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BUSH v. ELLIOTT. BUSH V. ELLIOTT CAR COMPANY.

decided: May 21, 1906.

BUSH
v.
ELLIOTT.

BUSH
v.
ELLIOTT CAR COMPANY.



ERROR TO THE CIRCUIT COURT OF THE UNITED STATES FOR THE NORTHERN DISTRICT OF ALABAMA.

Author: Day

[ 202 U.S. Page 477]

 MR. JUSTICE DAY delivered the opinion of the court.

These cases were heard together and concern the same question upon practically the same facts. They involve the jurisdiction of the Circuit Court of the United States to entertain a suit to recover upon an alleged cause of action for moneys due the bankrupt at and prior to the adjudication in bankruptcy, where one of the trustees in bankruptcy is a citizen of the same State with the defendant, and the bankrupt a citizen of another State.

The suits were brought by the plaintiffs as trustees in bankruptcy of the Southern Car and Foundry Company, a corporation organized under the laws of New Jersey and a citizen of

[ 202 U.S. Page 478]

     that State, against the Elliott Car Company, a corporation and a citizen of the State of Alabama, and against J. M. Elliott, Jr., a citizen of the same State. They were to recover certain sums of money alleged to have been lent by the bankrupt, for goods sold and delivered to the defendants, and upon an account stated and for money paid for them by the bankrupt. In both cases motions to dismiss were filed upon the ground that the Circuit Court of the United States had no jurisdiction because Thomas G. Bush, one of the trustees in bankruptcy, is and was at the time of the beginning of the suit a citizen of the State of Alabama, the same State of which the defendants were citizens, and the defendants had not consented to be sued in the Circuit Court of the United States in which the action was brought. The Circuit Court held that it had no jurisdiction and dismissed the suit.

The correctness of the decision of the court below depends upon the construction of section 23 of the Bankruptcy Act of 1898. This section, entitled "Jurisdiction of the United States and State Courts," prior to the amendment of February 5, 1903, read as follows: "a. The United States Circuit Courts shall have jurisdiction of all controversies at law and in equity, as distinguished from proceedings in bankruptcy, between trustees as such and adverse claimants concerning the property acquired or claimed by the trustees, in the same manner and to the same extent only as though bankruptcy proceedings had not been instituted and such controversies had been between the bankrupts and such adverse claimants. b. Suits by the trustee shall only be brought or prosecuted in the courts where the bankrupt, whose estate is being administered by such trustee, might have brought or prosecuted them if proceedings in bankruptcy had not been instituted, unless by consent of the proposed defendant." By the amendment of February 5, 1903, the following words were added to clause b: "except suits for the recovery of property under section sixty, subdivision b, and section sixty-seven, subdivision e." The excepted suits, for the recovery of property, covered by the

[ 202 U.S. Page 479]

     amendment of 1903, pertain to actions to recover property conveyed by the bankrupt in fraud of the act, and do not concern actions of the character of those now under consideration.

Both sides cite and rely upon the case of Bardes v. Hawarden Bank, 178 U.S. 524, in which case it was held that a District Court of the United States had no jurisdiction of an action brought by the trustee to set aside an alleged fraudulent transfer made by the bankrupt within four months before the proceedings in bankruptcy. That case pertained to an action to set aside a fraudulent conveyance of property which had not come into the control of the bankruptcy court. In later cases it has been held that the decision did not extend to cases wherein the bankrupt court had acquired jurisdiction over the subject matter of the property as that of the bankrupt, as to which the bankrupt courts have been held to have jurisdiction under the power conferred in subdivision seven, section two, of the act. White v. Schloerb, 178 U.S. 542; Bryan v. Burnheimer, 181 U.S. 188, in which case the opinion was given by Mr. Justice Gray, who also delivered the opinion in the Bardes case, and Whitney v. Wenman, 198 U.S. 539.

While the Bardes case involved only the jurisdiction of the District Court, we think the principles announced in the opinion of Mr. Justice Gray in that case, when applied to the one now under consideration, are decisive in favor of the jurisdiction of the Circuit Court to entertain these suits. The elaborate consideration of the history of section 23 of the present Bankruptcy Act, given in the Bardes case, renders it unnecessary to do more than epitomize from the opinion so much thereof as is necessary to an understanding of the question now made as to the jurisdiction of the Circuit Court.

The Bankruptcy Act of 1898, in respect to the matters now under consideration, was a radical departure from the act of 1867, in the evident purpose of Congress to limit the jurisdiction of the United States courts in respect to controversies which did not come simply within the ...


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