In re Morales , 9 P.R. Fed. 56 ( 1916 )

HamxltoN, Judge,

delivered tbe following opinion:

Tbe bankrupts herein were so adjudged on March 30, 1916, and reference bad to T. E. Lee, referee in bankruptcy at Ponce. Tbe first meeting of creditors was field on tfie 18tfi day of May, .and Agustín Blasini was duly appointed trustee, and qualified.

Attachment proceedings against bankrupt Eernanda Rodriguez bad been commenced in tfie municipal court of Ponce prior to tfie filing of tfie petition, and tfie marshal of that court took certain goods into possession. Tfie referee, upon tfie qualification of tfie trustee, addressed tfie municipal judge, requesting him to instruct tfie marshal of tfie municipal court to deliver tfie attached property to tfie trustee. Tfie municipal judge, Hon. E. B. Fornaris, replied that tfie trustee should appear in tfie municipal court and state fiis claim, which would be passed upon after hearing tfie party to whom tfie attachment was granted. Tfie referee thereupon again addressed tfie municipal judge, calling fiis attention to § 67 (f) of tfie Bankruptcy Act and tfie case of Clarke v. Larremore, 188 U. S. 486, 47 L. ed. 555, 23 Sup. Ct. Rep. 363. Although not in tfie file, it seems that tfie municipal judge afterwards replied, reiterating in effect fiis previous view that tfie trustee should appear before him and make fiis claim. Tfie question now comes up as to tfie proper procedure under tfie circumstances.

This court has always desired to proceed in perfect harmony with tfie local courts, and indeed considers all courts, Federal and Insular, as constituting one system under tfie Constitution and Laws of tfie United States, and local laws made in pursuance thereof. It does not doubt that tfie municipal judge at Bonce entertains tfie same views.

Tfie subject of bankruptcy is by express constitutional provision placed in tfie hands of tfie Congress of tfie United States, and tfie Bankruptcy Law is necessarily exclusive in whatever it covers. Tbe execution of tbis law is by its provisions confided to tbe Federal district courts and review proceedings in tbe circuit court of appeals and tbe Supreme Court of tbe United States. There is a class of cases in wbicb tbe trustee may proceed in tbe local courts for tbe collection of assets, but tbis is not sucb a case, and so tbis provision need not be considered. Tbe immediate question is, wbat is tbe proper procedure when prior to tbe bankruptcy a local attachment has placed property of tbe bankrupt in tbe bands of a depository or custodian ? There would seem to be three possible modes of reaching tbe end in view: (1) Tbe district court, wbicb has exclusive jurisdiction, can proceed through tbe local court, either requesting or directing it to have tbe property turned over; (2) Tbe trustee in bankruptcy can appear in tbe local court, and by motion or otherwise secure the- desired result; (3) Tbe district court can make tbe necessary order directed to the custodian himself.

1. It is true that tbe Federal court can, under § 265 of tbe Judicial Code, make all necessary orders in bankruptcy cases, even to enjoining local courts, wbicb in other cases is forbidden. But it would not appear that tbis is tbe preferable course in tbe case under consideration. If the local court for any reason did not think it should make tbe order, there would ensue a conflict of jurisdiction, wbicb is to be avoided in all cases where possible. Besides, it is far from tbe wish of tbis court to assume or to be put in tbe position of giving orders to another court. Tbe statute does not require tbis, and it might very readily produce friction between courts and judges. Tbe Federal district court is not superior to tbe municipal court, or to any other court acting within its jurisdiction. Tbe Federal court merely has, for instance in bankruptcy proceedings, a jurisdiction wbicb tbe local ■courts do not possess. This court bas no wish to issue any order, and should not make any request unless it could issue an order, to another court. This court has a number of times held that it does not consider itself superior to any other court, local, or of any other character, acting within its proper jurisdiction. It therefore would not and could not issue anything in the nature of a mandamus to another court directing it to do a particular act. The law restricts its power to injunction in bankruptcy where another court exceeds its jurisdiction.

2. The same reasoning will apply, even in a stronger degree, to the course suggested by the municipal judge, — that is to say, that the trustee in bankruptcy, and officer of the Federal court, should appear before a local court and submit himself to its jurisdiction by claiming the goods in question. This would leave the matter to the discretion of the local court, and the local court is not vested by law with such discretion. From the time that the petition, or certainly the adjudication, is made, the power of the local court over the property of the bankrupt is entirely taken away. It is true it would revive if the bankruptcy fell through, but that has not occurred.in this case, and would very seldom occur in practice. The result of the course now under consideration would be that the local court could, at some time governed by its own rules, pass upon the application, and possibly deny it, and its order would be subject to appeal or review by the local supreme court. Such a delay could not be entertained. The theory of the Bankruptcy Act is that the administration shall be short and inexpensive, and to effect this one particular court is designated for the administration.

3. It would seem that the proper practice is for the bankruptcy court to make an order directing the depositary or custodian to pay tbe money to tbe trustee. Tbis was tbe course pursued in Re Kenney, 95 Fed. 427, and 97 Fed. 555, as affirmed in 188 U. S. 486, 47 L. ed. 555, 23 Sup. Ct. Rep. 363. In that case tbe order was directed to tbe local sheriff; and sucb an order in tbe case at bar should be directed to tbe depositary or custodian, or to tbe local marshal, depending upon where lies tbe control of tbe property in question. Tbe certificate of tbe referee does not make tbis point clear. Disobedience of this order might amount to a contempt, and in sucb case would be acted upon by tbis court in tbe usual manner.

4. Tbe effect of tbe above views is that tbe local courts have no. duties to perforin under tbe Bankruptcy Act as sucb, and that, therefore, no order should be issued to them in tbe premises. Tbe most that tbe local court can do’ in bankruptcy matters is to make an entry staying all further proceedings because of tbe pendency of bankruptcy proceedings in tbe Federal court. Tbis •attachment case, for instance, practically goes off tbe local docket. On tbe other band, whoever has, or may be supposed to have, property of tbe bankrupt is amenable to the Federal district court, and tbis directly, regardless of whether be is an official or not. That issue'must be tried in tbe Federal court in order to avoid tbe question of conflict of jurisdiction. Tbe custodian for tbe local marshal, therefore, is in sucb case not responsible any more to tbe marshal as sucb, but to tbe court which has exclusive jurisdiction of bankruptcy matters. It is true that tbe Federal court is not infallible. It may make mistakes, but at least every one will there have bis day in court, and if be thinks tbe decision is erroneous can appeal to tbe circuit court of appeals, which is tbe same forum to which any issue in a local court would ultimately go.

This would appear to be tbe only way to secure harmony and uni-ty of action in the collection of the assets of a bankrupt. It may be that upon understanding the views of this court, the parties in question will acquiesce, and that it will not be necessary for any order to be made in the premises! This opinion, therefore, will be certified to the referee for such use as may be appropriate, but no order affecting the property or persons in interest will be entered.