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(198 U. S. 539) EDWARD B WHITNEY, as Trustee in / ing Company and the United States Mort

Bankruptcy of Daniel Le Roy Dresser gage & Trust Company were corporations and Charles E. Riess, as Members of the of the state of New York. That the defendFirm of Dresser & Co., Appts.,

ant Charles H. Wenman acted as the agent

and attorney in fact of the defendants Fish CHARLES H. WENMAN, Stuyvesant Fish, and Boldt. Prior to March 7, 1903, the George C. Boldt, et al.

bankrupts, partners, as Dresser & Company,

became insolvent, and on that day assigned Courtsjurisdiction of court of bankruptcy all their property for the benefit of their

--suit to determine rights to property in creditors. On March 9, 1903, upon the peits possession.

tition of certain creditors, Robert C. Morris

and Charles S. Mackenzie were appointed by Jurisdiction of a proceeding in the nature of a the district court for the southern district

plenary action, in which the parties were duly of New York receivers in bankruptcy of served and brought into court, to determine Dresser & Company. That at least six rights in or liens upon property which, under the facts as admitted by demurrer to the months prior to March 7, 1903, the firm of bill, came into possession of a court of bank- Dresser & Company had been insolvent and ruptcy as property of the bankrupt, whether unable to pay its debts, and was only able held by him or for him, was conferred on to continue in business by borrowing large such court by the bankrupt act of July 1, 1898, § 2 (30 Stat. at L. 545, chap. 541, U.

sums of money; and in order not to injure S. Comp. Stat. 1901, p. 3420), authorizing the the creditors it became necessary to pledge bankruptcy court to cause the estate of the the goods, wares, and merchandise in which bankrupt to be collected, reduced to money, the company was dealing, but to conceal and distributed, and to determine contro said pledge from the unsecured creditors. versies in relation thereto, and bring in and That the goods dealt with by Dresser & substitute additional parties when necessary for the complete determination of a matter in Company consisted, for the most part, of controversy; and such jurisdiction is not Japanese silks imported for sale. For the ousted by an unauthorized surrender of the purpose of pledging these goods with certain property by the receiver in bankruptcy.

of the creditors, without the knowledge of

the other creditors, Dresser & Company en(No. 576.]

tered into a plan or arrangement with the Submitted April 24, 1905. Decided May 29, defendants the Security Warehousing Com1905.

pany: to wit, a certain alleged lease of the

store, display and sales rooms was made by the of United States for the Southern Dis- housing Company at a nominal rental of $1 trict of New York to review a decree dis- a year, in order that thereafter the said missing for want of jurisdiction a bill which warehousing company might claim that the seeks to determine rights in or liens upon goods and display and sales rooms belonged property which, under the facts as alleged, to it. That the goods in reality belonged to came into the possession of the court as the firm of Dresser & Company, and there property of the bankrupt. Reversed.

was no change of location or ownership of

the said goods, but Dresser & Company reStatement by Mr. Justice Day:

mained in possession and control thereof, Edward B. Whitney, as trustee in bank- and permitted the display of them in the ruptcy of Daniel LeRoy Dresser and Charles same manner as that firm had done prior to E. Riess, members of the firm of Dresser & the pretended storage. Dresser & Company Company, filed a bill in equity against exhibited the goods to their customers, send. Charles H. Wenman, Stuyvesant Fish, and ing portions to dyers and manipulators, and George C. Boldt, in the district court of the generally handled and used them as if they United States for the southern district of were their own, and free and clear from all New York. Upon demurrer to the bill, the claims and encumbrances. That the Secucourt dismissed the same for want of juris- rity Warehousing Company exercised no sudiction. The allegations of the bill set pervision or control over the said goods, but forth in substance: That on September 17, merely employed, or pretended to employ, 1903, the complainant was duly appointed the confidential clerk and secretary of Dan. trustee in bankruptcy of Dresser and Riess, iel LeRoy Dresser and Dresser & Company, doing business as Dresser & Company, and as its alleged custodian, in whose charge it that as such trustee he qualified on Septem- was claimed the goods had been placed at ber 29, 1903. That during the time men- a salary of $1 per month. She exercised no tioned in the bill, and up to March 7, 1903, control or supervision over the goods, but Dresser & Company were carrying on busi- during the period of her employment conness as merchants in the city of New York. tinued to act as the confidential secretary of That the defendants the Security Warehous-'tne bankrupts. The security company also placed a few small tags on the shelves and the Security Warehousing Company claimed bins in which the goods were stored and dis- that certain of the goods supposed to have played for sale, upon which tags the name been stored with it by Dresser & Company, of the security company was printed, but and covered by the security instruments, the tags were not easily discovered, and in had been sold by Dresser & Company bemost instances were so placed as not to be fore March 7, 1903, amounting to the sum readily seen, and were not of such a char- of $22,000. That said receivers collected acter as to identify the goods.

