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MACDONALD v. PLYMOUTH COUNTY TRUST CO.

decided: May 16, 1932.

MACDONALD, TRUSTEE IN BANKRUPTCY OF CRAIG, REED & EMERSON, INC
v.
PLYMOUTH COUNTY TRUST CO.



CERTIORARI TO THE CIRCUIT COURT OF APPEALS FOR THE FIRST CIRCUIT.

Hughes, Van Devanter, McReynolds, Brandeis, Sutherland, Butler, Stone, Roberts, Cardozo

Author: Stone

[ 286 U.S. Page 264]

 MR. JUSTICE STONE delivered the opinion of the Court.

In a bankruptcy proceeding pending in the District Court for Massachusetts, the trustee in bankruptcy, the petitioner here, filed a petition with the referee to set aside certain alleged transfers of property by the bankrupt to the respondent as voidable preferences within the

[ 286 U.S. Page 265]

     provisions of § 60 (b) of the Bankruptcy Act. The respondent appeared in the proceeding, denied the material allegations of the petition, but consented in open court that the trial of the issues proceed before the referee. The referee made an order, based on findings, granting in part the relief prayed. The District Court, on cross petitions to review the determination of the referee, modified his order in respects not now material. 46 F.2d 811. On appeal the Court of Appeals for the First Circuit reversed the order of the District Court, holding that as the issues before the referee were determinable only in a plenary suit, the referee, notwithstanding the consent of the parties, was without jurisdiction to decide them. 53 F.2d 827. This Court granted certiorari, to resolve a conflict of the decision below with that in In re Hopkins (C. C. A. 2d), 229 Fed. 378; see also Arkansas Natural Gas Corp. v. Page, 53 F.2d 27; American Finance Co. v. Coppard (C. C. A. 5th), 45 F.2d 154; Board of Education v. Leary (C. C. A. 8th), 236 Fed. 521; Gamble v. Daniel (C. C. A. 8th), 39 F.2d 447, appeal dismissed, 281 U.S. 705.

The only question, presented by the petition, which need be considered here, is whether, the issues raised being such as were triable in a plenary suit, the referee, the parties consenting, had jurisdiction to determine them. Under the applicable provisions of the Bankruptcy Act, the District Court below had jurisdiction to hear and determine the present suit. Section 60 (b) of the Bankruptcy Act confers on trustees in bankruptcy authority to maintain plenary suits to set aside voidable preferences as defined in that section. Section 23 (b), as originally enacted, provided, "Suits by the trustee shall only be brought or prosecuted in the courts where the bankrupt, whose estate is being administered by such trustee,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

[ 286 U.S. Page 266]

     proposed defendant." An amendment of this section in 1903 removed its restrictions on suits brought under § 60 (b) by adding the words "except suits for the recovery of property under section sixty, subdivision b; . . ." At the same time § 60 (b) was amended, so as to confer jurisdiction over suits by the trustee to set aside voidable preferences in "any court of bankruptcy." By § 1 (8) "courts of bankruptcy" includes District Courts.

Jurisdiction over the present suit being thus vested in the District Court as a court of bankruptcy, the question with which we are immediately concerned is whether the referee appointed by the District Court where the bankrupt's estate is being administered, is a court within the meaning of § 23 (b), and is included in the phrase "any court of bankruptcy" in § 60 (b), and hence is vested with such jurisdiction that, the defendant consenting, he may try and determine the issues in the suit.

That he may not try such issues without the consent of the defendant has been often and uniformly held. Louisville Trust Co. v. Comingor, 184 U.S. 18, 26; Babbitt v. Dutcher, 216 U.S. 102, 113; Weidhorn v. Levy, 253 U.S. 268, 273; Harrison v. Chamberlin, 271 U.S. 191, 193; see also Daniel v. Guaranty Trust Co., 285 U.S. 154. In cases where the defendant made timely objection to a determination by the referee, it has been said that the referee is without power to hear the issues involved in a plenary suit, and that such a suit, if brought before him, must be dismissed for want of jurisdiction. See Weidhorn v. Levy, supra.

But a distinction is to be noted between the power of the referee to decide the issues in such a suit brought before him without objection, and his power to compel the litigation of them before him, over the objection of the proposed defendant. Where a suit by the trustee is plenary in character, as are those ...


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