delivery of the property would defeat the suit, which certainly does not necessarily follow. The order does not stay the suit, and as the district court, if it took possession of the property, would be bound to enforce the security and apply the property in satisfaction of the debt, if one existed, the obvious mode in which to ascertain whether a debt existed, and to ascertain its amount and enforce the security if it existed, would be to permit the creditor to proceed to judgment in the suit by which the security was obtained, and through which, from its, very nature, it was-, by the laws creating it, to be enforced. The district court, if it had a right to control the proceedings, must take some measures to satisfy the lien. What those measures should be, unless to direct the plaintiff to ascertain the amount of his debt by a judgment and to apply the property in satisfaction of it when rendered, does not appear. A question might certainly arise, if the suit were to be defeated, how the lien or security, which originated upon the service of the writ (and according to the law of the State was dependent upon the prosecution of the suit and the rendition of a judgment), is to be preserved and enforced. The case Ex parte Foster, certainly seemed to look to the destruction of the suit, by pleading the discharge as an effectual means of defeating the lien or security which was dependent upon it. If the district court had authority to make the order, was bound to enforce the lien, and might control the proceedings in the State court; it would seem that removing the property subject to the security, it should remove the suit on which the security depended — should remove the principal as well as the incident.

But we do not place our decision in this case upon these considerations. Those portions of the opinion in Ex parte the City Bank of New-Orleans, of which we have cited the abstracts, claim from us some further examination. That case decides that “ the supreme court possesses no revising power over the decrees of the district courts, sitting in bankruptcy;” and that it “is not authorized to issue a writ of prohibition to the district courts, except in cases where they are proceeding as courts of admiralty and maritime jurisdiction.” So far as this, it is matter of authority. Those were the points in issue in the ease ; which was an application for a writ of prohibition. Other matters were discussed at the bar, and were involved in the previous proceedings in the district court, but the decision of those matters was in no way necessary or important to the conclusion that the supreme court had no power to issue a writ of prohibition. And upon that part of the case, which is the part upon which the plaintiffs in error rely, we may say that we do not feel required to receive, and for reasons which we shall state we can not take, the particular views expressed in the opinion delivered, as matter of authority, decisive of this case.

That part of the case relating to the jurisdiction of the district courts, of which we have already cited the material portions of the abstract, as published in the Law Reporter, is not upon the principal points involved in this case, which are the authority of the district court to issue this order upon the sheriff to deliver the property, and its effect. If it bo supposed that the district court had the right to issue the order, the effect of it upon this suit remains to be settled. And it has been argued here, that that case does not decide the question whether the district court had the right to make an order on the sheriff to deliver the goods, so long as they were in his custody under the laws of the State. The bench of the Supreme Court at the time of the decision of that case was not full, and it is understood that the court were not unanimous in the opinion delivered. The course of reasoning in an opinion, and incidental positions not necessary to the decision of the case, do not always receive the sanction of all the members of the court, even when no dissent is expressed ; and although entitled to great respect, this consideration might be sufficient to show that such reasoning and conclusions upon collateral points do not, under such circumstances, come to us with the weight of a binding authority.

But there is still another and a conclusive reason why we can not receive the part of the opinion to which we have referred, as a guide to direct our judgments, and that is, that we can not reconcile the different portions of it, so as to regulate our action according to it. In one portion it seems to take from the State courts all jurisdiction of any suit against the bankrupt, after a decree in bankruptcy, by asserting an exclusive jurisdiction in the district and circuit courts over all such cases. And in a subsequent portion it expressly admits the jurisdiction of the State courts over such suits, and their authority to render valid judgments, hut asserts a superior jurisdiction in the district court to suspend or control those proceedings at its will, making the jurisdiction of the State courts in fact subservient to that of the district court.