upwards of $20,000 of accounts receivable The bill then avers the issue of certain of Dresser & Company, and paid the same warehouse receipts upon said goods, repre- over to the Security Warehousing Comsenting that they had been stored with the pany. That these goods were sold and the company at its warehouse at 15–17 Greene accounts collected by the warehousing comstreet, New York, which was, in fact, the pany before the appointment of complainant store of Dresser & Company. Then follow as trustee in bankruptcy of Dresser & Comallegations as to the delivery of the ware- pany. None of said goods or their proceeds house receipts, some to the United States have come into the hands of the trustee Mortgage & Trust Company and some to the except the sum of $1,944.93, paid to the defendant Wenman for himself or defend complainant by the security company. Then ants Fish and Boldt. And it is averred that follow averments as to the payment of the the security instruments did not describe proceeds of the goods sold and accounts colthe goods in such a way as to make them lected to the other defendants and the capable of identification. That Daniel Le- holders of said warehouse receipts. It is Roy Dresser was one of the incorporators of averred that the books and records of the the Security Warehousing Company, and Security Warehousing Company are lost or one of its directors and stockholders. That destroyed. It is alleged that the attempt at the time of the delivery of the security to create a lien upon the goods in the maninstruments Charles S. Mackenzie was gen- ner aforesaid was contrary to law and the eral counsel of the security company, and statutes of the state of New York. That was fully cognizant of the system of pre- the silk goods had been sold at much less tended storage before described, and was than their value. The prayer of the bill is also personal counsel for Daniel LeRoy that the security instruments be declared Dresser. That after the delivery of the invalid, fraudulent, and void, and that the warehouse instruments Dresser & Company complainant be decreed the owner of the continued to display and sell and dispose goods and accounts, and that the defendants of the goods and manage the business in the be required to account for the value of the same manner that they had been in the same, and for general relief, as the nature habit of doing prior to the said pretended of the case may require. storing, without objection from the Security Warehousing Company. Then follow alle- Messrs. Robert D. Murray, George H. gations as to the knowledge or opportunity Gilman, and J. Aspinwall Hodge for for knowing, on the part of the defendants, appellants. of the situation above described. When the Messrs. Edwin B. Smith, Louis F. receivers, Morris and Mackenzie, went into Doyle, and Smith & Barker for appellees. possession of the stock of Dresser & Company on March 9, 1903, upwards of $150,- Mr. Justice Day, after making the fore000 worth of the goods was still in the pos- going statement, delivered the opinion of session and under control of Dresser & Com- the court: pany. After the receivers had taken pos

This case is here upon the question of the session of the store the Security Warehous-jurisdiction of the district court to entering Company notified them that it claimed tain the action. The case in the court bethat the store, display and sales rooms below was dismissed for want of jurisdiction, longed to it under the alleged lease, and the demurrer having been sustained solely that the goods therein contained had been upon the ground that the bankruptcy act stored with it by Dresser & Company, and of July 1, 1898 [30 Stat. at L. 545, chap. requested the delivery of all the goods to it. 541, U. S. Comp. Stat. 1901, p. 3421], as The receivers did not dispute this claim of amended by the act of February 5, 1903, the warehousing company, but complied [32 Stat. at L. 797, chap. 487],1 gave the with it. Neither the court nor the unse-court no jurisdiction. We are not concerned cured creditors of Dresser & Company were with the merits of the controversy further advised of the facts concerning this claim than the allegations concerning the same or the character of the pretended storing are necessary to be considered in determinupon which the issue of the so-called ware. ing the question of the jurisdiction of the house receipts was based. Then follow alle district court, as a court of bankruptcy, to gations as to the sale of the goods, and that'entertain this suit. It is sufficient to say that, in our opinion, the bill made a case ing jurisdiction over suits brought by truswhich presented a controversy for judicial | tees in bankruptcy to set aside fraudulent determination as to the right of the defend-transfers of money or property made by the ants to hold the lease and property under bankrupt to third parties before the instithe alleged security of the warehouse re- tution of the bankruptcy proceedings, withceipts undertaken to be issued in the man- out the consent of the defendants. In that ner set forth in the petition. Whether it case it was held that the power conferred will turn out, upon full hearing, that the in subd. 7 of $ 2, above quoted, was limited lease and securities are good, is not now to by the direct provisions of § 23 as to the be determined. The bill makes allegations jurisdiction of suits brought by trustees, which raise a justiciable controversy as to the effect of which section was to compel the validity of the alleged lien in view of the trustee to resort to the state courts to the lack of change of possession of the goods set aside

