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Stiefel v. Street


April 20, 1931


On Petition for Rehearing.

The basis of the petition is that, until the defendant canceled the lease, the bankrupt could not reclaim the deposit; that, as the lease continued until after the trustee was appointed, the cause of action was the trustee's, and that jurisdiction depends upon his citizenship, not upon the bankrupt's. So far as we can see, the same reasoning would apply to a contract falling due after petition filed, or to a bond conditional upon a default then occurring. We do not so read section 23a (11 USCA § 46(a). It touches "controversies * * * between trustees as such and adverse claimants concerning the property acquired or claimed by the trustees," and covers all controversies relating to such property, whether upon a cause of action arising before or after petition, so long as it "concerns" the bankrupt's property. We may ignore section 23b (11 USCA § 46(b) for the reasons already given in our first opinion.

McEldowney v. Card (C.C.) 193 F. 475, was quite different; the trustee was suing upon a contract made by him, for the sale of the bankrupt's property. The action could by no stretch be said to "concern" the bankrupt's property, and the language relied upon is to be read in connection with the facts. In Re Baudouine, 101 F. 574, we had before us a summary proceeding to compel a testamentary trustee to turn over to the trustee in bankruptcy the income of a trust made for the bankrupt, falling due after petition filed. All we decided was that summary proceedings would not lie, but we went further obiter, and said that the District Court might entertain a plenary suit under section 2, subdivision 7 (11 USCA § 11(7). In spite of some uncertainties in expression we understand our argument to have been that section 23 comprehended only causes of action arising before petition filed, and that section 2(7) covered all others. Bardes v. Hawarden Bank, 178 U.S. 524, 20 S. Ct. 1000, 44 L. Ed. 1175, overruled our conclusion, though it might still be true that section 23 was limited as we said. But Bardes v. Hawarden Bank was itself a suit to set aside a preference and a fraudulent transfer, and was therefore upon a cause of action on which the bankrupt could not have sued. Page 537 of 178 U.S., 20 S. Ct. 1000. It is true that it only decided that such a suit could not be brought in the District Court; but the discussion presupposed that jurisdiction depended upon section 23, and not upon the sections giving general jurisdiction to the Circuit Court. Thus it appears to us that all of the reasoning in Re Baudouine, by which we reached our erroneous conclusion, must be treated as overruled. The case has not been the basis of any other decision except Judge Hough's in Skillin v. Magnus (D.C.) 162 F. 689, itself overruled in Kelley v. Gill, 245 U.S. 116, 38 S. Ct. 38, 62 L. Ed. 185. We can find no other case in which the question is discussed, though tenuous inferences may perhaps be drawn from the expressions in several of the decisions of the Supreme Court, which perhaps tend to support our view. The color they give is too faint to justify citation.

We adhere to our ruling that it is only when the trustee is suing upon a right not derivative from the bankrupt that jurisdiction depends upon his citizenship; in all cases directly arising out of the bankrupt's property, it is the bankrupt's citizenship that controls.

Petition denied.


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