It has heretofore been supposed that the language of the sixth section of the act, providing that the jurisdiction conferred by it on the district court “ shall extend to all cases and controversies in bankruptcy arising between the bankrupt and any creditor or creditors who shall claim" any debt or demand under the bankruptcy,” &e., was limited to such creditors as came in and proved their debts under the bankruptcy, or instituted some proceedings, relying upon the fact of bankruptcy to sustain them, or having reference to the petition. Such was substantially one of the objections taken in the argument of the case of the City Bank. But that position seems to have been distinctly denied. It is said, “We do not so interpret the language. "When creditors are spoken of “ who claim a debt or demand under the bankruptcy,” we understand the meaning to be, that they are creditors of the bankrupt, and that their debts constitute present subsisting claims upon the bankrupt’s estate, unextinguished in fact or in law, and capable of being asserted under the bankruptcy in any manner and form which the creditors might elect, whether they have a security by way of pledge or mortgage therefor, or not.” (7 Raw Hep. 563.) And this seems to lie at the foundation of the opinion in that ease, except so far as the matter of prohibition is concerned.

The great question, which in fact is the basis of all the rest, is this; what is the jurisdiction of the district court ? And this depends upon what is comprehended within the terms “ in bankruptcy,” “ under the bankruptcy,” and “ in virtue of the bankruptcy.” The district court had jurisdiction of “ all cases and controversies in bankruptcy,” where creditors claimed “ any debt or demand under tlie bankruptcy,” and of “ all acts, matters, and things, to be done under and in virtue of the bankruptcy.” The opinion extends the construction of these terms, so as to embrace not only all debts and demands of creditors who actually assert a claim, in some mode, having for its foundation the petition and decree of bankruptcy and the jurisdiction of the district court consequent thereupon, but, as we have just seen, to all debts and claims capable of being so asserted ; and it makes this an exclusive jurisdiction in the district and circuit courts ; for in another part of the opinion, referring to the eighth section of the act, and the concurrent jurisdiction there conferred upon the circuit court, of all suits which may or shall be brought by any assignee of the bankrupt against any person claiming an adverse interest, or by such person against the assignee, &e., we find it said, “ of course, in whichever court,” (circuit or district) “ such adverse suit should bo first brought, that would give such court full jurisdiction thereof, to the exclusion of the other. But in no shape whatsoever can this clause bo construed otherwise to abridge the exclusive jurisdiction of the district court over all other “ matters and proceedings in bankruptcy arising under the act, or over all acts and matters and things to be done under and in virtue of the bankruptcy.” (7 Law Bop. 562.) And again, “Prompt and ready action, without heavy charges or expenses, could be safely relied on, when the whole jurisdiction was confided to a single court in the collection of the assets, in the ascertainment and liquidation of the liens and other specific claims thereon, in adjusting the various priorities and conflicting interests, in marshaling the different funds and assets, in directing the sales at such times and in such a manner as should best subserve the interest of all concerned, in preventing, by injunction or otherwise, any particular creditor, or person having an adverse interest, from obtaining an unjust and inequitable preference over tbe general creditors by an improper use of his rights or his remedies in the State tribunals ; and finally, in making a due distribution of the assets, and bringing to a close, within a reasonable time, the whole proceedings in bankruptcy. Sound policy, therefore, and a just regard to public as well as private interests, manifestly dictated to Congress the propriety of vesting in the district court full and complete jurisdiction over all eases arising, or acts done, or matters involved, in the due administration and final settlement of the bankrupt’s estate; and it is accordingly, in our judgment, designedly given by the sixth section of the act.” (7 Law Rep. 570. See, also, page 568.)

If then by “ creditors who claim any debt or demand under the bankruptcy,” all creditors are in fact intended, whose “debts constitute present subsisting claims upon the bankrupt’s estate, unextinguished in fact or in law, and capable of being asserted under the bankruptcy”; and if the debts and demands against the bankrupt, capable of being so asserted, are to be deemed debts and demands “ under the bankruptcy,” as they must be in that case, the conclusion seems to follow, that the district and circuit courts have exclusive jurisdiction of all such debts and suits. The opinion, as we have shown distinctly, asserts this, and we have no doubt that the act confers upon the courts of the United States exclusive jurisdiction of all suit and proceedings “in bankruptcy.” The necessary result of this doctrine must be, that the jurisdiction of the State courts over any debt or demand capable of being asserted under the bankruptcy, would be ousted by the decree of bankruptcy. They would not have a right to enforce any lien or mortgage, or to entertain jurisdiction of any suit or demand, fiduciary or otherwise, capable of being proved under the bankruptcy; for such demand or suit would be a demand and proceeding under the bankruptcy and in bankruptcy, and therefore within the exclusive jurisdiction of the district court, or the exclusive concurrent jurisdiction of the district and circuit courts. On this hypothesis, no injunction would be necessary to restrain proceedings in the State courts. All such proceedings, after the decree of bankruptcy, would be without jurisdiction, and might well be treated as nullities.

