Carpenter Bros. v. O'Connor

16 Ohio C.C. 526

• Court: Ohio Circuit Courts
• Decided: October 15, 1898
• Status: Published

Opinion

Wilson, J.

This was an action m the court below brought by Carpenter Bros, to obtain a judgment upon a promissory note and foreclosure of a chattel mortgage; also to marshal liens against the defendant O’Connor’s property.

The petition in the common pleas court was filed on the 10th day of September. On the 12th day of September following John O’Connor filed his petition in voluntary bankruptcy in the United States district court. On the 14th of September thereafter the plaintiff, Carpenter Bros., filed a motion with due notice to the parties interested for the appointment of a receiver in the action pending in the common pleas court. On the 19th of September, an adjudication was had upon the petition in bankruptcy, and the defendant O’Connor was declared a bankrupt. On the 1st of October following, the motion for the appointment of the receiver came on to be heard in the state court, and the receiver was appointed. On the 3rd of October a trustee in bankrupcty qualified in the bankruptcy court. A motion was then made by the trustee in the case in the state court to have the property of the bankrupt turned over to him. This motion was sustained, and the action of the court in sustaining the motion is assigned for error.

Under the constitution of the United States, congress is vested with plenary power to enact a bankrupt law. There is but one limitation upon the power of congress in that behalf, and that is, that the law shall be uniform.

The law in question is not attacked in this case for want of uniformity. There is, in our opinion, no constitutional question raised in this case.

The parties are simply seeking the interpretation of the statute to which, when correctly interpreted, they must yield, for no other reason than that it is thus written in the law.

It is not a case in which there is conflict of jurisdiction as between courts of co-ordinate powers where you are called upon to determine which shall have possession of the property. The court in bankruptcy has exclusive jurisdiction to take and administer the assets of the bankrupt — pay his debts in so far as the assets will pay them, and discharge him if he is entitled to a discharge from further payment.

The state court cannot do this. It cannot determine, at the outset, whether or not the defendant is a bankrupt, nor can it discharge him from the further payment of his debts after his property has been exhausted. So that it is a mistaken idea to say that the state court and the court in bankruptcy are co-ordinate courts, each having jurisdiction over this subject matter. The state court has •nothing to do with the proceedings in bankruptcy.

The order of procedure in this case should be under 'the statute as follows: When the petition in bankruptcy Was filed by the defendant, all proceedings in the state feourt should stop. In other words, in the language of 'the Bankrupt Act as contained in section eleven, “The proceedings shall be stayed.” This is mandatory. The state court has no right to proceed further in an action there pending until the petition in bankruptcy has been adjudicated. When that has been done, the case may be further stayed in the state court at its discretion. But whether it is stayed or not, the plaintiff in the state •court cannot obtain judgment against the defendant for any costs made after the petition in bankruptcy is filed, nor can he obtain judgment in the state court for any interest upon his claim accruing thereafter. The running of the claim and all costs incident to the procuring of a judgment against the claimant are arrested at once upon the filing of the petition in bankruptcy, and if the defendant is declared a bankrupt, the plaintiff in the state court is entitled to receive only his claim with interest and costs 'to that date. He may pay the costs in the state court, which he rightfully made in the prosecution of his claim •against the. bankrupt in that court, and present them to the trustee in bankruptcy to be allowed as a proper claim against the assets in the bankrupt court. His rights are protected in the same degree in so far as the exemptions under the homestead and other laws are concerned. The state laws govern entirely in the bankrupt court in that regard. If under the laws of the state the plaintiff’s claim precludes the allowance of a homestead or other exemption, so will it when it is presented to the trustee in bankruptcy, and all of the property of the bankrupt which is not exempt under the laws, of the state from the claim of the plaintiff, must be turned over to the trustee in bankruptcy and administered upon by him.

The plaintiff may go on, the common pleas court not having seen fit to further stay proceedings in that court, and reduce his claim to judgment. But it will be at his own cost in that court after, and he will be entitled to in? terest only to the date of filing the petition in bankruptcy, After he has reduced his claim to judgment, he must pre? sent it to the trustee in bankruptcy and have it there allowed and paid out of the assets in the hands of the trustee in that court in the order of its priority.

This is so because the bankrupt law passes the title .of the property of the bankrupt to the trustee in bankruptcy, as from the date he is declared a bankrupt. There is no alternative to this proposition. The property must go there to be administered upon, and the plaintiff in the state court must seek relief in that court, which has exclusive jurisdiction in bankruptcy and which alone can furnish the relief to which both parties are entitled.

With this view of the law we are of the opinion that the court did not err in ordering that this property be turned over to the trustee in bankruptcy. He was entitled to come into court for the purpose of claiming the property. He may, indeed, come into that court, and, as trustee in bankruptcy, contest the claim of the plaintiff in the state court, or. it may be contested in the bankrupty court. So that the rights* of the parties will all be preserved by the procedure which has been followed by the court thus far.

The appointment of the receiver was irregular, because the United States bankruptcy act by its terms stays all proceedings after the filling of the petition in bankruptcy untiljthe same has been adjudicated. The application for the appointment of a receiver was made between the filing-of the petition in bankruptcy and the adjudication on that petition, and the proceedings under the motion were unauthorized.

But in as much as the court has taken the property from the receiver and given it to the trustee in bankruptcy, the receiver is functus officio, and that error is not prejudicial at the present stage'of. the case. Therefore we grant no relief to the defendant in error on his cross-petition in error.

Judgment accordingly.