Burlingame v. Parce

Mebwin, J.: It is claimed by tbe appellant that tbe court has no jurisdiction of the action by reason of the fact that plaintiff, an assignee in bankruptcy, seeks hereby to enforce tbe collection of a portion of tbe assets of tbe bankrupt. Under tbe law as it stood prior to tbe passage of tbe Revised Statutes of tbe United States, June 22, 1874, it was held, in Claflin v. Houseman (3 Otto, 130), by tbe United States Supreme Court, that State courts bad jurisdiction of suits to recover tbe assets of tbe bankrupt, although, as in that case, tbe cause of action accrued solely under tbe provisions of tbe bankrupt law; it was an action to recover for a preference in fraud of tbe act. By tbe United States Revised Statutes it was provided (§ 711, sub. 6) that tbe jurisdiction vested in tbe courts of tbe United States should be exclusive of tbe courts of tbe several States, “ of all matters and proceedings in bankruptcy,” that tbe District Courts (§ 563, sub. 18) should have in their respective districts “ original jurisdiction, in all matters and proceedings in bankruptcy,” that (§ 4972, sub. 2) such jurisdiction should extend “ to tbe collection of all tbe assets of tbe bankrupt,” that (§ 630) the Circuit Courts should have jurisdiction in matters in bankruptcy “ to be exercised within tbe limits and in tbe manner provided by law.” These provisions, whether inadvertently or not, as is intimated in Claflin v. Houseman, operated to make tbe jurisdiction of tbe United States courts exclusive in all cases legally within their operation. [146] The question therefore, is, whether the present action is such a case. In Olcott v. Maclean (10 Hun, 277), the cause of action wag based on an alleged violation of the bankrupt act, being to recover for a preference made void by its pi’ovisions, and the General Term, first department, held that the State court had no jurisdiction. The same court, in Brewers and Maltsters’ Insurance Company v. Davenport (10 Hun, 264), held that the State court had jurisdiction of an action brought by a debtor of the bankrupt to determine whether the assignee in bankruptcy, or an attaching creditor were entitled to certain moneys that plaintiff was ready to pay. In Goodrich v. Wilson (119 Mass., 429) which was an action by an assignee in bankruptcy to recover for money paid in fraud of the bankrupt act, it was held the State court had jurisdiction. The force of section 711 of the United States Revised Statutes, above referred to, does not seem to have been considered, but construction was given to section 2, chapter 390, of the Laws of 1874, winch provided “ that the court having charge of the estate of any bankrupt, may direct that any of the legal assets or debts of the bankrupt, as contradistinguished from equitable demands, shall, when such debt does not exceed $500, be collected in the courts of the State where such bankrupt resides, having jurisdiction of claims of such nature and amount.” The effect of this provision, it was there said, is not to confer or take away jurisdiction of the State- courts, but simply to allow the federal courts of original jurisdiction to decline to entertain certain actions. This seems to me a reasonable view o'f that law. The decision of the present case depends, I think, on the proposition whether or not it is a case arising under any law of the United States. Of such cases, exclusive jurisdiction may be conferred on the United States courts. (Constitution, art. 3, § 2, sub. 1.) Olcott v. Maclean (supra), was clearly such a case, and was so considered by the court. (Page 280.) ' If the present is not such a case, it is not within the legal operation of the law of congress. The subject of the present action is the mortgage and the rights conferred by it or claimed under it. Those in no sense arise undex any law of .the United States. [147] The question is not whether the construction of some law of the United States may not be incidentally involved, but whether the case anises under the law. Does it there originate — have its base ? That cannot be here truthfully said. In Story on Constitution (§ 1646), it is said, a case in the sense of this elause arises when some subject touching the Constitution, laws or treaties of the United States is submitted to the courts by a party who asserts his rights in the form prescribed by law. In Osborn v. United States Bank (9 Wheat., 738), it was said that any suit brought by the United States Bank was a case arising under a law of the United States, for the reason that the bank was incorporated under such law. 