the suit is brought to determine.74 For suits to avoid preferences under section 60 of the Bankruptcy Law,75 to annul preferential or fraudulent liens under section 67,76 and for suits under State laws to avoid fraudulent transfers under section 70,77 the appropriate subjects should be consulted. The trustee's duty as to suits already pending in the name of or against the bankrupt will be considered in subsequent sections, as well as the limitation on suits brought by and against him.

§ 33. Stay of suits begun after filing of petition.—When property is in the actual possession of a court, this draws to it the right to decide upon conflicting claims to its ultimate possession and control, and as between two courts exercising concurrent jurisdiction, the court which first acquires possession will maintain it.78 But a court of bankruptcy will not generally stay a suit brought for the purpose of asserting a valid lien which attached before the beginning of the bankruptcy proceeding.79 To protect its jurisdiction a court will enjoin all parties from proceedings looking to the same remedy in another court of concurrent jurisdiction.80

834. Stays of suits against bankrupt.-The basis of jurisdiction for the stay of a suit against the bankrupt is the discharge ability of the debt. The suit must be founded upon a claim from which a discharge would be a release. If the debt which is the foundation of an action in a State court is one from which the bankrupt will not be discharged, the suit in the State court should

74. Joseph v. Makley, 8 Am. B. R. 18, where the suit is on a cause of action antedating the adjudication security for costs will be required in New York.

75. See chapter XXIII, section 14, supra.

76. See chapter XXII, section 28,

supra.

77. See section 19, this chapter. 78. In re Russell, 3 Am. B. R. 658, 101 Fed. 248. Compare In re

Chambers, 3 Am. B. R. 537, 98 Fed. 865.

79. In re San Gabriel Sanitarium Co., 7 Am. B. R. 206, 111 Fed. 892.

80. Moran v. Sturgis, 154 U. S. 256, 273; Texas & Pac. R. R. Co. v. Johnson, 151 U. S. 81. See also In re Gutman, 8 Am. B. R. 252, 114 Fed. 1009; In re Kleinhaus, 7 Am. B. R. 604, 113 Fed. 107; In re Basch, 3 Am. B. R. 235, 97 Fed. 761.

not be enjoined.81 The words, "from which a discharge would be a release," are, however, construed broadly, and suits not strictly within them are sometimes stayed.82 The word "suits" is also given a wide meaning. It includes actions at law, suits in equity, and, in fact, any legal proceedings where the personal liability of the debtor is sought to be fixed.83 Thus, it embraces legal steps after judgment, such as supplementary proceedings,84 sheriff's sales on execution,85 the distribution of the proceeds of such sales,86 as well as a wide range of proceedings discussed later;87 though, were it not for other sections of the law, it may be doubted whether the word could be extended so far.88 Where the suit involves nothing but the question of fraud, to which a discharge cannot be pleaded, its prosecution should not be stayed.89 The character of an action brought against a bankrupt in a court of the State of New York must be determined by the pleadings, and the bankruptcy court, upon a motion to vacate and modify its order restraining the prosecution thereof, is not required to enter into an investigation de hors the pleading, to ascertain the nature of the action.90 The right to enjoin has sometimes been broadly expressed.91 The present tendency is toward limitations of the power.92

81. Mackel v. Rochester, 14 Am. B. R. 429, 135 Fed. 904.

82. In re Hilton, 4 Am. B. R. 774; In re Basch, 3 Am. B. R. 235, 97 Fed. 761; Ex parte Christy, 3 How. (U. S.) 292.

83. Bailey v. Glover, 21 Wall. (U. S.) 342; In re Rosenberg, Fed. Cas. No. 12,054; McKay v. Funk, 13 N. B. R. 334.

84. In re Burke, 19 Am. B. R. 51; In re De Lany & Co., 10 Am. B. R. 634, 124 Fed. 280; In re Kletchka, 1 Am. B. R. 479, 92 Fed. 901; In re De Long, 1 Am. B. R. 66; In re Adams, 1 Am. B. R. 94.

85. In re Northrup, 1 Am. B. R.

427.

86. In re Lesser, 3 Am. B. R. 815, 100 Fed. 433, aff'd 5 Am. B. R. 320,

rev'd in Metcalf v. Barker, 187 U. S. 165, 9 Am. B. R. 36; In re Kenney, 2 Am. B. R. 494, 95 Fed. 427.

