the property is situated, although not where the proceeding in bankruptcy is pending and irrespective of the residence of the trustee, the bankrupt or the defendant. The court may direct process to be served upon the defendant in another district.10 When the requisite diversity of citizenship exists and the value of the matter in dispute is that essential to the jurisdiction, such a suit when brought in a State court by the trustee may be removed by the defendants.11 Such suits can only be instituted in courts of bankruptcy by trustees, and not by creditors, who can only sue in the State courts unless there exists some other ground of Federal jurisdiction; 12 although, when the trustee refuses to sue, they may by leave of the court sue in his name at their own expense upon filing a bond for costs.18 It has been held that a receiver in bankruptcy cannot institute a suit.14 Such plenary suits by trustees are not, like summary applications, "proceedings in bankruptcy;" but they are "controversies" arising out of the bankruptcy proceedings,15 and under had jurisdiction of a suit for its recovery although if the property had been misappropriated without the consent of the corporation there would have been no jurisdiction in any Federal Court. Brent v. Simpson, C. C. A., 238 Fed. 285. Where such a proceeding was brought by a trustee in bankruptcy in a District Court as an action at law, and, pending trial, by stipulation, an order was entered referring the cause and certain issues arising upon the pleadings to a designated lawyer, to state and take the evidence and his conclusions of law and fact thereupon to the next term of court for its further action; it was held that this order, in effect, constituted the referee an arbitrator, whose findings would be reviewed only for fraud, misconduct or other recognized legal reasons authorizing the setting aside of an arbitrator's award. Westall v. Avery, 171 Fed. 626; Bankruptcy Law, § 23b, as amended, 36 St. at 8 Collett v. Adams, 249 U. S. 545; Lawrence v. Lowrie, 133 Fed. 995, 13 Am. B. R. 297; Remington on Bankruptcy, § 1690. See supra, § 608. 9 Collett v. Adams, 249 C. S. 545. 10 Ibid. 11 Ewing v. S. L. Leszynsky & Co., 236 Fed. 811. 12 Viquesney v. Allen, C. C. A., 131 Fed. 21; Remington on Bankruptcy, 1716. See Brumby v. Jones, C. C. A., 141 Fed. 318; Henrie v. Henderson, C. C. A., 145 Fed. 316. Contra, Horner-Gaylord Co. v. Miller & Bennett, 147 Fed. 295. 13 Re Bailey, 151 Fed. 753. 14 Boonville Nat. Bank v. Blakey, C. C. A., 107 Fed. 891; Beach v. Macon Grocery Co., C. C. A., 116 Fed. 143; Re Kolin, C. C. A., 134 Fed. 557. Infra, § 634. 15 Boonville Nat. Bank v. Blakey, the laws of the United States. They are subject to the general rules regulating pleadings and practice in courts of equity and of common law.16 They cannot be brought in equity, except in cases which would ordinarily be within the equitable jurisdiction of the court.17 They cannot be begun before a referee.18 C. C. A., 107 Fed. 891; Stelling v. Jones Lumber Co., C. C. A., 116 Fed. 261; McNulty v. Feingold, 129 Fed. 1001; Delta Nat. Bank v. Easterbrook, C. C. A., 133 Fed. 521. It has been held that an adverse claim to property in the possession of the court of bankruptcy should be determined by a proceeding in bankruptcy instead of by a plenary suit. Re Seger Bros. Co., 243 Fed. 459. See infra, § 635. "There may be controversies arising in the course of bankruptcy proceedings that are so far connected with those proceedings as to be in effect a part of them and capable of summary disposition by the referee under the general order of reference, although because of their nature or because involving a distinct and separable issue they may be reviewable, under the sections cited, by appeal rather than by petition to revise." Weidhorn v. Levy, 253 U. S. 268, 271. 16 Sessler v. Nemcof, 183 Fed. 656. It has been held that the objection that a judgment at law was not obtained before the commencement of the suit in equity cannot be raised by an objection to the jurisdiction but must be set up by proceedings analogous to a demurrer. Hally Glenn, 247 Fed. 997. suit by a trustee in bankruptcy to recover possession of property taken under an invalid mortgage by the bankrupt, it was held that the mortgagee could only question the capacity of the trustee to sue by filing In a a special plea and that by answering to the merits he waived such objection. Re Federal Contracting Co., C. C. A., 212 Fed. 685. 