'A distinction was, however, admitted between the party and the cause (page 827), and it was said that the party may originate under a law with which the cause has no connection, and if the act of congress was a simple act of incorporation, it was admitted the distinction might be entitled to great consideration. (See Bank v. Devaux, 5 Cranch, 61.) The Osborne case was an action brought to restrain the officers of the State of Ohio from collecting from the bank a tax, imposed on one of its branches for doing business in that State without being allowed to do so by the laws thereof, and of course it involved the construction of the law chartering the United States Bank, and was based on the law itself. It may be, as is said in that case, that all contracts made with an institution so chartered would be cases arising under a law of the United States, and still it would not follow that, where the only operation of the law was to provide for the transfer of certain causes of action already existing, those causes of action, when sought to be enforced by the assignee, would all be cases arising under such law. As well might all actions of ejectment, in which the source of title was an United States land patent, be cases arising under an United States law. As well might all real-estate actions brought by a foreign-born citizen, after naturalization, be such cases. Suppose the assignee of a bankrupt should assign a mortgage, or any chose of action, that had been previously owned by the bankrupt and came into the hands of- the assignee as assets, would it follow that the suit on such assigned claim must be brought in the United States courts ? It will be observed that, by section 5049 of the bankrupt act, a [148] copy of the assignment, duly certified by tbe clerk of tbe court, is conclusive evidence of the right of tbe assignee to sue for tbe property of tbe bankrupt. My opinion is that tbis is not a case arising under any law of tbe United States, and is not, therefore, affected by, -or within tbe operation of tbe United States statute, giving exclusive jurisdiction to tbe.courts of tbe United States. Proceeding, then, to tbe merits, tbe question is, whether the receiver was properly appointed. At tbe commencement of tbe suit, an injunction order was granted restraining tbe defendants from interfering with, or taking away any of tbe trees or stock, tbe premises being a nursery. Were tbis in force still, not modified or waived, it would seem to me almost a necessity to have a receiver to properly care for and market tbe stock on tbe premises. But it appears by tbe papers that tbe parties, since tbe injunction, have agreed that defendant Hubbell might dig and use tbe stock, and bold tbe avails subject to tbe order of tbe court. Tbis,'therefore, disposes of any occasion for having a receiver, by reason of tbe injunction being in force, and leaves tbe propriety of tbe appointment to be determined upon tbe other facts in tbe case. To entitle a mortgagee to have a receiver appointed, it must appear that tbe mortgaged premises are an inadequate security for the debt, and that tbe mortgagor, or other person personally bable for tbe debt, is insolvent. (Bank v. Tallman, 31 Barb., 201; In the Matter of Prime, 1 id., 306; Bank of Ogdensburgh v Arnold, 5 Paige, 38; Shotwell v. Smith, 3 Edw. Ch. [m. p.], 588, Sea Ins. Co. v. Stebbins, 8 Paige, 565; Astor v. Turner, 11 id., 436; Frelinghuysen v. Colden, 4 id., 204.) Tbe inadequacy should be clearly made out. (Shotwell v. Smith, 3 Edw. Ch. [m. p.], 588.) Is'it so in tbe present case ? Tbe plaintiff, in bis verified complaint, alleges generally, that tbe premises are a very doubtful and inadequate security for tbe mortgage, and will not, in bis opinion, bring any such sum at forced sale. Tbis is denied by Hubbell and Parce, and by Deland, an apparently disinterested party. Tbe burden is on tbe plaintiff to show tbe inadequacy. I don’t think it can be fairly said, on tbe papers presented, that that fact is established. [149] It is suggested Hubbell has no defense, still he has the right to contest the propriety of this provisional remedy. The order appointing a receiver should therefore be reversed, with ten dollars costs and disbursements. Smith, J., concurred in the result. Talcott, P. J., concurred on the ground that this court, in Wente v. Young,* have held in favor of the jurisdiction. Order appointing receiver reversed, with ten dollars costs and disbursements.