McHenry v. La Soci et E. Francaise D'Epargnes./Opinion of the Court

by Morrison Waite

United States Supreme Court

95 U.S. 58

McHenry  v.  La Soci et E. Francaise D'Epargnes.

In Claflin v. Houseman, 93 U.S. 130, we decided that, under the law as it stood previous to the adoption of the Revised Statutes, the courts of the United States did not have exclusive jurisdiction of suits for the settlement of conflicting claims to property belonging to the estate of a bankrupt, and that an assignee in bankruptcy might sue in a State court to collect the assets. In Mays v. Fritton, 20 Wall. 414, we also held, that if an assignee in bankruptcy submitted himself to the jurisdiction of a State court in a suit affecting the estate which was pending when the proceedings in bankruptcy were commenced, he was bound by any judgment that might be rendered. And in Eyster v. Gaff, 91 U.S. 525, Mr. Justice Miller, speaking for the court, said:--

'The debtor of a bankrupt, or the man who contests the right to real or personal property with him, loses none of his rights by the bankruptcy of his adversary. The same courts remain open to him in such contests, and the statute has not divested those courts of jurisdiction in such actions. If it has for certain classes of actions conferred jurisdiction for the benefit of the assignee in the Circuit and District Courts of the United States, it is concurrent, and does not divest that of the State courts.'

The principles upon which those cases rest are decisive of this. The complainant, having a debt against the bankrupt secured by mortgage, proved the claim against the estate. This, under sect. 20 of the bankrupt law, 14 Stat. 526, Rev. Stat., sect. 5075, admitted the complainant as a creditor of the general estate only for the balance of the debt after deducting the value of the mortgaged property, to be ascertained by agreement, sale, or in such other manner as the bankrupt court might direct. The assignee is not required to take measures for the sale of mortgaged property, unless its value is greater than the incumbrance. His duties relate chiefly to unsecured creditors, and he need not trouble himself about incumbered property, unless something may be realized out of it on their account, or unless it becomes necessary to do so in order to ascertain the rights of the secured creditor in the general estate. If he does, and it becomes necessary to adjust the liens before his sale, he may, under the ruling in Claflin v. Houseman, institute the necessary proceedings for that purpose in the courts of the United States, or of the State, as he chooses. If he does not, the secured creditor who wishes to make his security available must act; and, having obtained leave of the bankrupt court to bring his action for that purpose, he may proceed in the State court, if the assignee does not object, or in the courts of the United States, at his election. Here the necessary leave to sue was obtained before the decree was rendered, and the assignee, instead of objecting to the jurisdiction of the State court, consented to that mode of proceeding. The bankrupt and his wife alone objected; but as to them, as we held in Eyster v. Gaff, the jurisdiction of the State court was not divested by the proceedings in bankruptcy.

Judgment affirmed.

Notes