Davis v. Friedlander

after stating the facts, delivered the opinion of the court.

In Doe v. Childress ( 21 Wall. 642 ), we considered the effect of proceedings in bankruptcy upon an attachment issued from a State court and levied upon the property of the bankrupt, more than four months prior to their commencement. That was an action of ejectment, by the assignee of a bankrupt, to recover land claimed by the defendant under a decretal sale in an attachment suit in a State court against the bankrupt. ' The latter was declared a bankrupt ten months after the institution of the attachment suit, four months before the decree therein, and seven months prior to' the sale at which the defendant became the purchaser of the land. Upon this state of facts it was ruled that the proceedings in bankruptcy did not operate to dissolve the attachment; that the debtor’s title passed to the assignee, subject to the lien created by the attachment; and that a judgment could be entered for the sale of the property, notwithstanding a discharge previously granted was-pleaded in bar of the action. It was said by the court that, “ where the power of a State court to proceed in a suit is subject to be impeached, it cannot be done except upon an intervention by the assignee, who shall state the facts and make the proof necessary to terminate such jurisdiction. ... If the assignee had intervened in the suit, he would have been entitled' to the property or its proceeds, subject to this [the attachment] lien. He did not, however, intervene or take any measures in the case. He allowed the property to be sold under the judgments in the attachment suits, and those under whom the defendant claim! purchased it, obtaining' a perfect title to the same.”

In Scott v. Kelly (22 id. 57), it appears that the assignee in bankruptcy became a party to an attachment suit in a State court, commenced shortly before the defendant was declared a bankrupt. The attachment was issued and levied after-.the

In Eyster v. Gaff ( 91 U. S. 521 ), the main qiwNon considered was whether a State court, in which a foreclosure suit was pending at the time of the bankruptcy- of the defendant, had jurisdiction to proceed without bringing the- assignee before the court. The question arose in an action of ejectment instituted by the assignee against the purchaser at the decretal sale in the foreclosure suit. Referring to the authority expressly given the assignee by statute, to-prosecute or defend all suits in which the bankrupt was a party, the court said : “ If there was any reason for interposing, the assignee could have had himself substituted for the bankrupt, or made a defendant on petition. If he chose to let the suit proceed without such defence, he stands as any other. person would on whom the title had fallen since the suit was commenced. It is a mistake' to suppose that the bankrupt law avoids, of its own force, all judicial proceedings in the State or other court. the instant one of the parties is adjudged a bankrupt. There is nothing in the act which sanctions such a propositions The court, in the case before us, had acquired jurisdiction of the' parties and of the subject-matter of the suit. . . . Having such jurisdiction, and performing its duty as. the case stood in that court, we are-at a loss to see how its decree-can be treated as void.” Again : “ The debtor of a bankrupt, or the man who contests the right to real or personal property with him, loses none of those rights by the bankruptcy of his adversary. The same courts remain open to him in such contests, and the statute has not divested those courts of jurisdiction in such actions. If it has, for certain classes of actions, conferred a jurisdiction, for the benefit of the assignee, on the Circuit and District Courts' of

These doctrines were further elaborated in Claflin v. Houseman (93 id. 180), where it was held that the assignee in bankruptcy', under the act of 1867, had authority to bring a suit in the State courts, "wherever those courts were invested with appropriate j urisdiction .suited to the nature of the case. See also Jerome v. McCarter, 94 id. 734 ; McHenry v. La Societe Francaise, 95 id. 58.

The principles announced in the foregoing cases would seem to be decisive of the main questions arising on this appeal, and we are of opinion that the decree below cannot be sustained. It rests, necessarily, upon the ground, that immediately upon the assignment of the bankrupt’s property to his assignees, the State court of chancery — although the attachments therein were sued out more than four months preceding the bankruptcy— had no jurisdiction to determine the relative rights of the attaching creditors and the assignees in ■ bankruptcy, or ■ to order a sale of the attached property, and apply the proceeds to the satisfaction of the debts of those creditors. But no such position can be maintained. It was competent for the assignees, .upon their appointment and qualification, by appropriate proceedings, directed against individual creditors, Suing in other courts, to have brought all the property in which the bankrupt had an.interest, including that attached in the suits in the State courts, under the direct control of the bankruptcy court, to be disposed of under its orders, with due - regard, however, to the previously acquired rights and equities, .in whatever way arising, of all the creditors of Kaufman. But they were not bound to pursue that course. . Consistently with the bankrupt law, as interpreted by this court, they were at liberty to appear in the State court, and assert there whatever rights they, as assignees, had in the attached property. Electing to pursue the latter course, they voluntarily submitted to the jurisdiction of the State court, which had ample authority to adjudicate, between the attaching creditors and the assignees in bankruptcy, upon all matters arising in the suits before it. Without questioning (as they do not now) the debts of the attaching creditors or the validity of their attachments, the

It results from what has been said, that the sale, under that decree, — whoever became the purchasers of the attached property, whether third persons or parties to the suits, — divested the assignees of whatever interest or title they had in the property. That decree, having been passed by a court of competent jurisdiction as to parties and subject-matter, and never having been modified by the court which rendered it, or by any court having authority to review its action, the assignees áre precluded from asserting in any other court any interest or-title whatever in the property thus sold. Had the present suit been instituted directly by the assignees, for the purpose of setting aside the sale made under the order of the State court, and of procuring another sale of the attached property, under the orders of the court in bankruptcy, the proceedings in the State court would have been a conclusive answer to such an action;

Plainty, therefore, the'present suit by Friedlander, Stich, & Co. is an attempt to invoke the jurisdiction of the District Court sitting in bankruptcy, to the end that they may establish, as against other creditors of Kaufman, their priority of lien upon property, in which, as we have seen, the assignees can now assert no right or interest for the benefit of general or unsecured creditors. Whether appellees have such priority of lien in virtue of their attachment in the law court; whether the proceedings in that court were such as, under the laws of Tennessee, gave them a lien superioi to that acquired by the

The decree1 of the Circuit Court will be, therefore, reversed, with directions that the petition-of Friedlander, Stich, & Co.-, filed in the District Court sitting in bankruptcy, be dismissed Avith costs to the present appellants, but Avithout prejudice to any claim they may assert, by any proper proceedings in a court of. competent jurisdiction, to a prior lien as against appellants, or others, upon the property levied upon by the attachment in the law. court of Memphis; and it is

So ordered.