1 U. S. Comp. St. Supp. 1903, p. 409.

aside conveyances of the character under the circumstances set forth. The named where an alleged fraudulent transquestion for this court now to determine is fer had been made by the bankrupt before whether the bankruptcy court, on the al- the beginning of the proceedings, unless legations made and admitted as true by the jurisdiction in the district court was by demurrer, had jurisdiction to determine the consent. This case (Bardes v. First Nat. controversy. It is positively alleged in the Bank) did not determine the right of the bill that the supervision and control of the district court to entertain jurisdiction of a goods continued in the firm of Dresser & proceeding having in view the adjudication Company, and that the alleged doings of of rights in or liens upon property which the Security Warehousing Company and its came into the possession of the bankruptcy agents were merely colorable, and did not, court as that of the bankrupt, the right in fact, change the control over the goods, to proceed concerning which would seem to nor give any notice of the alleged lease of be broadly conferred in the section of the the warehousing company, nor the lien of bankruptcy act above quoted. At the same the instruments thereby secured. It is fur- term at which the Bardes Case was decided, ther positively averred that when the re- this court determined the case of White v. ceivers were appointed upwards of $150,000 Schloerb, 178 U. S. 542, 44 L. ed. 1183, 20 worth of goods belonging to the firm were Sup. Ct. Rep. 1007. In that case it was in the possession and under the control of held that, after an adjudication in bankthe bankrupts, and after the receivers had ruptcy, an action in replevin could not be taken possession of the store the goods were brought in the state court to recover propdelivered up to the warehousing company erty in the possession of and held by the without any order or attempt to procure bankrupt at the time of the adjudication, the sanction of the court to such surrender and in the hands of the referee in bankof the property. Under these circumstances, ruptcy when the action was begun, and that had the bankruptcy court jurisdiction to de- the district court of the United States, termine the rights of parties claiming in- sitting in bankruptcy, had jurisdiction by terests in the property ?

summary process to compel the return of Section 2 of the bankrupt act of 1898, the property seized. In the case of Bryan among other things, confers jurisdiction v. Bernheimer, 181 U. S. 188, 45 L. ed. 814, upon the district courts of the United 21 Sup. Ct. Rep. 557, it appeared that the States, as courts of bankruptcy, (3) to bankrupt had made a general assignment “appoint receivers or the marshals, upon for the benefit of his creditors nine days . application of parties in interest, in case before the filing of his petition in bankthe court shall find it absolutely necessary, ruptcy, and the assignee sold the property for the preservation of estates, to take after the bankruptcy proceedings had been charge of the property of bankrupts after begun, after the adjudication in bankruptcy, the filing of the petition, and until it is but before the appointment of a trustee. dismissed or the trustee is qualified;" | Upon petition of creditors, the district (7) to "cause the estates of bankrupts to court ordered that the marshal take possesbe collected, reduced to money, and dis- sion, and the purchaser appear within ten tributed, and determine controversies in days and propound his claim to the proprelation thereto, except as herein otherwise erty, or, failing so to do, be declared to provided.”