17 Sessler v. Nemcof, 183 Fed. 656. There is no presumption in favor of the jurisdiction which might appear upon the face of the plaintiff's bill. Kelley v. Aarons, 238 Fed. 996. A petition by a judgment creditor of a corporation that assets which a bankrupt officer had received from such corporation be applied to the payment of the petitioner's judgment was dismissed because it failed to allege a return of execution unsatisfied. Re Goldberg & Sagman, 232 Fed. 194. 18 Re Cohn, 98 Fed. 75; Re Scheiber, 131 Fed. 121; Horskins v. Sanderson, 132 Fed. 415; Re Ballou, 215 Fed. 810; Re Weidhorn, 243 Fed. 756. But see Re Goldberg & Sagman, 232 Fed. 194; Remington on Bankruptcy, § 1695. It was held that a proceeding was a plenary suit which was begun by a petition by the trustees for the determination of the validity of a claim to a fund in court and the issues raised by an answer thereto referred to a Special Master to take testimony and report findings of fact and conclusions of law. Re Hollingsworth & Whitney Co., C. C. A., 242 Fed. 753, 759. That a petition for a decree that the trustee in bankruptcy holds certain land in trust for the petitioner is a summary proceeding. Re Snelling, 202 Fed. 258. They differ in these respects from the summary applications previously described, which are "proceedings in bankruptcy," and are not considered to be controversies at law or in equity.19 A plenary suit is necessary whenever it is sought to recover money from, or to take property from, the possession of a person who asserts an adverse claim of title to the same which is not merely colorable.20 It seems that when a suit is brought by a trustee in bankruptcy because of interference with property after this has been reduced to his possession,21 or a breach of a contract made with him in his representative capacity,22 the citizenship of the parties ordinarily determines the jurisdiction, irrespective of the citizenship of the bankrupt. An answer which contains no objection upon such ground 23 or a plea praying affirmative relief 24 is a consent to the jurisdiction. The jurisdiction of a Federal court of equity to continue a creditors' bill previously instituted, founded upon a judgment 19 Clay v. Waters, C. C. A., 178 Fed. 385. Cf. § 666, infra. Re Goldberg & Sagman, 232 Fed. 194, 195, 196, per Learned Hand, D. J.: "The jurisdiction of this court is unquestionable; and it is confusing to regard the proceedings here as 'summary'-a phrase more technically applicable to proceedings to reduce to the possession of this court property held by others. This is a proceeding strictly analogous to ancillary dependent bills in equity, arising where the court has sequestered corporate assets for distribution. Such bills do not, for example, rest upon an independent diversity of citizenship; they rest upon the custody of the fund. That is the case here; convenience, and that alone, determines whether they shall proceed by petition entitled in the bankruptcy suit, or by 'plenary suit' under the hand of the court. In such a case as this there is no convenience in a 'plenary suit.'"" 20 Re Gill, C. C. A., 190 Fed. 726; Re Mimms & Parham, 193 Fed. 276; Re Howe Mfg. Co., 193 Fed. 524; Re Spalding Cotton Mills, 193 Fed. 554; Re Iron Clad Mfg. Co., 194 Fed. 906; Johnston v. Spencer, C. C. A., 195 Fed. 215. See § 608, supra; § 635, infra. 21 See Spencer v. Duplan Silk Co., 191 U. S. 526, 48 L. ed. 287. The fact that, in order to determine to what extent the defendant's action was justified it was necessary to try a controversy between him, and the bankrupt did not, it was held, make the latter's citizenship affect the jurisdiction. Atherton v. Beaman, 256 Fed. 871. 22 McEldowney v. Card, 193 Fed. 475. 23 Seegmiller v. Day, C. C. A. 249 Fed. 177. See supra, § 609. 24 McEldowney v. Card, 193 Fed. 475. See § 169, supra. and execution, returned unsatisfied, is not divested by an adjudication in bankruptcy.25 A District court of the United States has jurisdiction of an action by a trustee in bankruptcy against a national bank to recover usurious interest received by the defendant from the bankrupt, since such an action arises under the laws of the United States.26 Where a bankrupt might have sued the defendant in a court of the United States, the trustee may do so, although the latter's citizenship is the same as that of the defendant.27 It has been held: that a Federal court of equity has jurisdiction of a suit by an adverse claimant against the trustee in bankruptcy, to determine the right to