Leroux v. Hudson/Opinion of the Court

This suit divides itself into two branches-the case of the assignee; and that of the marshal and his deputies. The assignee was not a party to the trespass suit. The plaintiffs in that suit, abandoning all pursuit of the goods and all action against the assignee, brought and continued their suit for damages against the marshal and his deputies. They did not disturb the possession of the goods in the assignee, or claim the proceeds of the goods. Although the bill states that the assignee, on applying to the bankruptcy court for an order to sell the goods, made known to it the facts as to the claim of Leroux and Max Schott thereto, it is not averred that any notice was given to them of the intention to sell or of the sale. It is provided as follows by section 5663 of the Revised Statutes:

'Whenever it appears to the satisfaction of the bankruptcy     court that the title to any portion of an estate, real or      personal, which was has come into the possession of the      assignee, or which is claimed by him, is in dispute, the      court may, upon the petition of the assignee, and after such      notice to the claimant, his agent or attorney, as the court      shall deem reasonable, order it to be sold under the      direction of the assignee, who shall hold the funds received      in place of the estate disposed of; and the proceeds of the      sale shall be considered the measure of the value of the      property, in any suit or controversy between the parties, in      any court. But this provision shall not prevent the recovery     of the property from the possession of the assignee by any      proper action commenced at any time before the court orders      the sale.'

The failure to give any notice to Leroux and Max Schott of the application for the order to sell the goods, although the facts as to their claim were laid before the bankruptcy court, and the fact that no suit was brought against the assignee to recover the possession of the goods from him, are evidence that the bankruptcy court and the assignee did not regard, and could not regard, the case as one where, under section 5063, the title to the goods was in dispute. It was not in dispute as between Leroux and Max Schott of the one part and the assignee of the other part. The former abandoned the goods, and all claim to them or to their proceeds, and the assignee acted on that view in selling the goods without notice. They relied solely on their suit in trespass, and the defendants in that suit relied for protection, in case of adverse result, not on the goods or their proceeds, but on the bond of indemnity which the petitioning creditors had given to the marshal. Under these circumstances, after pleading in the suit in the state court, and procuring a postponement of the trial, the defendants in that suit and the assignee joined in bringing the bill in equity. Had the circuit court of the United States any cognizance of the suit? There was no common interest between the assignee and the other plaintiffs. The assignee was not sued in the state court. When the suit in equity was brought, the marshal had no interest in the goods, and no right to rely on them or their proceeds for idemnity, and no right to look to the assignee for protection. The marshal turned the goods over to the assignee, and did so voluntarily, so far as appears, relying on the bond of indemnity as his protection, and substituting that in place of a retention of the goods, when he might well have insisted on retaining them, if Leroux and Max Schott still claimed title to them, inasmuch as the suit in trespass was brought before the goods were turned over to the assignee.

An assignee in bankruptcy has, by section 5129, the right, in case of a transfer of property to a person not a creditor of the bankrupt, in violation of that section, to 'recover the property or the value thereof, as assets of the bankrupt.' Here the assignee had the property, and there was no occasion for him to bring a suit to recover it.

By section 4979 a circuit court of the United States has jurisdiction of a suit 'at law or in equity brought by an assignee in bankruptcy against any person claiming an adverse interest, or by any such person against an assignee, touching any property or rights of the bankrupt transferable to or vested in the assignee.' The jurisdiction invoked by the assignee in this case cannot be maintained under section 4979. It does not appear by the bill or the proofs that the defendants claim an interest in the proceeds of the goods adverse to the interest which the assignee claims in such proceeds. When the bill was filed the goods had been sold and were represented by their proceeds in the hands of the assignee. The only interest which the assignee then had touching the goods or in their proceeds was his claim to own those proceeds as assignee. No interest could be adverse to such interest of his unless it was another claim to own or receive those proceeds. The defendants made no such claim. The bill does not allege that they did, but it and the proofs show that from the time they brought the trespass suit they never disputed the right of the assignee to deal with the goods and their proceeds as part of the assets of the estate. Nor is the bill filed to remove a cloud on the title to real estate, or to set aside written instruments of title which might interpose obstacles to the rights of the assignee in the goods or their proceeds.

It is enacted by section 630 of the Revised Statutes 'that the circuit court shall have jurisdiction in matters in bankruptcy, to be exercised within the limits and in the manner provided by law.' This refers to the limitations in section 4979. As the bill avers that all the parties are citizens of Michigan, the jurisdiction of the circuit court in this case must be given by the bankruptcy statute or it does not exist. We are of opinion, upon full consideration, that it is not so given, notwithstanding what was said by this court in Ex parte Schwab, 98 U.S. 240. It may, moreover, be said, that if there were jurisdiction by the citizenship of the parties a bill such as this, by the assignee in bankruptcy, to obtain such relief as he asked in respect to his own rights, would not lie, he being in possession, and his right to assert possession and ownership, and to control and dispose of the property and its proceeds, not being questioned or threatened.

As regards the marshal and his deputies, apart from the assignee, there is nothing in the bankruptcy statute which authorizes them to invoke the action of the circuit court for any relief by injunction in respect to the suit for trespass. As the assignee had no right conferred by that statute to bring the suit in equity in respect to any claim of his own, he had no right as assignee to bring it in respect to any claim of his co-plaintiffs, nor had all together any right conferred by that statute to bring it. The relief sought by injunction depends wholly, as the bill is framed, on the right of the assignee, as such, to maintain the suit in respect to his own case.

If the case as to the marshal and his deputies were one of jurisdiction by citizenship of the parties, it would fall within the principles laid down by this court in Buck v. Colbath, 3 Wall. 334. The provisional warrant being one merely commanding the marshal to seize the property of the debtors, it was for the marshal to determine for himself whether the goods seized were legally liable to seizure under the warrant, and the circuit court could afford him no protection against the consequences of an erroneous exercise of his judgment in that determination. He was liable to suit in any court of competent jurisdiction, for injuries growing out of his mistakes. The state court in which the suit for trespass was brought was such a court, and that suit was an appropriate suit. The parties bringing it were entitled to proceed with that suit in that forum. As was said in Buck v. Colbath, there was nothing in the mere fact that the provisional warrant issued from a federal court, 'to prevent the marshal from being sued in a state court, in trespass, for his own tort, in levying it upon the property of a man against whom the writ did not run, and on property which was not liable to it.' This view was reaffirmed in Sharpe v. Doyle, 102 U.S. 686, and was there applied to a seizure under a provisional warrant in bankruptcy like that in the present case.

We have limited our decision to the precise questions presented in this case, without attempting to define the cases in which an assignee in bankruptcy can maintain a suit under section 5129 or under section 4979, or to specify what relief by injunction can be granted to him under the bankruptcy act, in a proper case.