(198 U. S. 539) v. ing Company and the United States Mortgage & Trust Company were corporations of the state of New York. That the defendant Charles H. Wenman acted as the agent and attorney in fact of the defendants Fish CHARLES H. WENMAN, Stuyvesant Fish, and Boldt. Prior to March 7, 1903, the George C. Boldt, et al. Courts-jurisdiction of court of bankruptcy -suit to determine rights to property in its possession. Jurisdiction of a proceeding in the nature of a plenary action, in which the parties were duly served and brought into court, to determine rights in or liens upon property which, under the facts as admitted by demurrer to the bill, came into possession of a court of bankruptcy as property of the bankrupt, whether held by him or for him, was conferred on such court by the bankrupt act of July 1, S. Comp. Stat. 1901, p. 3420), authorizing the bankruptcy court to cause the estate of the bankrupt to be collected, reduced to money, and distributed, and to determine controversies in relation thereto, and bring in and substitute additional parties when necessary 1898, § 2 (30 Stat. at L. 545, chap. 541, U. for the complete determination of a matter in controversy; and such jurisdiction is not ousted by an unauthorized surrender of the property by the receiver in bankruptcy. [No. 576.] bankrupts, partners, as Dresser & Company, became insolvent, and on that day assigned all their property for the benefit of their creditors. On March 9, 1903, upon the petition of certain creditors, Robert C. Morris and Charles S. Mackenzie were appointed by the district court for the southern district of New York receivers in bankruptcy of Dresser & Company. That at least six months prior to March 7, 1903, the firm of Dresser & Company had been insolvent and unable to pay its debts, and was only able to continue in business by borrowing large sums of money; and in order not to injure the creditors it became necessary to pledge the goods, wares, and merchandise in which the company was dealing, but to conceal said pledge from the unsecured creditors. That the goods dealt with by Dresser & Company consisted, for the most part, of Japanese silks imported for sale. For the purpose of pledging these goods with certain of the creditors, without the knowledge of the other creditors, Dresser & Company entered into a plan or arrangement with the Submitted April 24, 1905. Decided May 29, defendants the Security Warehousing Com 1905. pany: to wit, a certain alleged lease of the store, display and sales rooms was made by APPEAL from the District Court of the Dresser & Company to the Security WareUnited States for the Southern District of New York to review a decree dismissing for want of jurisdiction a bill which seeks to determine rights in or liens upon property which, under the facts as alleged, came into the possession of the court as property of the bankrupt. Reversed. housing Company at a nominal rental of $1 a year, in order that thereafter the said warehousing company might claim that the goods and display and sales rooms belonged to it. That the goods in reality belonged to the firm of Dresser & Company, and there was no change of location or ownership of the said goods, but Dresser & Company reStatement by Mr. Justice Day: mained in possession and control thereof, Edward B. Whitney, as trustee in bank- and permitted the display of them in the ruptcy of Daniel LeRoy Dresser and Charles same manner as that firm had done prior to E. Riess, members of the firm of Dresser & the pretended storage. Dresser & Company Company, filed a bill in equity against exhibited the goods to their customers, sendCharles H. Wenman, Stuyvesant Fish, and ing portions to dyers and manipulators, and George C. Boldt, in the district court of the generally handled and used them as if they United States for the southern district of were their own, and free and clear from all New York. Upon demurrer to the bill, the claims and encumbrances. That the Secucourt dismissed the same for want of juris-rity Warehousing Company exercised no sudiction. The allegations of the bill set pervision or control over the said goods, but forth in substance: That on September 17, 1903, the complainant was duly appointed trustee in bankruptcy of Dresser and Riess, doing business as Dresser & Company, and that as such trustee he qualified on September 29, 1903. That during the time mentioned in the bill, and up to March 7, 1903, Dresser & Company were carrying on business as merchants in the city of New York. That the defendants the Security Warehous merely employed, or pretended to employ, the confidential clerk and secretary of Daniel LeRoy Dresser and Dresser & Company, as its alleged custodian, in whose charge it was claimed the goods had been placed at a salary of $1 per month. She exercised no control or supervision over the goods, but during the period of her employment continued to act as the confidential