But a position, that the State courts have no jurisdiction over debts and demands capable of being proved under the bankruptcy, is entirely inconsistent with the bankrupt act, with Ex parte Foster, Ex parte Bellows Sp Peck, and even with other portions of Ex parte the City Bank of Neto-Orleans, for it is there admitted that the courts of a State may entertain jurisdiction of suits upon such debts. The opinion is explicit upon that point. Speaking of the asserted jurisdiction of the district court to suspend or control proceedings in the State courts, brought by any creditor or person having an adverse interest, it is said, “But because the district court does possess such a jurisdiction under the act, there is nothing in the act which requires that it should, in all cases, be absolutely exercised. On the contrary, where suits are pending in the State courts, and there is nothing in them which requires the equitable interference of the district court to prevent any mischief or wrong to other creditors under the bankruptcy, or any waste or misapplication of the assets, the parties may well be permitted to proceed in such suits and consummate them by proper decrees and judgments, especially where there is no suggestion of any fraud or injustice on the part of the plaintiff in those suits. The act itself contemplates that such suits may be prosecuted, and further proceedings had in the State courts.” (7 Law Bep. 567.) And the reason why injunctions have been granted to stay proceedings in the State courts has been, that the rights of the assignee, and of the other creditors,. would be concluded by a judgment obtained there in favor of any particular creditor.

The jurisdiction of the State courts over debts capable of being proved under the bankruptcy, being admitted, the inquiry arises, how has this jurisdiction been obtained ? It is very clear that it was not conferred by the bankrupt act. That does not purport to confer any jurisdiction in -bankruptcy upon the State- courts, and a question might have arisen, whether it could have done so had Congress attempted it. Martin v. Hunter’s Lessee, 1 Wheaton 337. It neither enlarges nor limits their jurisdiction. The authority to the assignee to prosecute and defend, given by the act, admitting that it may be exercised in, the State courts, is not a grant of jurisdiction to those courts over the subject matter, but authorizes the assignee to resort to such jurisdiction as they may have had before,

/ in consequence of the transfer of all the rights and property of the bankrupt to him, and of the duties thereby devolved upon him. The jurisdiction of the State courts, it is not to be doubted, is derived from the laws of the several States in which'’ they are situated. It existed before the passage of the bankrupt act, and it is entirely independent of it, although the provisions of the act must be enforced as the paramount law in all cases where they come in question in the administration of the ordinary jurisdiction. The bankrupt act neither purports to interfere with the exercise of the jurisdiction conferred by the laws of the several States upon the State tribunals, ■nor to authorize the courts of the United States to interfere with it, except in such manner as is provided by the general laws in other cases. There is no provision to be found purporting to give any such authority. In this view of the matter, creditors of a bankrupt having claims capable of being asserted in the State courts, are left at full liberty to resort to those jurisdictions, and to pursue their remedies there, notwithstanding those claims are debts capable also of being asserted under the bankruptcy.