87. In re Gutwillig, 1 Am. B. R. 388, 92 Fed. 337; Lea v. West Co., 1 Am. B. R. 261, 91 Fed. 237.

88. In re Globe Cycle Works, 2 Am. B. R. 447, 456. Compare In re Southern Loan & Trust Co., 3 Am. B. R. 9, 96 Fed, 514.

89. Mackel v. Rochester, 14 Am. B. R. 429, 135 Fed. 904; In re Wollock, 9 Am. B. R. 685, 120 Fed. 516.

90. In re Adler, 18 Am. B. R. 240. 91. In re St. Albans Foundry Co., 4 Am. B. R. 594; In re Rogers, 1 Am. B. R. 541.

92. In re Currier, 5 Am. B. R. 630; In re Ward, 5 Am. B. R. 215, 104 Fed. 985; In re Remington Auto

94

93

§ 35. Of suits or proceedings in rem.-The general rule is that the court that first acquires jurisdiction will retain it. Thus, a Federal court will restrain a replevin creditor proceeding in a State court against property in the custody of the Federal court," but will refuse a stay in most cases where the State court is in possession, or where the bankrupt had no legal or equitable title to the property sought to be replevined.95 But the rule yields, however, where the possession of the State court is (1) the result of a fraud on the law, or (2) of a lien declared void or voidable under the law. But if the lien is by a judgment creditor's suit begun more than four months before the bankruptcy a stay will not be granted.96 Where a proceeding was commenced long prior to the proceedings in bankruptcy, and the property in controversy was under the control and in the possession of a receiver appointed by the State court, a bankruptcy court cannot enjoin the proceedings or order the property turned over to the trustee in bankruptcy.97 Where, before filing a petition against an involuntary bankrupt, a creditor brings an attachment suit in a State court and such court acquires jurisdiction of the property attached, such

& Motor Co., 9 Am. B. R. 533, 119 Fed. 441, prosecution of claim against stockholders of a bankrupt corporation for unpaid subscriptions.

93. In re Russell, 3 Am. B. R. 658, 101 Fed. 248.

94. In re Seebold, 5 Am. B. R. 358, 105 Fed. 910; Keegan v. King, 3 Am. B. R. 79, 96 Fed. 758; In re Russell, supra; In re Price, 1 Am. B. R. 606, 92 Fed. 987; Carter v. Hobbs, 1 Am. B. R. 215, 92 Fed. 594. Compare In re Neely, 5 Am. B. R. 836, 108 Fed. 371, 7 Am. B. R. 312, 113 Fed. 210.

95. In re Smith, 9 Am. B. R. 590, 119 Fed. 1004; Matter of Kanter & Cohen, 9 Am. B. R. 372, 121 Fed. 984, 58 C. C. A. 260.

96. Metcalf v. Barber, 187 U. S. 165, 9 Am. B. R. 30, rev'g In re Lesser, 5 Am. B. R. 320, 3 Am. B. R.

815; White v. Thompson, 9 Am. B. R. 653, 119 Fed. 868, 56 C. C. A. 308, an injunction restraining proceedings in the disposition of property duly levied on under an execution, issued upon a judgment more than a year prior to the adjudication in bankruptcy of the debtor, is unwarranted. Contra In re Vastbinder, 13 Am. B. R. 148; In re Baughman, 15 Am. B. R. 23, 138 Fed. 742, a sale of the bankrupt's property under an execution issued upon a judgment more than four months prior to his adjudication may be stayed; Matter of Pollman, 16 Am. B. R. 144. See also Nat. Bank v. Hobbs, 9 Am. B. R. 190, 118 Fed. 626.

97. Pickens v. Dent, 187 U. S. 177, 9 Am. B. R. 47, aff'g 5 Am. B. R. 644, 106 Fed. 663.

suit should not be stayed.98 A creditor's suit to set aside a fraudulent conveyance is an action in rem, and not against the debtor personally; his discharge in bankruptcy is no bar thereto."9

§ 36. To enforce a lien.-Such stays usually are sought either to prevent the enforcement of an execution or an attachment levied within the four months period, or the foreclosure of a valid mortgage. If the former, there seems little doubt about the power to halt the lien creditor or of the wisdom of exercising it.1 If the latter, while the power exists, the mortgaged premises being in the custody of the court,2 yet, provided the mortgage is valid, it will not as a rule be exercised, and certainly not unless it appears that the equity of redemption vested in the trustee is of some value.3 The decisions under the former class of cases are fairly uniform, and, where there is a difference, now that the doctrine of Bardes v. Bank has been eliminated, turn, as a rule, on whether the action sought to be stayed is or rests upon a transaction which is void or voidable under the present law. Those under the latter class, declaring against the exercise of jurisdiction and remitting the party who seeks to stay to the State court, are equally

98.

