In re FLAHERTY

265 F. 741, 1920 U.S. Dist. LEXIS 1147
CourtDistrict Court, N.D. Iowa
DecidedMay 12, 1920
StatusPublished
Cited by2 cases

This text of 265 F. 741 (In re FLAHERTY) is published on Counsel Stack Legal Research, covering District Court, N.D. Iowa primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
In re FLAHERTY, 265 F. 741, 1920 U.S. Dist. LEXIS 1147 (N.D. Iowa 1920).

Opinion

REED, District Judge

(after stating the facts as above). From the foregoing statement it seems plain that this court has and had undoubted jurisdiction to exercise proceedings in bankruptcy in aid of the United States District Court for the District of Montana against George E. Elaherty and Clara R. Carter as copartners under the firm name and style of George E. Flaherty, doing business as such partners in Missoula, Mont., and that said United States District Court for the District of Montana had jurisdiction to adjudicate said George E. Flaherty and Clara R. Carter as an involuntary bankrupt, if it was in fact such a partnership.

It was formerly held by several of the lower federal courts that the bankruptcy courts, under the present Bankruptcy Act as originally enacted, had no ancillary jurisdiction beyond their territorial limits in aid of bankruptcy courts in other districts than their own. In re Williams (D. C.) 120 Fed. 38; In re Williams (D. C.) 123 Fed. 321; In re Sutter Bros. (D. C.) 131 Fed. 654; In re Von Hartz et al., 142 Fed. 726, 74 C. C. A. 58 (C. C. A. 2d Circuit). But in Babbitt, Trustee, v. Dutcher, 216 U. S. 102, 30 Sup. Ct. 372, 54 L. Ed. 402, 17 Ann. Cas. 969, and Elkus, Petitioner, v. Madson Steele Co., Bankrupt, 216 U. S. 115, 30 Sup. Ct. 377, 54 L. Ed. 407, it is held that the respective District Courts of the. United States under said act as so enacted, sitting in bankruptcy, have ancillary jurisdiction to make orders and to issue process in aid of proceedings pending and being administered in the District Court of another district, and that courts of bankruptcy have jurisdiction to grant orders for the examination of witnesses who reside within their own district, although the bankruptcy proceedings in which the examination is desired are being administered in the original court of bankruptcy sitting in another district, in aid of the court having original jurisdiction in bankruptcy.

In the Elkus Case the opinion is by Chief Justice Fuller, who recites the facts as follows:

“On the 28th day of February, 1908, a petition in involuntary bankruptcy was filed in the United States District Court for the Northern District of Illinois against the Madson Steele Company, and in due course the said corporation was adjudicated a bankrupt, and Frank M. McKey was appointed its trustee in bankruptcy. Application was made to the United States District Court for the Southern District of New York for an authorization to examine pursuant to the provision of section 21a of the national Bankruptcy Act, the officers of a New York corporation which it was alleged had, within four months prior to the filing of the petition in bankruptcy, received a payment under circumstances which would permit of recovery by the trustee in bankruptcy as a voidable preference. These officers were residents of the Southern district of New York. The application in the Southern district of New York was made on behalf of the trustee of the bankrupt’s estate, whielr was being administered in tile Northern district of Illinois, and the order proposed for signature required the examination of witnesses within the jurisdiction of the District Court for the Southern district of New York, and the production of books and vouchers which contained transactions between the bankrupt corporation and the New York corporation. The United States District Court for the Southern District of New York refused to direct the appearance and examination of the said witnesses, on the ground that it had no jurisdiction to grant an order for examination in a proceeding which was not pending within its own district, and from the order denying the right to examine the petition to review was taken to this court.
[748]*748“The questions submitted are: T. Did the United States District Court for the Southern District of New York have jurisdiction to grant an order for the examination of witnesses, who were residents of that district, when the bankrupt proceedings in which the examination was desired were being administered in the Northern district of Illinois? II. Have the respective District Courts of the United States sitting in bankruptcy ancillary jurisdiction to make orders and issue process in aid of proceedings pending and being administered in the District Court of another district?’ On thp authority of Babbitt, Trustee, v. Dutcher, just decided, ante p. 102, we answer both questions in the affirmative, and it will be so certified.”

These cases were decided February 21, 1910, prior to the amendment of the Bankruptcy Act of that year, section 2 (Comp. St. § 9586) of which is amended by striking from clause 19 the word “and” and -adding a new clause, to be known as clause 20, so that said clauses shall read as follows:

“(19) Transfer eases to other courts of bankruptcy; and
“(20) Exercise ancillary jurisdiction over persons or property within their respective territorial limits in aid of a receiver or trustee appointed in any bankruptcy proceedings pending in any other court of bankruptcy.”

Whatever doubts may have existed as to the right of the several District Courts to exercise ancillary jurisdiction under the present Bankruptcy Act before its amendment in 1910 is put at rest by the decision of the Supreme Court in Babbitt v. Dutcher, 216 U. S. 102, 30 Sup. Ct. 372, 54 L. Ed. 402, 17 Ann. Cas. 969, and Elkus, Petitioner, v. Madson Steele Co., Bankrupt, 216 U. S. 115, 30 Sup. Ct. 377, 54 L. Ed. 407, and by the amendment of section 2 of the Act of June 25, 1910.

The order of this court upon December 11, 1918, granting ancillary jurisdiction in this district to Frederick D. Whisler, as trustee of George E. Flaherty and Clara R. Carter, as copartners, if they are in fact copartners, is well within its jurisdiction, and upon filing said order with the clerk of this court in the Central division, the order of the referee was issued, directing the said Glara R. Carter to appear before him upon a date fixed and show cause why she should not file in this district schedules of her assets and liabilities, and otherwise comply with the order of this court in aid of the United States District Court of Montana, wherp the proceedings against her and her alleged copartner, George E. Flaherty, under the firm name of George EFlaherty, is pending.

Instead of complying with such order of the referee and of this court granting ancillary proceedings herein in aid of the proceedings in the United States District Court of Montana, Clara R. Carter appeared specially by counsel and filed a plea in abatement to the proceedings in this court, and to the jurisdiction of this court to entertain ancillary proceedings in said cause upon the grounds:

(1) That this court and the referee are without jurisdiction to entertain ancillary proceedings in bankruptcy in this cause, for thp reason that, at the time of the adjudication of George L. Flaherty and Clara R. Carter, doing business under the firm name and style of George E. Flaherty, the said Clara R. Carter was not then a [749]*749citizen or resident of Montana, and was not engaged in business at any place within said state.

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Related

In re J. H. Small Shoe Co.
4 F.2d 618 (D. Connecticut, 1924)
In re Flaherty
295 F. 699 (D. Montana, 1924)

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Bluebook (online)
265 F. 741, 1920 U.S. Dist. LEXIS 1147, Counsel Stack Legal Research, https://law.counselstack.com/opinion/in-re-flaherty-iand-1920.