In re Goldberg & Sagman

LEARNED HAND, District Judge (after stating the facts as above). [1] Any court, whether or not it be one of bankruptcy, having acquired jurisdiction of a fund for distribution, will prevent suits elsewhere, and draw to itself the decision of all questions arising in its disposition. Indeed, it cannot discharge its own duties otherwise, for it must know how much it has to distribute. The method of determining the claims rests ordinarily in its discretion, though our Circuit Court of Appeals has held that, when a bankruptcy court enjoins a third party’s suit elsewhere, it should secure him a jury trial, if he would have had such, had he been allowed to pursue his remedies, In re Russell, 101 Fed. 248, 41 C. C. A. 323. When the petitioner has no such rights, and especially when he comes in voluntarily and files a petition in the bankruptcy court, his claim should be entertained; there can ordinarily he no convenience in having a “plenary suit,” as is suggested here. [2] The jurisdiction of this court is unquestionable; and it is confusing to regard the proceedings here as “summary” — a phrase more technically applicable to proceedings to reduce to the possession of this court property held by others. This is a proceeding strictly analogous to ancillary dependent hills in- equity, arising where the court has sequestered corporate assets for distribution. Such hills do not, for example, rest upon an independent diversity of citizenship; they rest upon the custody of the fund. That is the case here; convenience, and that alone, determines whether they shall proceed by petition entitled [196] in the bankruptcy suit, or by “plenary suit” under the hand of the court. In such a case as this there is no convenience in a “plenary suit.” Therefore the case will proceed on this petition. [3] The frame of the petition is somewhat ambiguous, and in any aspect it is bad as it lies; but it may be made good by amendment. Its vice rests in the fact that there is no allegation that the execution has been returned nulla bona, and without that a judgment creditor of the Superior Jewelry Company, Incorporated, would have no power to assert its rights. If, however, the execution is returned, perhaps the bill will lie as a judgment creditors’ bill alleging that there are assets of the corporation which are not subject to execution, but which ought nevertheless to be applied to the judgment of the petitioner; or it may be that it will lie as a bill -to set aside a fraudulent conveyance, upon the theory that there was an actual conveyance by the Superior Jewelry Company, Incorporated, without adequate consideration. All these matters, however, rest wholly within the powers of the referee when he passes on the case; I mean to express no intimation as to whether the petitioner can eventually succeed. The petition is, within the competence of the referee, to be disposed of on the merits, precisely as though it we're an original bill in equity before a court of competent jurisdiction. The order is reversed, and the cause remanded for further proceedings in accordance with this opinion. ,