secretary of tne bankrupts. The security company also placed a few small tags on the shelves and the Security Warehousing Company claimed bins in which the goods were stored and dis- that certain of the goods supposed to have played for sale, upon which tags the name been stored with it by Dresser & Company, of the security company was printed, but and covered by the security instruments, the tags were not easily discovered, and in had been sold by Dresser & Company bemost instances were so placed as not to be fore March 7, 1903, amounting to the sum readily seen, and were not of such a char- of $22,000. That said receivers collected acter as to identify the goods. upwards of $20,000 of accounts receivable of Dresser & Company, and paid the same over to the Security Warehousing Company. That these goods were sold and the accounts collected by the warehousing company before the appointment of complainant as trustee in bankruptcy of Dresser & Com have come into the hands of the trustee except the sum of $1,944.93, paid to the complainant by the security company. Then follow averments as to the payment of the proceeds of the goods sold and accounts collected to the other defendants and the holders of said warehouse receipts. It is averred that the books and records of the Security Warehousing Company are lost or destroyed. It is alleged that the attempt to create a lien upon the goods in the manner aforesaid was contrary to law and the statutes of the state of New York. That the silk goods had been sold at much less than their value. The prayer of the bill is that the security instruments be declared invalid, fraudulent, and void, and that the complainant be decreed the owner of the goods and accounts, and that the defendants be required to account for the value of the same, and for general relief, as the nature of the case may require. The bill then avers the issue of certain warehouse receipts upon said goods, representing that they had been stored with the company at its warehouse at 15-17 Greene street, New York, which was, in fact, the store of Dresser & Company. Then follow allegations as to the delivery of the ware-pany. None of said goods or their proceeds house receipts, some to the United States Mortgage & Trust Company and some to the defendant Wenman for himself or defendants Fish and Boldt. And it is averred that the security instruments did not describe the goods in such a way as to make them capable of identification. That Daniel LeRoy Dresser was one of the incorporators of the Security Warehousing Company, and one of its directors and stockholders. That at the time of the delivery of the security instruments Charles S. Mackenzie was general counsel of the security company, and was fully cognizant of the system of pretended storage before described, and was also personal counsel for Daniel LeRoy Dresser. That after the delivery of the warehouse instruments Dresser & Company continued to display and sell and dispose of the goods and manage the business in the same manner that they had been in the habit of doing prior to the said pretended storing, without objection from the Security Warehousing Company. Then follow allegations as to the knowledge or opportunity for knowing, on the part of the defendants, of the situation above described. When the receivers, Morris and Mackenzie, went into possession of the stock of Dresser & Company on March 9, 1903, upwards of $150,000 worth of the goods was still in the possession and under control of Dresser & Company. After the receivers had taken possession of the store the Security Warehousing Company notified them that it claimed that the store, display and sales rooms belonged to it under the alleged lease, and that the goods therein contained had been stored with it by Dresser & Company, and requested the delivery of all the goods to it. The receivers did not dispute this claim of the warehousing company, but complied with it. Neither the court nor the unsecured creditors of Dresser & Company were advised of the facts concerning this claim or the character of the pretended storing upon which the issue of the so-called warehouse receipts was based. Then follow allegations as to the sale of the goods, and that Messrs. Robert D. Murray, George H. Gilman, and J. Aspinwall Hodge for appellants. Messrs. Edwin B. Smith, Louis F. Doyle, and Smith & Barker for appellees. Mr. Justice Day, after making the foregoing statement, delivered the opinion of the court: This case is here upon the question of the jurisdiction of the district court to entertain the action. The case in the court below was dismissed for want of jurisdiction, the demurrer having been sustained solely upon the ground that the bankruptcy act of July 1, 1898 [30 Stat. at L. 545, chap. 541, U. S. Comp. Stat. 1901, p. 3421], as amended by the act of February 5, 1903, [32 Stat. at L. 797, chap. 487],1 gave the court no jurisdiction. We are