Tennessee Producer Marble Co. v. Grant, 14 Am. B. R. 288, 135 Fed. 332.

99. Flint v. Chaloupka, 18 Am. B. R. 293.

1. In re Eastern Com. & Imp. Co., 12 Am. B. R. 305, 129 Fed. 847.

2. Quaere: Whether the mortgagee, being a secured creditor, is not, under section 57h, a party who is already within the jurisdiction of the court of bankruptcy.

3. In re Sabine, 1 Am. B. R. 315. Compare In re Pittelkow, 1 Am. B. R. 472, 92 Fed. 901.

4. In re Tune, 8 Am. B. R. 285, 115 Fed. 906; In re Kenney, 5 Am. B. R. 355, 105 Fed. 897; In re Seebold, supra; In re Lesser, supra;

Bear v. Chase, 3 Am. B. R. 746; In re Kimball, 3 Am. B. R. 161, 97 Fed. 29. Most of the cases contra rest on Bardes v. Bank, 178 U. S. 524, 4 Am. B. R. 163, and since the amendatory act of 1903, are no longer the law (for instance, In re Wells, 8 Am. B. R. 75, 114 Fed. 222, and In re Shoemaker, 7 Am. B. R. 437, 112 Fed. 648). But see In re Ogles, 1 Am. B. R. 671, and In re Franks, 2 Am. B. R. 634, 95 Fed. 635. Even were this not so, the power to enjoin the consummation of a fraud on the law is by no means negatived by Bardes v. Bank. Compare Bryan v. Bernheimer, 175 U. S. 274, 5 Am. B. R. 623.

8

uniform, and the earlier cases contra are no longer controlling. Nor was this latter result appreciably affected by Bardes v. Bank." However, in extreme cases, and in cases where the mortgage itself is voidable under the terms of the law, the right to stay will usually be exercised. Where the lien creditor voluntarily makes himself a party to the proceedings, as when he appears at the first meeting and asks that his security be ascertained for the purpose of voting on that part of his debt which may be unsecured, the rule is, of course, different. Such a creditor may later be stayed. But not, if the suit is a creditor's bill of long standing.10 A suit to enforce a mechanic's lien against real property of the bankrupt may be brought against the trustee without leave of the court.11 Where distress has been made by a landlord and afterwards the property has been transferred to another person who has become bankrupt, the result is to place the property under the control of the bankruptcy court, and such court may restrain further proceedings under the distress.12

§ 37. General assignments.-Prior to Bardes v. Bank,13 the cases were uniform in holding that a general assignment being an act of bankruptcy and a constructive fraud on the law, the general assignee might be halted by an injunction from the court of bankruptcy.14 Whatever doubt resulted from that case was eliminated by the same court's decision in Bryan v. Bernheimer.15

5. In re Porter, 6 Am. B. R. 259; In re Gerdes, 4 Am. B. R. 346, 102 Fed. 318; Heath v. Shaffer, 2 Am. B. R. 98, 93 Fed. 647; In re Holloway, 1 Am. B. R. 659, 93 Fed. 638.

6. In re San Gabriel Sanitarium Co., 4 Am. B. R. 197, 102 Fed. 310; In re Pittelkow, supra; In re Sabine, supra.

7. In re San Gabriel Sanitarium Co., 7 Am. B. R. 206, 111 Fed. 892. 8. See In re Sabine, 1 Am. B. R. 315.

9. In re Riker, 5 Am. B. R. 720, 107 Fed. 96.

Nor

10. Pickens v. Roy, 187 U. S. 177, 9 Am. B. R. 47.

11. In re Smith, 9 Am. B. R. 603, 121 Fed. 1014.

12. In re Lines, 13 Am. B. R. 318, 133 Fed. 803.

13. 178 U. S. 524, 4 Am. B. R. 163. 14. In re Gutwillig, 1 Am. B. R. 78, 90 Fed. 475, aff'd 1 Am. B. R. 338, 92 Fed. 337; Lea v. West, 1 Am. B. R. 261, 91 Fed. 237; In re M. Solomon & Co., 2 N. B. N. Rep. 460. 15. 181 U. S. 188, 5 Am. B. R.

623.