have no right in it. The purchaser apThis section, in connection with § 23, peared and set up that he bought the propwas before this court for construction in erty in good faith from the assignee, and the case of Bardes v. First Nat. Bank, 178 prayed the process of the court that the U. S. 524, 44 L. ed. 1175, 20 Sup. Ct. Rep. creditors might be remitted to their claim 1000, in which case it was held that § 236 against the assignee for the price, or the of the act as it then stood prevented the same be ordered to be paid into court by courts of the United States from entertain-' the assignee, and paid over to the purchaser, who was willing to rescind the purchase justice, who delivered the opinion of the upon receiving his money. It was held that court, and it was held that the filing of a the purchaser had no title to the bankrupt’s petition in bankruptcy is a caveat to all estate, and that the equities between him the world, and, in effect, an attachment and and the creditors should be determined by injunction, and that, on adjudication, title the district court, bringing in the assignee, to the bankrupt's estate became vested in if necessary. In this case Mr. Justice Gray, the trustee, with actual or constructive poswho also delivered the opinion in the Bardes session, and placed in the custody of the Case, said:

bankruptcy court. “The bankrupt act of 1898, § 2, invests We think the result of these cases is, in the courts of bankruptcy with such juris- view of the broad powers conferred in § 2 diction, at law and in equity, as to enable of the bankrupt act, authorizing the bankthem to exercise original jurisdiction in ruptcy court to cause the estate of the bankbankruptcy proceedings, in vacation in rupt to be collected, reduced to money, and chambers, and during their respective distributed, and to determine controversies terms to make adjudications of bankruptcy, in relation thereto, and bring in and substiand, among other things, ‘(3) appoint re- tute additional parties when necessary for ceivers or the marshals upon the applica- the complete determination of a matter in tion of the parties in interest, in case the controversy, that when the property has becourts shall find it absolutely necessary for come subject to the jurisdiction of the bankthe preservation of estates to take charge ruptcy court as that of the bankrupt, of the property of bankrupts after the filing whether held by him or for him, jurisdicof the petition, and until it is dismissed or tion exists to determine controversies in rethe trustee is qualified ;' '(6) bring in and lation to the disposition of the same, and substitute additional persons or parties in the extent and character of liens thereon or proceedings in bankruptcy when necessary rights therein. This conclusion accords for the complete determination of a matter with a number of well-considered cases in in controversy; (7) cause the estates of the Federal courts. Re Whitener, 44 C. C. bankrupts to be collected, reduced to money, A. 434, 105 Fed. 180; Re Antigo Screen and distributed, and determine controversies Door Co. 59 C. C. A. 248, 123 Fed. 249; in relation thereto, except as herein other- Re Kellogg, 57 C. C. A. 547, 121 Fed. 333. wise provided.' The exception refers to the In the case of First Nat. Bank v. Chicago provisions of § 23, by virtue of which, as Title & T. Co. (decided on May 8 of this adjudged at the last term of this court, the term), 198 U. S. 280, ante, 693, 25 Sup. Ct. district court can, by the proposed defend- Rep. 693, in holding that the jurisdiction ant's consent, but not otherwise, entertain of the district court did not obtain, it was jurisdiction over suits brought by trustees pointed out that the court had found that in bankruptcy against third persons, to re- it was not in possession of the property. cover property fraudulently conveyed by Nor can we perceive that it makes any the bankrupt to them before the institution difference that the jurisdiction is not sought of proceedings in bankruptcy. Bardes v. to be asserted in a summary proceeding, First Nat. Bank, 178 U. S. 524, 44 L. ed. but resort is had to an action in the nature 1175, 20 Sup. Ct. Rep. 1000; Mitchell v. of a plenary suit, wherein the parties can be McClure, 178 U. S. 539, 44 L. ed. 1182, 20 fully heard after the due course of equitable Sup. Ct. Rep. 1000; Hicks v. Knost, 178 procedure. U. S. 541, 44 L. ed. 1183, 20 Sup. Ct. Rep. It is insisted that in the present case the 1006."

property was voluntarily turned over by the This case (Bryan v. Bernheimer) would receiver, and thereby the jurisdiction of the seem to limit the effect of the decision in district court, upon the ground herein the Bardes Case to suits against third per- stated, is defeated, as the property is no sons on account of transfers made before the longer in the possession or subject to the bankruptcy, and to recognize the right of control of the court. But the receiver had the bankruptcy court to adjudicate upon no power or authority, under the allegarights in property in the possession of the tions of this bill, to turn over the property. court, belonging to the bankrupt. In the He was appointed a temporary custodian, case of Mueller v. Nugent, 184 U. S. 1, 46 and it was his duty to hold possession of L. ed. 405, 22 Sup. Ct. Rep. 269, this court the property until the termination of the recognized the power of the bankruptcy proceedings, or the appointment of a trustee court to compel the surrender of money or for the bankrupt. The circumstances alother assets of the bankrupt in his posses- leged in this bill tend to show that the sion or that of some one for him. In that transfer of the property was collusive, and case the decisions in Bardes v. First Nat. certainly, if the allegations be true, it was Bunk, White v. Schloerb, and Bryan v. made without authority of the court. The Bernheimer were reviewed by the chief court had possession of the property, and



