U.S. Supreme Court RIEHLE v. MARGOLIES, 279 U.S. 218 (1929)

[Page 279 U.S. 218, 226]

Byers v. McAuley, 149 U.S. 608, 620, 13 S. Ct. 906; Waterman v. Canal-Louisiana Bank, , 30 S. Ct. 10. Under the Bankruptcy Act of 1867 (14 Stat. 517), a judgment against the debtor rendered in a suit in a state court pending at the time of the commencement of the bankruptcy proceedings established conclusively in bankruptcy the existence and amount of the debt provable against the estate. Norton v. Switzer, 93 U.S. 355, 363, 364 S.. Compare Hill v. Harding, , 2 S. Ct. 404. A judgment in a state court against a receiver, pursuant to section 66 of the Judicial Code (28 USCA 125), establishes conclusively the right to payment from the funds of the receivership, although the act makes the suit in the state court 'subject to the general equity jurisdiction of the court in which such manager or receiver was appointed so far as the same may be necessary to the ends of justice.' [Footnote 1] Where a receivership of a national bank is appointed by the Comptroller of the Currency, a judgment entered after the appointment in an action commenced in a state court before the appointment is binding upon the receivers as well as upon the bank. Speckert v. German National Bank (C. C. A.) 98 F. 151, 154.

[Page 279 U.S. 218, 227]

of the debtor's property ordered therein, has long been applied in some of the lower federal courts. [Footnote 2] No case has been found in which the right has been denied. A like rule has been applied in state courts. [Footnote 3] In Pendleton v. Russell, 144 U.S. 640, 644, 12 S. Ct. 743, it was sought to prove against funds of a dissolved corporation in the hands of a receiver appointed by a court of New York a judgment recovered in Tennessee after the dissolution. The proof was disallowed because the dissolution had operated, like death, as an abatement of the suit. But the court said: 'Had the original judgment of the Circuit Court of the United States been affirmed, instead of being reversed, it having been rendered when the insurance company was in existence, it would have stood as a valid claim against the assets of that company after its dissolution.'

[Page 279 U.S. 218, 228]

be conclusive in the bankruptcy or insolvency proceedings. Thus, it has been held by some lower federal courts that a judgment recovered after institution of bankruptcy proceedings in an action commenced in a state court prior thereto, on a claim to which the limited power to stay action in a state court conferred by section 11 of the Act of July 1, 1898, c. 541, 30 Stat. 549 (11 USCA 29), applies, is not to be accepted in bankruptcy as conclusive proof of the claim. [Footnote 4] Similarly it has been held, where a statutory proceeding for the winding up an insolvent corporation is brought in the state of the incorporation, that the assets will be distributed only among those persons who have been found to be creditors either by that court or elsewhere with its leave, and that a judgment recovered in another state without leave from it will not entitle the plaintiff to share in the assets. [Footnote 5] These decisions are not inconsistent with the conclusion stated above. They have no application to receiverships in a federal court sitting in equity, which lacks the power to stay an action in the state court. Margolies had the absolute right to prosecute his claim to judgment in the state court, the order of the District Court staying its prosecution was properly dissolved, and the judgment entered there is conclusive as between the parties and their privies in the federal court. Kline v. Burke Construction Co., 260 U.S. 226, 230, 233 S., 43 S. Ct. 79, 24 A. L. R. 1077

Affirmed. Footnotes

Footnote 1 Central Trust Co. v. St. Louis, Arkansas & Texas Ry. Co. (C. C. A.) 41 F. 551; Dillingham v. Hawk (C. C. A.) 60 F. 494, 23 L. R. A. 517; St. Louis S. W. Ry. Co. v. Holbrook (C. C. A.) 73 F. 112; Willcox v. Jones (C. C. A.) 177 F. 870; Manhattan Trust Co. v. Chicago Electric Traction Co. (C. C.) 188 F. 1006; American Brake Shoe & Foundry Co. v. Pere Marquette R. R. Co. (D. C.) 263 F. 237, Id. (D. C.) 278 F. 832; International & Great Northern Ry. Co. v. Adkins (D. C.) 14 F.(2d) 149.

Footnote 2 Mercantile Trust Co. v. Pittsburg & Western R. R. Co. (C. C.) 29 F. 732; Pine Lake Iron Co. v. La Fayette Car Works (C. C.) 53 F. 853. Compare Shelby v. Bacon, 10 How. 56, 69, 70; Wilder v. City of New Orleans (C. C. A.) 87 F. 843, 848; Anglo-American Land, etc., Co. v. Cheshire Provident Institution (C. C.) 124 F. 464, 466; Pennsylvania Steel Co. v. New York City Ry. Co. (C. C.) 161 F. 786, 787; United States v. Illinois Surety Co. (D. C.) 238 F. 840, 846; International & Great Northern Ry. Co. v. Adkins (D. C.) 14 F. (2d) 149, 152.

Footnote 3 Pringle v. Woolworth, 90 N. Y. 502; Taylor v. Gray, 59 N. J. Eq. 621, 44 A. 668; St. Louis, B. & M. Ry. Co. v. Green (Tex. Civ. App.) 183 S. W. 829, 833. See 'Judgment Claims in Receivership Proceedings,' by Judge John K. Beach, 30 Yale Law Journal 674. Compare Central Trust Co. v. D'Arcy, 238 Mo. 676, 142 S. W. 294, where the rule was applied to proof under an assignment for the benefit of creditors; Matter of Empire State Surety Co., 216 N. Y. 273, 283, 110 N. Ed. 610. See contra Evans v. Illinois Surety Co., 319 Ill. 105, 149 N. E. 802, in which the difference between an equity receivership and receivers under bankruptcy or insolvency laws was not referred to. Cases like In re New Jersey Refrigerating Co., 97 N. J. Eq. 358, 127 A. 198, where both actions are brought in courts of the same state, depend, of course, upon the local law.

Footnote 4 In re Hoey, Tilden & Co. (D. C.) 292 F. 269, 271; In re James A. Brady Foundry Co. (C. C. A.) 3 F.(2d) 437; In re Barrett & Co. (D. C.) 27 F.(2d) 159. Whether that is the correct rule we have no occasion to consider. See contra In re Buchan's Soap Corp. (D. C.) 169 F. 1017. Compare Hobbs v. Head & Dowst Co. (C. C. A.) 184 F. 409; In re Benwood Brewing Co. (D. C.) 202 F. 326, 327, 328; In re Havens (C. C. A.) 272 F. 975; In re Rosentein (C. C. A.) 276 F. 704; In re Kelley (D. C. ) 297 F. 676; In re Winter (D. C.) 17 F.(2d) 153.

Footnote 5 Attorney General v. Legion of Honor, 196 Mass. 151, 81 N. E. 966; Hackett v. Legion of Honor, 206 Mass. 139, 142, 92 N. E. 133.