But as the jurisdiction in such cases was conferred by the State laws, existed before the passage of the bankrupt act, and was not limited or enlarged by that act, it will follow that it is not a jurisdiction in bankruptcy; that the creditors who resort to it by suit, are not creditors “ who claim a debt or demand under the bankruptcy”; and that the proceedings had upon their claims are not matters and things done “ under and in virtue of the bankruptcy.” IIow then is it made to appear, that “ the prosecution or defence of such suits in the State courts is obviously intended to be placed under the discretionary authority - of the district court?” The right to control the bankrupt, and the assignee, obviously gives no such power. It must be derived from the doctrine that the proceedings in the State courts are proceedings in and under the bankruptcy, of which the district court has jurisdiction, although the case is pending in the court of another government, or it must be founded, as we have heretofore supposed it was, upon some alleged necessity of the ease. If proceedings under the bankruptcy are confined to those which have for their object the collection and the distribution of the assets among the persons who claim as creditors of a bankrupt, and those proceedings which are incidental to, and subservient to that object, the prosecution of suits by creditors claiming adversely to the bankruptcy, does not come within that description; and creditors may waive their rights under the bankruptcy, and take such other remedy in the courts of the State as the forms of proceeding there will allow, the bankrupt act being regarded, like other laws of the United States, as the paramount law, so far as it applies to each particular caso. The assignee being appointed under the bankruptcy, the district court has jurisdiction over him, and may control him in the prosecution or defence of any such suit; but the adverse party, who claims nothing under or by virtue of the bankrupt act, and the court upon which the act confers no jurisdiction, with its officers, stand upon a different ground.

For the reasons suggested, we have thought that the different portions of the opinion to which we have adverted, the one alleging that all creditors having present debts capable of being asserted under the bankruptcy, are creditors “who claim a debt or demand under the bankruptcy,” and the other admitting the jurisdiction of the State courts over demands thus capable of being asserted and proved under the commission, can not stand together; and we have had to choose between them. The first, so far as we are aware, is new, and in our judgment not warranted by the phraseology of the act. It ousts, in our view, as we have said, the jurisdiction of the State courts, over all debts capable of being proved under the com-' mission. The latter has not only been acted upon every where, but has been fully sustained by the district court and Supreme Courts of the United States, in the cases referred to, and is admitted in the language of the act itself.

Adopting the position that the State courts have a jurisdiction over such cases, not founded upon the bankrupt act, or the bankruptcy, we conclude that mortgages and liens saved by the act may be enforced under it; and discharges may be pleaded, or other defence made, under the laws of the United States, or the State. But injunctions ■or orders can not be issued by the district courts to stay proceedings or defeat the jurisdiction, because that court has no supervisory jurisdiction by the bankrupt act, and because injunctions are prohibited by a general law of the United States, and the case of a bankrupt furnishes no exception to that law. And congress having neither conferred nor limited the jurisdiction of the State courts, the plea that it is necessary to interfere with and control the exercise of that jurisdiction, on account of any of the requirements of the bankrupt act, can not avail, because the act contemplates no such necessity; and it is evident that no such necessity exists, because the act must have been administered in Pennsylvania, and in Vermont since the decision of Downer v. Brackett (5 Law Rep. 392" court="D. Vt." date_filed="1842-07-01" href="https://app.midpage.ai/document/downer-v-brackett-8630535?utm_source=webapp" opinion_id="8630535">5 Law Rep. 392), without any such interference. The judgment in the State courts against a bankrupt, rendered in pursuance of their jurisdiction, must have the same faith and credit as is given to their judgments in other cases where they have jurisdiction, and may be enforced by the court rendering it in the same manner. And if a judgment is founded upon an erroneous construction of the bankrupt act it may be reversed.

It is not necessary to deny that Congress possesses the power to confer an authority such as is claimed. It is sufficient that that body has not attempted its exercise. Cases may undoubtedly be put to show that a power to restrain and control proceedings in the courts of the States would enable the courts of the United States to administer their jurisdiction more conveniently; but those extreme cases neither confer authority on the courts of the United States, nor take away that existing in the State courts. Much less can they show a repeal of a positive prohibition upon the former.

In the view we have taken of the case, it is hardly necessary to say, in conclusion, that we are of the opinion that the order of the district court, set forth in the rejoinder, imposed no duty upon the sheriff) and that it furnishes no answer to the replication.

Judgment affirmed.

Note. The judgment in this case was affirmed, on error, in the Supreme Court of the United States. See 7 Howard’s Sup. Court Rep. 612.