Wheelock v. Lee

Reynolds, J. The first question to be considered is whether the court has jurisdiction of this action. It is a suit brought by an assignee in bankruptcy, to collect debts and recover property alleged to belong to the bankrupt. The bankrupt act of 1867, section 1, gives the district courts jurisdiction (among other matters) “ of the collection of the assets of the bankrupt.” This jurisdiction has been repeatedly held to be not exclusive, but concurrent with that of the state courts. Such an action is not a matter or proceeding in bankruptcy of which the federal courts have exclusive jurisdiction (See Clafflin agt. Houseman, 93 U. S., 130; Cook agt. Whipple, 55 N. Y., 150). It is claimed, however, that the state courts have been deprived of jurisdiction in such actions, except in [403] a limited class of cases, by section 2, of chapter 390, Laws of 1874. This is an amendment of section 1 of the bankrupt act above referred to, and is as follows : “ 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.” As I read this proviso, it neither professes to confer any jurisdiction upon the state courts nor to take away any jurisdiction which they possess. Its obvious' purpose and construction is to empower the district courts to rid themselves of a certain class of cases, by sending them to a forum, which is recognized as already having jurisdiction over such matters. We are referred to the case of Olcott agt. Maclean (10 Hun, 277) as holding that the state courts are deprived of jurisdiction except in the cases which the district courts may direct to be brought before them. We have very great respect for the authority of the court making that decision, but if the reasoning is meant to apply to a case like the one before us we are unable to concur in it. That action was brought upon a case arising under the laws of the United States; thé cause of action was created by the bankrupt laws, and it may be that of such a cause of action, the courts of the United States have exclusive jurisdiction; but the cause of action in this case existed, independent of any act of congress, the assignee merely standing in the place of the borrower, to prosecute an action which he might have maintained if he had not become a bankrupt. The court, in Olcott agt. Maclean (p. 281), says, “enumerating the cases that might be prosecuted in such courts ” (state courts), “ excluded all others not included by the import of the terms made use of.” But section 1 of the bankrupt act, either as originally passed or amended by the act of 1874, is one conferring jurisdiction on the district courts, not on the state courts ; it does not say what the state courts may or may not [404] try; as amended, it specifies what the district courts may decline to try, leaving it optional with them to do so or not. It neither takes away the jurisdiction of the district courts in those cases which they may send to the state courts, nor the jurisdiction of the state courts in such actions as cannot thus be sent to them. In the latter cases the selection of the tribunal is left to the suitor and not to the' district court. The view we have thus taken concurs with that held by judge Gilbert, in a case before him at special term, and is in accordance with the decision of the supreme court of Massachusetts, in Goodrich agt. Wilson (119 Mass., 429). Gray, C. J., says: “ The effect of the provision of the act of congress of 1874 (chap. 390, sec. 2), 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 actions at common law to which the assignee is a party, in' which the debt demanded is less than the amount which determines the jurisdiction in other cases.” McCue, J., concurs.