Wetmore v. McMillan

Day, J. l. practice in the supreme court, I. No complaint is made of the order of the court striking out the second count of the petition of inter-vention. The ruling is clearly in accord with the . holding of this court in Hecht v. Springstead, 51 Iowa, 502; and Brewster v. Dryden & Berry, 53 Id., 657. The appellant contends that when it is conceded that the court could not take jurisdiction of the matter set up in the second count of the petition, the appellee in effect surrenders his whole case, because the relief prayed is predicated upon the whole petition, and no separate relief is asked on the first count alone. We regard it a sufficient answer to this position that no such point is made in the motion to strike the petition from the files, nor was such objection raised to the first count in any manner in the court below. If it had been, the intervenor might have amended his petition. [348] 2. bakeoticourts: action by assignee. II. There has been ranch discussion and considerable conflict as to the right of an assignee in bankruptcy to maintain an action in the State courts to recover the assets of the bankrupt. In the case of Claflin v. Houseman, 93 U. S., 130, it was authoritatively settled by the Supreme Court of the United States that under the bankrupt act of March 2, 1867, an assignee might maintain such suit in the State courts. This decision was made upon a controversy arising prior to the enactment of section 711, Revised Statutes of the United States, which provides that the jurisdiction vested in the courts of the United States shall bo exclusive of the courts of the several States of all matters and proceedings in bankruptcy. In Claflin v. Houseman, supra, referring to this section the court say:. “ Whether this regulation will or will not affect the cognizance of plenary actions and suits it is not necessary now to determine.” In Hecht v. Springstead, 51 Iowa, 502, it was held that the State courts have no jurisdiction in an action to vacate a judgment valid under the laws of the State, but invalid by reason of being in fraud of the Federal bankrupt law. In Brewster v. Dryden & Berry, 53 Iowa, 657, it was held that a State court has no jurisdiction to cancel a conveyanee valid under the laws of the State, upon the ground that it was made in contravention of the bankrupt law. Neither of these cases touches the question presented in the first count of the intervenor’s petition. In that count of the petition it is sought to set aside a conveyance of the property of the bankrupt, because made in fraud of the rights of creditors under the common law and the laws of the State. The invalidity of the conveyance does not depend upon any provision of the bankrupt law. An amendment of section 4974 of Revised Statutes of the United States, adopted Tune 22, 1874, 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 contradistinguishéd from equitable demands, [349] shall, when such debt does not exceed five hundred dollars, be collected in the combs of the State where such bankrupt resides having-jurisdiction of claims of such nature and amount.” The appellant relies upon this provision of the statute as negativing any jurisdiction of the State courts, except in cases where the amount does not exceed five hundred dollars, and the court having jurisdiction of the estate has directed the action to be brought in the State court. Referring to this provision the Supreme Court of Massachusetts, in Goodrich v. Wilson, 119 Mass., 429, say that its effect “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 o,f those courts in other cases.” We think this is the correct construction of this statute. In Kidder v. Honobin, 72 N. Y., 159, the court of appeals of New York hold that, notwithstanding the provisions of section 711, and the amendment to section 4974 of the Revised Statutes above referred to, a State court has jurisdiction of an action by an assignee in bankruptcy to recover a debt due the bankrupt. In the course of a well prepared opinion the court say: “ When a common law action is an appropriate remedy to enforce a right asserted by an assignee in bankruptcy, whether the right is given by the bankrupt act, or existed in favor of the bankrupt before the bankruptcy, an action to enforce or vindicate the right is not a matter or proceeding in bankruptcy within section 711. The exercise of the original and ordinary jurisdiction of the State courts in such cases is in no proper sense an exercise of jurisdiction in bankruptcy. The fact that the plaintiff makes his title under the bankrupt act by assignment from the debtor, or by force or operation of the act itself, does not make the suit a matter or proceeding in bankruptcy, any more than would a suit brought by an assignee appointed under the State insolvent law to recover a [350] debt owing to the insolvent be a proceeding or matter in insolvency.” A portion of this language may seem to conflict with the decisions of this court in Hecht v. Springstead, and in Brewster v. Dryden & Berry, supra, but the point actually decided is not in conflict with those cases. There is a manifest distinction between an action brought in a State court by an assignee in bankruptcy to enforce a right which depends for its existence entirely upon the provisions of the bankrupt law and to enforce a right or recover a claim existing under the common law, or under the laws of the State. We think that an assignee in bankruptcy may maintain an action in the State courts to recover the property of the estate in a ease where the right to the property does not depend upon the provisions of the bankrupt law. 3_._._. intervention. III. Section 3228 of the Code provides: “ If a third person claim the property, or any part thereof, the plaintiff may amend and bring him in as a co-defendant, or the defend an £ may obtain liis substitution by the proper mode, or the-claimant may himself intervene by the process of intervenor.” It may be conceded that a debtor who has fraudulently conveyed his property could not intervene in an action for the purpose of setting the conveyance aside. It may further be conceded that a simple creditor, without any lien, would not have such interest in the property as would authorize him to intervene and claim the property. But an assignee in bankruptcy stands in a position different from the debtor or a simple creditor. lie succeeds to the rights of the debtor, and in addition thereto he becomes the agent of all the creditors for the protection of their rights. There can be no doubt that an assignee in bankruptcy acquires such an interest in the property of a bankrupt fraudulently conveyed that he may maintain an independent action to recover the property. Allen v. Massey, 17 Wal., 351; In re Gurney, 15 B. R., 373. In Miles v. Jones, 15 B. Reg., 150, it is said by Strong, J., that, notwithstanding some decisions to the contrary, an assignee [351] in bankruptcy stands in the position of a judgment creditor, and that the adjudication of bankruptcy is equivalent to the recovery of a judgment and a levy. See, also, Adams v. Merchants’ National Bank of Indianapolis, 2 Federal Reporter, 174; In re Werner, 5 Dillon, 119. If the assignee acquired such an interest in the property in controversy that he could have instituted in. the courts of this State an independent action to recover it, it follows necessarily, we think, that he acquired such interest as authorizes him to intervene under the provisions of section 3228 of the Code. The court, in our opinion, did not err in refusing to strike from the flies the'first count of intervenor’s petition. Affirmed.