Harris v. First National Bank of Mt. Pleasant

Mr. .Justice Day delivered the opinion of the court. This case presents the single question of the jurisdiction of-the District Court Of the United States, to entertain a suit *383 •brought by Harris as trustee in bankruptcy against the First National Bank of Mt. Pleasant, Texas.,, The petition alleged that Hargrove, the bankrupt, was indebted to the defendant bank for an overdraft in the sum of $2,000; that to secure the payment of the same Hargrove delivered into the bank’s possession as collateral security certain notes; that at the time of the adjudication in bankruptcy' Hargrove had paid the overdraft in full. Further,- the petition alleged that af; the time Hargrove was adjudged a bankrupt the bank had in its possession two certain promissory notes, which had been signed by one McGee as principal and by Hargrove as surety. That prior to the bankruptcy Hargrove paid the notes and thus became entitled to the same. That defendant refuses to account for said notes, and wrongfully withholds them from the trustee. The prayer of the petition is that the bank be required to surrender to the trustee the • notes so pledged- as collateral security, and also the notes paid by Hargrove as surety, or, in default thereof, judgment against the bank in the sum. of $3,500, the value of all the notes. Upon issue made as to its-jurisdiction the District Court held it was without jurisdiction and dismissed the suit. In Bardes v. Hawarden Bank, 178 U. S. 524, thjs court hejd that under § 23- -of the Bankruptcy Act "of 1898 the District Court of the United States could, by the consent of the defendant, and not otherwise, entertain suits by the trustee against third persons to recover property conveyed by the bankrupt before the institution-of proceedings in bankruptcy. Subsequently, Congress, by the act jof February 5, 1903, 32 Stat. 797, c. 487, amended certain sections of the .Bankruptcy Act. To § 236, which provided that suits by the trustee should only be brought in courts where the bankrupt; whose estate was being administered by the trustee, might have brought them if 'proceedings ,iif- bankruptcy had not been instituted, unless by the defendant’s' consent, these words were added: “Except suits1 for the recovery of property *384 under section sixty, subdivision b, and. section sixty-seven, subdivision e.” Subdivision 6 of § 00 made provision for the recovery of preference's given by the. bankrupt within four months before the filing of the petition in bankruptcy. To that subdivision these, words were added: “And, for the purpose of such recovery, any court of bankruptcy, as, hereinbefore defined, and any state court which would have had jurisdiction if bankruptcy had not intervened, shall have concurrent jurisdiction.” Subdivision e of § 07 made provision for setting aside fraudulent conveyances, and the.. recovery of property so conveyed at the suit of the trustee. To that subdivision these words were added: “For the purpose of such recovery any court of bankruptcy as hereinbefore defined, and any state court xohich would have had jurisdiction if bankruptcy had not intervened, shall, have concurrent jurisdiction.” A consideration of these amendments, having reference to the recovery of preferences and of property fraudulently conveyed, shows that they .cannot include the action under consideration here. Nor is it claimed that they 'are sufficient' of themselves to authorize the present suit. Reliance is had on the amendment made by the act of February 5, 1903, of subd. e of § 70. We give that subdivision, putting the amendment in italics: “ e. The trustee may avoid any transfer by the bankrupt of his property which any creditor might have avoided, and may recover the .property so transferred, or its value, from the person to whom it was transferred, unless he was a bona fide holder for value prior to the date of the adjudication. Such property may be recovered or its value collected from-whoever may have received it, except a bona fide holder, for value. For the purpose of such recovery any court of bankruptcy as hereinbeforer defined, and any state court which would have had jurisdiction if bankruptcy had not intervened, shall have concurrent jurisdiction.” It is to be noted that § 70, subd. e, is not mentioned in the *385 amendment to § 23, enlarging the jurisdiction of the Federal codrt to entertain suits without the consent of the defendant. And it has been held that suits under § 70, subd. e, can only be brought in a court of bankruptcy‘with the consent of the defendant. Hull v. Burr, 153 Fed. Rep. 945. The contrary view wag taken in Hurley et al. v. Devlin, 149 Fed. Rep. 268. But we do not find.it necessary to pass upon that question. Assuming for. this purpose that actions may be brought by trustees in the courts of bankruptcy in cases coming within the terms of § 70, subd! e, without the consent of defendant, we do not think the present action is one of that ¡character: That subdivision, provides for avoiding transfers'of the bankrupt’s property which his creditors might have avoided, and for. recovery of such property-, , or its value, from persons who are not bona fide holders for value. In this action no such| transfer Is alleged, no attack is made upon a transfer by the. bankrupt which would have been void as to creditors. The petition seeks to recover property held by the' bank, if the allegations are true, which belonged to the bankrupt, and consequently' passed to the trustee as the representative' ■of the bankrupt’s estate; The recovery sought is of property held for the bankrupt estate, which the defendant wrongfully refused to surrender.. The District Coprt- was right in denying jurisdiction of the suit, and its judgment is. Affirmed.