jurisdiction to hear and determine the in- / which affirmed a judgment of the Circuit terests of those claiming a lien therein or Court of the Seventh Judicial Circuit in ownership thereof. We do not think this and for Dade County, in that state, in favor jurisdiction can be ousted by a surrender of of defendant in an action to recover a parcel the property by the receiver, without au- of land claimed under a patent from the thority of the court. Whether the rights United States. Affirmed. of the claimants to the property could be litigated by summary proceedings, we need Statement by Mr. Justice Brewer: not determine. What we hold is, that In 1845 fractional township 53 south, under the allegations of this bill, the dis- range 42 west, in Dade county, Florida, was trict court had the right, in a proceeding surveyed and a plat thereof was approved in the nature of a plenary action, in which and filed in the office of the surveyor genthe parties were duly served and brought eral in Florida, and also in the office of the into court, to determine their rights, and to Land Department of Washington. By this grant full relief in the premises, if the survey fractional section 19 was divided allegations of the bill shall be sustained into two lots, numbered 1 and 2, containing This view renders it unnecessary to con- 164.84 acres. In 1875 a resurvey was made sider the effect of the amendments of the of the township, plats of which were also bankruptcy act, passed February 5, 1903, duly approved and filed in the office of the broadening the power of the bankruptcy surveyor general in Florida, and with the courts to entertain suits by trustees to set Land Department at Washington. By this aside certain conveyances made by the bank- new survey, said section 19 was divided into rupt.

7 lots, containing, in the aggregate, 337.76 Decree reversed.

The difference between the two surveys of section 19 is shown in the following plats. (See opposite page.)

On June 24, 1878, a patent was issued to (199 U. S. 54) WILLIAM H. H. GLEASON, Plff. in Err., cation, for a tract described as lots 1 and 2

William H. Gleason, on a homestead appli

of section 19 containing 164.84 acres, acEDWARD L. WHITE.

cording to the official plat of the survey of

1845. Plaintiff in error, who was plaintiff Error to state court-review of conflicting below, claims by deed from the patentee.

testimony-public landsright of pat-On May 4, 1885, lot 5 of section 19, accord. entee to profit by mistake of Land Depart. ing to the survey in 1875, was patented by ment.

the United States to Florida as swamp land,

and thereafter deeded by the state to the de1. A judgment of a state court will be affirmed fendant. In 1898 this action to recover a

by the United States Supreme Court on a part of lot 5 was commenced in the circuit writ of error if there is evidence sufficient to court of the seventh judicial circuit of sustain it, although there may be other Florida, in and for Dade county. The case conflicting testimony, where no special find ings of fact were made, and the proceedings was tried by the court without a jury; a in the trial court were approved by the high-judgment rendered for the defendant was est state court without an opinion. *

affirmed by the supreme court of the state, 2. A patentee of a part of a fractional section and thereafter brought to this court on

whose patent, through the carelessness of the writ of error. Included in the action was Land Department in relying on the descrip. lot 1 of section 19, as shown by the plat of tion in his homestead entry, refers, for the description of the land conveyed, to the orig. 1875, but, as judgment was rendered for inal survey, which calls for a water bound the plaintiff in respect to that tract, it is ary on the east, although a resurvey had unnecessary to further refer to it. There then been made at his instance, cannot re-was a stipulation as to certain facts, with cover from a subsequent patentee under the a provision that testimony of further facts second survey any land lying east of the meander line as shown on the earlier survey, might be received, and that the court might since otherwise he would profit by a mistake view the premises. The findings of the of the government of which he must have court recite that it viewed the premises, been cognizant.

and, upon the stipulated facts, and further

testimony incorporated in a bill of excep[No. 188.]

tions, found generally for the defendant as

to lot 5. Argued and submitted March 16, 17, 1905. Decided May 29, 1905.

Mr. George M. Robbins for plaintiff

in error. N ERROR to the of the

Mr. Edward L White in propria per State of Florida to review a judgment 'sona for defendant in error.


*Ed. Note.-For cases in point, see vol. 13, Cent. Dig. Courts, $$ 1089, 1094

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