U.S. Supreme Court SCHUMACHER v. BEELER, 293 U.S. 367 (1934)

[Page 293 U.S. 367, 368]

Messrs. Coleman Avery, John W. Peck, and Frank H. Shaffer, Jr., all of Cincinnati, Ohio, for petitioner.

Messrs. Henry B. Street and Province M. Pogue, both of Cincinnati, Ohio, for respondent.

Mr. Chief Justice HUGHES delivered the opinion of the Court.

In granting the writ of certiorari, we limited our review to the question of the jurisdiction of the District Court under section 23b of the Bankruptcy Act. That provision, and its immediate context, section 23a, are set forth in the margin. [Footnote 1] 44 Stat. 664, 11 U.S.C. 46(a)(b), 11 USCA 46(a, b).

[Page 293 U.S. 367, 370]

moved to dismiss the cause for the want of jurisdiction, and the motion was granted.

This order was reversed by the Circuit Court of Appeals. That court concluded that the validity of the trustee's claim, and of that of the sheriff, depended upon disputed facts and issues of law; that the adverse claim of the sheriff was substantial and that its merits could be adjudged only in a plenary suit; that this proceeding should be treated as one of that nature and that there was consent to the jurisdiction of the District Court within the meaning of section 23b of the Bankruptcy Act. As the case had not been heard upon its merits, and the record presented no findings of fact or conclusions of law, the Circuit Court of Appeals did not deal with any question except that of jurisdiction and directed that the cause be remanded to the District Court with instructions to hear and determine the controversy.

The trustee's petition, which the Circuit Court of Appeals treated as a bill of complaint, did not allege diversity of citizenship. Nor did it contain clear and sufficient averments showing that the complainant, as against the sheriff claiming under a judgment recovered and an execution issued more than four months before the bankruptcy, had possession of the property in question by virtue of which the District Court would have jurisdiction of the suit irrespective of the consent of the defendant. [Footnote 2]

[Page 293 U.S. 367, 377]

subdivision e.' These special exceptions exclude any other.'

By the Act of June 25, 1910 (36 Stat. 840), section 23b was further amended so as to include in the exception suits for the recovery of property under section 70, subd. e, 11 USCA 46. See Weidhorn v. Levy, 253 U.S. 268, 272, 40 S.Ct. 534.

We think that the exceptions thus established by the amending acts show clearly that it was the intent of the Congress that section 23b should operate as a grant of jurisdiction to the federal court of suits brought by a trustee in bankruptcy against adverse claimants, provided the defendant consented to be sued in that court, although the bankrupt could not have brought suit there if proceedings in bankruptcy had not been instituted, and that, in suits falling within the exceptions, the federal court should have jurisdiction without the defendant's consent. The question was not necessarily involved in the case of Lovell v. Isidore Newman & Son, 227 U.S. 412, 426, 33 S.Ct. 375, and so far as the language of the opinion indicated a contrary view, it is not approved. Compare MacDonald v. Plymouth County Trust Co., 286 U.S. 263, 268, 52 S.Ct. 505; Page v. Arkansas Natural Gas Corporation, 286 U.S. 269, 271, 272 S., 52 S.Ct. 507.

We conclude that the court had jurisdiction in the instant case, and the decree of the Circuit Court of Appeals setting aside the order of the District Court and directing that court to hear and determine the controversy upon its merits is affirmed.

Decree affirmed. Footnotes

Footnote 1 Section 23a, 23b, as amended by the Act of May 27, 1926, c. 406, 8, 11 USCA 46(a, b), are as follows:'Sec. 23. (a) The United States district 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, except suits for the recovery of property under section 60, subdivision b (section 96, subdivision b, of this title); section 67, subdivision e (section 107, subdivision e, of this title); and section 70, subdivision e (section 110, subdivision e, of this title).'

Footnote 2 See Whitney v. Wenman, 198 U.S. 539, 552, 25 S.Ct. 778; Murphy v. John Hofman Co., , 568-570, 29 S.Ct. 154; Hebert v. Crawford, 228 U.S. 204, 208, 33 S.Ct. 484; Taubel, etc., Company v. Fox, 264 U.S. 426, 432, 434 S., 44 S.Ct. 396; Isaacs v. Hobbs Tie & Timber Co., 282 U.S. 734, 737, 738 S., 51 S.Ct. 270; Stration v. New, 283 U.S. 318, 321, 326 S., 51 S.Ct. 465; Page v. Arkansas Natural Gas Corporation, 286 U.S. 269, 271, 52 S.Ct. 507.