not concerned with the merits of the controversy further than the allegations concerning the same are necessary to be considered in determining the question of the jurisdiction of the district court, as a court of bankruptcy, to entertain this suit. It is sufficient to say 1 U. S. Comp. St. Supp. 1903, p. 409. that, in our opinion, the bill made a case | ing jurisdiction over suits brought by truswhich presented a controversy for judicial tees in bankruptcy to set aside fraudulent determination as to the right of the defend- transfers of money or property made by the ants to hold the lease and property under bankrupt to third parties before the instithe alleged security of the warehouse re- tution of the bankruptcy proceedings, withceipts undertaken to be issued in the man-out the consent of the defendants. In that ner set forth in the petition. Whether it case it was held that the power conferred will turn out, upon full hearing, that the in subd. 7 of § 2, above quoted, was limited lease and securities are good, is not now to by the direct provisions of § 23 as to the be determined. The bill makes allegations jurisdiction of suits brought by trustees, which raise a justiciable controversy as to the effect of which section was to compel the validity of the alleged lien in view of the trustee to resort to the state courts to the lack of change of possession of the goods set aside conveyances of the character under the circumstances set forth. The named where an alleged fraudulent transquestion for this court now to determine is fer had been made by the bankrupt before whether the bankruptcy court, on the al- the beginning of the proceedings, unless legations made and admitted as true by the jurisdiction in the district court was by demurrer, had jurisdiction to determine the consent. This case (Bardes v. First Nat. controversy. It is positively alleged in the Bank) did not determine the right of the bill that the supervision and control of the district court to entertain jurisdiction of a goods continued in the firm of Dresser & proceeding having in view the adjudication Company, and that the alleged doings of of rights in or liens upon property which the Security Warehousing Company and its came into the possession of the bankruptcy agents were merely colorable, and did not, court as that of the bankrupt, the right in fact, change the control over the goods, to proceed concerning which would seem to nor give any notice of the alleged lease of be broadly conferred in the section of the the warehousing company, nor the lien of bankruptcy act above quoted. At the same the instruments thereby secured. It is fur-term at which the Bardes Case was decided, ther positively averred that when the receivers were appointed upwards of $150,000 worth of goods belonging to the firm were in the possession and under the control of the bankrupts, and after the receivers had taken possession of the store the goods were delivered up to the warehousing company without any order or attempt to procure the sanction of the court to such surrender of the property. Under these circumstances, had the bankruptcy court jurisdiction to determine the rights of parties claiming interests in the property? Section 2 of the bankrupt act of 1898, among other things, confers jurisdiction upon the district courts of the United States, as courts of bankruptcy, (3) to "appoint receivers or the marshals, upon application of parties in interest, in case the court shall find it absolutely necessary, for the preservation of estates, to take charge of the property of bankrupts after the filing of the petition, and until it is dismissed or the trustee is qualified;" (7) to "cause the estates of bankrupts to be collected, reduced to money, and distributed, and determine controversies in relation thereto, except as herein otherwise provided." This section, in connection with § 23, was before this court for construction in the case of Bardes v. First Nat. Bank, 178 U. S. 524, 44 L. ed. 1175, 20 Sup. Ct. Rep. 1000, in which case it was held that § 236 of the act as it then stood prevented the courts of the United States from entertain this court determined the case of White v. Schloerb, 178 U. S. 542, 44 L. ed. 1183, 20 Sup. Ct. Rep. 1007. In that case it was held that, after an adjudication in bankruptcy, an action in replevin could not be brought in the state court to recover property in the possession of and held by the bankrupt at the time of the adjudication, and in the hands of the referee in bankruptcy when the action was begun, and that the district court of the United States, sitting in bankruptcy, had jurisdiction by summary process to compel the return of the property seized. In the case of Bryan v. Bernheimer, 181 U. S. 188, 45 L. ed. 814, 21 Sup. Ct. Rep. 557, it appeared that the bankrupt had made a general assignment for the benefit of his creditors nine days before the filing of his