property in the possession of the trustee; but not where a bill is already pending in such a court, to which the trustee is a party, to enjoin the prosecution of subsequent suits which would interfere with the court's jurisdiction of the former.28 But in the absence of the requisite difference of citizenship and value of the matter in dispute, it has no jurisdiction; of a bill by a married woman praying, that an adjudication of her husband's bankruptcy be set aside; that lands belonging to the connubial community which had been sold by the Court of Bankruptcy be resold after a determination as to which of the claims were separate debts of the alleged bankrupt and which were debts of the community and that the bankruptcy proceedings be stayed until the termination of the suit; 29 nor, it has been held, to determine a dispute as to a water right connected 25 Nat. Bank of the Republic v. Hobbs, 118 Fed. 626. 26 Reed v. American-German Nat. Bank, 155 Fed. 233. Before the abolition of the Circuit Courts it was held that where, in such a court, which had jurisdiction by reason of citizenship, judgment was recovered by an adverse claimant against a trustee in bankruptcy for the possession of specific property, and it then appeared for the first time that the defendant had sold part of the property pending the suit, the Circuit Court should order the trustee to pay the proceeds to Fed. Prac. Vol. III-68 the plaintiff; and that it was error to remit him to an application to the court of bankruptcy. J. B. McFarlan Carriage Co. v. Solanas, C. C. A., 106 Fed. 145. 27 Bush v. Elliott, 202 U. S. 477, 484, 50 L. ed. 1114, 1117, 26 Sup. Ct. 668. "The citizenship of the trustee is wholly immaterial to the jurisdiction of such a case." 28 Kelley v. T. L. Smith Co., C. C. A., 196 Fed. 466. 29 Gibbons V. Dexter Horton Trust & Savings Bank, 225 Fed. 424. with land in the trustee's possession when the stream is not in the custody of the court; 30 nor in proceedings against a bankrupt firm of a creditor's petition against a solvent who is charged to be a secret partner praying that such solvent be required to file schedules of his individual assets and liabilities.81 A plenary suit to recover a debt due the bankrupt or for other relief in personam, where it is not sought to recover a preference given within four months before the filing of the petition for an adjudication of bankruptcy, to recover property transferred in fraud of creditors or the value thereof, is not within the jurisdiction of a Court of Bankruptcy.32 Without the consent of the defendant, a court of bankruptcy has no jurisdiction of an action by a trustee to recover damages because of a conspiracy, through which property was bought at less than its true value from the bankrupt, while insolvent.33 A Federal court of equity has no jurisdiction of a bill in equity to establish a preferential claim to a fund in a court of bankruptcy and to set aside an order of the latter court or of its referee.34 § 611. Extraterritorial jurisdiction of courts of bankruptcy. A court of bankruptcy has generally no extraterritorial juris 30 Bear Gulch Placer Mining Co. v. Walsh, 198 Fed. 351. 31 Re Samuels, C. C. A., 215 Fed. 845. 32 Bush v. Elliott, 202 U. S. 477, 50 L. ed. 1114; Hinds v. Moore, C. C. A., 134 Fed. 221; De Friece v. Bryant, 232 Fed. 233. So held: of a suit to compel a stockholder to pay corporate debts because her shares were issued for property fraudulently overvalued. Re Haley, C. C. A., 158 Fed. 74. Of omnibus suits to collect subscriptions due by stockholders of a bankrupt corporation, Kelley v. Gill, 245 U. S. 116, affirming 238 Fed. 996; to compel the issue of stock in a corporation to the trustee of a bankrupt who is entitled thereto, Re Ballou, 215 Fed. 810; to recover assets of a bankrupt which had been mis appropriated, Park v. Cameron, 237 U. S. 216; of suits for accounting of the transactions of a partnership which had not been adjudicated a bankrupt brought by the trustee in bankruptcy of a member of the firm, Tate v. Brinser, 226 Fed. 878; to establish a secret trust in favor of the bankrupt created more than four months before the filing of the petition, Newcomb v. Biwer, 199 Fed. 529; to recover property which had been taken from bankruptcy by force, Waite v. Gottstein, 224 Fed. 281; to recover property which had been given to the bankrupt, Flanders v. Coleman, 249 Fed. 757. 33 Lynch v. Bronson, 177 Fed. 605. 34 U. S. Fidelity Co. v. Bray, 225 U. S. 205, 56 L. ed. 1055. |