CHAPTER II.

CREATION OF COURTS OF BANKRUPTCY AND THEIR JURISDICTION.

§ 2. That the courts of bankruptcy as hereinbefore defined, viz, the district courts of the United States in the several states, the supreme court of the District of Columbia, the district courts of the several territories, and the United States courts in the Indian Territory and the district of Alaska, are hereby made courts of bankruptcy, and are hereby invested, within their respective territorial limits as now established, or as they may be hereafter changed, with such jurisdiction at law and in equity as will enable them to exercise original jurisdiction in bankruptcy proceedings, in vacation in chambers and during their respective terms, as they are now or may be hereafter held, to (1) adjudge persons bankrupt who have had their principal place of business, resided, or had their domicile within their respective territorial jurisdictions for the preceding six months, or the greater portion thereof, or who do not have their principal place of business, reside, or have their domicile within the United States, but have property within their jurisdictions, or who have been adjudged bankrupts by courts of competent jurisdiction without the United States and have property within their jurisdiction; (2) allow claims, disallow claims, reconsider allowed or disallowed claims, and allow or disallow them against bankrupt estates; (3) appoint receivers or the marshals, upon application of par

ties in interest, in case the courts shall find it absolutely necessary, for the preservation of estates, to take charge of the property of bankrupts after the filing of the petition and until it is dismissed or the trustee is qualified; (4) arraign, try, and punish bankrupts, officers, and other persons, and the agents, officers, members of the board of directors or trustees, or other similar controlling bodies, of corporations for violations of this act, in accordance with the laws of procedure of the United States now in force, or such as may be hereafter enacted, regulating trials for the alleged violation of laws of the United States; (5) authorize the business of bankrupts to be conducted for limited periods by receivers, the marshals, or trustees, if necessary in the best interests of the estates; (6) bring in and substitute additional persons or parties in proceedings in bankruptcy when necessary for the complete determination of a matter in controversy; (7) cause the estates of bankrupts to be collected, reduced to money and distributed, and determine controversies in relation thereto, except as herein otherwise provided; (8) close estates, whenever it appears that they have been fully administered, by approving the final accounts and discharging the trustees, and reopen them whenever it appears they were closed before being fully administered; (9) confirm or reject compositions between debtors and their creditors, and set aside compositions and reinstate the cases; (10) consider and confirm, modify or overrule, or return, with instructions for further proceedings, records and findings certified to them by referees; (11) determine all claims of bankrupts to their exemptions; (12) discharge or

refuse to discharge bankrupts and set aside discharges and reinstate the cases; (13) enforce obedience by bankrupts, officers, and other persons to all lawful orders, by fine or imprisonment or fine and imprisonment; (14) extradite bankrupts from their respective districts to other districts; (15) make such orders, issue such process, and enter such judgments in addition to those specifically provided for as may be necessary for the enforcement of the provisions of this act; (16) punish persons for contempts committed before referees; (17) pursuant to the recommendation of creditors, or when they neglect to recommend the appointment of trustees, appoint trustees, and upon complaints of creditors, remove trustees for cause upon hearings and after notices to them; (18) tax costs, whenever they are allowed by law, and render judgments therefor against the unsuccessful party, or the successful party for cause, or in part against each of the parties, and against estates, in proceedings in bankruptcy; and (19) transfer cases to other courts of bankruptcy.

Nothing in this section contained shall be construed to deprive a court of bankruptcy of any power it would possess were certain specific powers not herein enumerated.

JURISDICTION.

General Jurisdiction of Bankruptcy Courts.

The proceeding in bankruptcy is equivalent to the general creditors' bill in chancery, and is a plenary proceeding, its practice being prescribed by the statute, and to that extent varying from the chancery practice obtaining in creditors'

bills.

So far as not varied by statute, the practice should be the same. The collateral proceedings incident to and arising in the course of a bankruptcy proceeding, in the form of petitions and motions nisi, against persons already parties to the bankruptcy proceeding, are of the same character as like collateral proceedings incident to and arising in a creditors' bill in chancery, and are summary only where they would be so in a creditors' bill, except where allowed by statute. In re Anderson, 23 Fed. 482. The proceeding in bankruptcy is in the nature of a proceeding in rem; the acquisition of jurisdiction is based upon the taking possession, by the court, of the debtor's whole property and effects, and upon its adjudication as to his status. Hence the federal court in which the bankruptcy proceedings are commenced has jurisdiction of the debtor's whole estate, wherever situate, and it is the only court which can enjoin a mortgage creditor from foreclosing his mortgage in a state court, notwithstanding the creditor resides within another circuit. Markson v. Heany, 1 Dill. 497, Fed. Cas. No. 9,098. So, the bankruptcy court has power to issue an injunction to restrain the sheriff of a state court from proceeding to sell the property of the estate under execution issuing from the state court on a judgment obtained prior to the institution of the bankruptcy proceedings. In re Mallory,

1 Sawy. 88, Fed. Cas. No. 8,991. So, the court has jurisdiction of an action by the trustee in bankruptcy of a voluntary bankrupt to recover a balance due from a principal to the bankrupt as his factor, for such a suit is essential to the winding up of the proceedings in bankruptcy, and jurisdiction in it depends upon the subject-matter, not the parties. Kelly v. Smith, 1 Blatchf. 290, Fed. Cas. No. 7,675. But the court of bankruptcy is created such by the statute, and has no powers but those conferred upon it, either expressly or by necessary implication, for the just and full execution of the law. Clark v. Binninger, 38 How. Prac. 341; In re Morris, Crabbe, 70, Fed. Cas. No. 9,825. Nevertheless, the federal courts, exercising their statutory powers in matters of bankruptcy, are not to be

regarded as limited or inferior tribunals, in such sense that their jurisdiction must affirmatively appear on the face of the record in order to the validity of their judgments; jurisdiction will be presumed, as in the case of all the higher courts. Hayes v. Ford, 15 N. B. R. 569; Chemung Canal Bank v. Judson, 8 N. Y. 254; Reed v. Vaughn, 10 Mo. 447. But when the want of jurisdiction appears on the face of the petition in bankruptcy, the consent of the parties cannot give jurisdiction, and the court of its own motion should take notice of the point. Hopkins v. Carpenter, 18 N. B. R. 339, Fed. Cas. No. 6,686. A stranger to a bankruptcy proceeding may come into it voluntarily by petition or other appropriate method, and submit to the bankruptcy court his rights touching property in the custody of the court claimed as assets by the trustee in bankruptcy. In re Anderson, 23 Fed. 482. A proceeding in involuntary bankruptcy is not one for the recovery of a creditor's debt, but to secure a distribution of the debtor's property among all his creditors; and therefore the prosecution of an action by the creditor for the recovery of his debt is not a bar to his proceeding against the debtor in bankruptcy. In re Henderson, 9 Fed. 196.

Ancillary Jurisdiction.

Any district court of the United States may, in the exercise of its ancillary jurisdiction, and in aid of the court in which proceedings are pending, grant injunctions, stay proceedings, enforce the provisions of composition resolutions, or administer other summary relief as a court in bankruptcy, as to persons or property within the district, if the relief sought is such as the court in which the proceedings are pending would grant if the person or property to be affected were within reach of the process of that court, provided that court is disabled from giving the same relief by reason of the persons or property not being subject to its process. In re Tifft, 19 N. B. R. 201, Fed. Cas. No. 14,034; McGehee v. Hentz, 19 N. B. R. 136, Fed. Cas. No. 8,794; Moore v. Jones, 23 Vt. 739, Fed. Cas.