petition in bankruptcy, and the assignee sold the property after the bankruptcy proceedings had been begun, after the adjudication in bankruptcy, but before the appointment of a trustee. Upon petition of creditors, the district court ordered that the marshal take possession, and the purchaser appear within ten days and propound his claim to the property, or, failing so to do, be declared to have no right in it. The purchaser appeared and set up that he bought the property in good faith from the assignee, and prayed the process of the court that the creditors might be remitted to their claim against the assignee for the price, or the same be ordered to be paid into court by the assignee, and paid over to the purchaser, who was willing to rescind the purchase | justice, who delivered the opinion of the upon receiving his money. It was held that the purchaser had no title to the bankrupt's estate, and that the equities between him and the creditors should be determined by the district court, bringing in the assignee, if necessary. In this case Mr. Justice Gray, who also delivered the opinion in the Bardes Case, said: "The bankrupt act of 1898, § 2, invests the courts of bankruptcy with such jurisdiction, at law and in equity, as to enable them to exercise original jurisdiction in bankruptcy proceedings, in vacation in chambers, and during their respective terms to make adjudications of bankruptcy, and, among other things, (3) appoint receivers or the marshals upon the application of the parties in interest, in case the courts shall find it absolutely necessary for the preservation of estates to take charge of the property of bankrupts after the filing of the petition, and until it is dismissed or the trustee is qualified;''(6) bring in and substitute additional persons or parties in proceedings in bankruptcy when necessary for the complete determination of a matter in controversy; (7) cause the estates of bankrupts to be collected, reduced to money, and distributed, and determine controversies in relation thereto, except as herein otherwise provided.' The exception refers to the provisions of § 23, by virtue of which, as adjudged at the last term of this court, the district court can, by the proposed defendant's consent, but not otherwise, entertain jurisdiction over suits brought by trustees in bankruptcy against third persons, to recover property fraudulently conveyed by the bankrupt to them before the institution of proceedings in bankruptcy. Bardes v. First Nat. Bank, 178 U. S. 524, 44 L. ed. 1175, 20 Sup. Ct. Rep. 1000; Mitchell v. McClure, 178 U. S. 539, 44 L. ed. 1182, 20 Sup. Ct. Rep. 1000; Hicks v. Knost, 178 U. S. 541, 44 L. ed. 1183, 20 Sup. Ct. Rep. 1006." court, and it was held that the filing of a petition in bankruptcy is a caveat to all the world, and, in effect, an attachment and injunction, and that, on adjudication, title to the bankrupt's estate became vested in the trustee, with actual or constructive possession, and placed in the custody of the bankruptcy court. We think the result of these cases is, in view of the broad powers conferred in § 2 of the bankrupt act, authorizing the bankruptcy court to cause the estate of the bankrupt to be collected, reduced to money, and distributed, and to determine controversies in relation thereto, and bring in and substitute additional parties when necessary for the complete determination of a matter in controversy, that when the property has become subject to the jurisdiction of the bankruptcy court as that of the bankrupt, whether held by him or for him, jurisdiction exists to determine controversies in relation to the disposition of the same, and the extent and character of liens thereon or rights therein. This conclusion accords with a number of well-considered cases in the Federal courts. Re Whitener, 44 C. C. A. 434, 105 Fed. 180; Re Antigo Screen Door Co. 59 C. C. A. 248, 123 Fed. 249; Re Kellogg, 57 C. C. A. 547, 121 Fed. 333. In the case of First Nat. Bank v. Chicago Title & T. Co. (decided on May 8 of this term), 198 U. S. 280, ante, 693, 25 Sup. Ct. Rep. 693, in holding that the jurisdiction of the district court did not obtain, it was pointed out that the court had found that it was not in possession of the property. Nor can we perceive that it makes any difference that the jurisdiction is not sought to be asserted in a summary proceeding, but resort is had to an action in the nature of a plenary suit, wherein the parties can be fully heard after the due course of equitable procedure. It is insisted that in the present case the property was voluntarily turned over by the This case (Bryan v. Bernheimer) would receiver, and thereby the jurisdiction of the seem to limit the effect of the decision in district court, upon the ground herein the Bardes Case to suits against third per- stated, is defeated, as the property is no sons on account of transfers made before the longer in the possession or subject to the bankruptcy, and to recognize the right of control of the court. But the receiver had the bankruptcy court to adjudicate upon no power or authority, under the allegarights in property in the possession of the tions of this bill, to turn over the property. court, belonging to the bankrupt. In the He was appointed a temporary custodian, case of Mueller v. Nugent, 184 U. S. 1, 46 and it was his duty to hold possession of L. ed. 405, 22 Sup. Ct. Rep. 269, this court the property until the termination of the recognized the power of the bankruptcy proceedings, or the appointment of a trustee court to compel the surrender of money or for the bankrupt. The circumstances alother assets of the bankrupt in his posses-leged in this bill tend to show that the sion or that of some one for him. In that case the decisions in Bardes v. First Nat. Bank, White v. Schloerb, and Bryan v. Bernheimer were reviewed by the chief transfer of the property was collusive, and certainly, if the allegations be true, it was made without authority of the court. The court had possession of the property, and jurisdiction to hear and determine the in- | which affirmed a judgment of the Circuit terests of those claiming a lien therein or Court of the Seventh Judicial Circuit in ownership thereof. We do not think this and for Dade County, in that state, in favor jurisdiction can be ousted by a surrender of of defendant in an action to recover a parcel the property by the receiver, without au- of land claimed under a patent from the thority of the court. Whether the rights United States. Affirmed. of the claimants to the property could be litigated by summary proceedings, we need not determine. What we hold is, that under the allegations of this bill, the district court had the right, in a proceeding in the nature of a plenary action, in which the parties were duly served and brought into court, to determine their rights, and to grant full relief in the premises, if the allegations of the bill shall be sustained. This view renders it unnecessary to consider the effect of the amendments of the bankruptcy act, passed February 5, 1903, broadening the power of the bankruptcy courts to entertain suits by trustees to set aside certain conveyances made by the bankrupt. Decree reversed. (199 U. S. 54) Statement by Mr. Justice Brewer: In 1845 fractional township 53 south, range 42 west, in Dade county, Florida, was surveyed and a plat thereof was approved and filed in the office of the surveyor general in Florida, and also in the office of the Land Department of Washington. By this survey fractional section 19 was divided into two lots, numbered 1 and 2, containing 164.84 acres. In 1875 a resurvey was made of the township, plats of which were also duly approved and filed in the office of the surveyor general in Florida, and with the Land Department at Washington. By this new survey, said section 19 was divided into 7 lots, containing, in the aggregate, 337.76 acres. The difference between the two surveys of section 19 is shown in the following plats. (See opposite page.) On June 24, 1878, a patent was issued to William H. Gleason, on a homestead appli WILLIAM H. H. GLEASON, Piff. in Err., cation, for a tract described as lots 1 and 2 v. EDWARD L. WHITE. of section 19 containing 164.84 acres, according to the official plat of the survey of 1845. Plaintiff in error, who was plaintiff Error to state court-review of conflicting below, claims by deed from the patentee. testimony-public lands-right of pat- On May 4, 1885, lot 5 of section 19, accordentee to profit by mistake of Land Departing to the survey in 1875, was patented by ment. 1. A judgment of a state court will be affirmed ander line as shown on the earlier survey, the United States to Florida as swamp land, and thereafter deeded by the state to the defendant. In 1898 this action to recover a part of lot 5 was commenced in the circuit court of the seventh judicial circuit of Florida, in and for Dade county. The case was tried by the court without a jury; a judgment rendered for the defendant was affirmed by the supreme court of the state, and thereafter brought to this court on writ of error. Included in the action was lot 1 of section 19, as shown by the plat of 1875, but, as judgment was rendered for the plaintiff in respect to that tract, it is unnecessary to further refer to it. There was a stipulation as to certain facts, with a provision that testimony of further facts might be received, and that the court might view the premises. The findings of the court recite that it viewed the premises, and, upon the stipulated facts, and further testimony incorporated in a bill of exceptions, found generally for the defendant as to lot 5. Mr. George M. Robbins for plaintiff in error. Mr. Edward L White in propria persona for defendant in error. *Ed. Note.-For cases in point, see vol. 13, Cent. Dig. Courts, §§ 1089, 1090. |
