and in obedience to the decree of that court have paid over the balance found to be in their hands to the trustee. This it was their clear duty to do. That court could have required this of them and enforced its commands through contempt proceedings. This was the orderly and appointed mode of procedure. This much is perfectly clear. It does not, however, meet the argument of the petitioners for this review. The question they raise is not what should be done in the state court, but what the bankruptcy court should do.
Counsel for the petitioners answer this by taking the position that the state receivers should be required to file their account in the bankruptcy court. This sends us to the beginning.
When the receivership bill was filed, the state court had jurisdiction to entertain it. Any other court had the like jurisdictional power. To avoid conflict, the courts apply the doctrine of comity. Under it when one court has taken possession of a rem, no other court will interfere. This rule does not, however, apply to bankruptcy courts. Their powers supersede those of other courts and title to any rem which is part of the bankruptcy assets vests in the trustee and relates back to the filing of the petition in bankruptcy.
Counsel supporting the review rely upon the case of Isaacs v. Hobbs Tie & Timber Co., 282 U.S. 734, 51 S. Ct. 270, 75 L. Ed. 645. No ruling has been so much misinterpreted. It is referred to as revolutionary and as a radical departure from formerly accepted doctrines.All it rules is as above outlined. There is in it no departure from principles before accepted. It is not in conflict with In re Watts and Sachs, 190 U.S. 1, 23 S. Ct. 718, 47 L. Ed. 933.
Accepting the well-established doctrines of these cases, what have we? The trustee has by operation of law become the owner of all the bankruptcy assets. Where are they? He finds them physically in the possession of the state receivers, but their possession is that of the court of their appointment. The situation is not different from that of any case in which assets are in the hands of another court through its process. What can the trustee do? One thing he can do is to ask the court in control to award the assets to him. This he does precisely as in any case in which he seeks to avail himself of the benefit of pending litigation. The court, however, cannot award to him the assets without first determining what they are. This it can only do by requiring its receivers to account. This is what was done in the instant case.
We need not discuss what other remedies the trustee may have because this question is not presented further than to inquire whether the state receivers can be called upon to file an account in the bankruptcy court. This is a technical accounting and this the referee refused to order. In this we think he was clearly right. The receivers were not the appointees of the bankruptcy court and owe it no duty to account to it. Whatever claim the trustee has upon the receivers is against them as individuals precisely as in the case of any one who was in possession of bankruptcy assets.
The learned referee in a clearly expressed opinion has based his refusal to make the asked for order upon the ground of comity. In this he followed highly supported precedents. Both the justices of the Supreme Court and the judges of ther Circuit Court of Appeals for our own Circuit have supplied him with precedents. What we rule is that his refusal of the order asked for is approved.
The petition for a review of the order of the referee is denied and the order made affirmed and confimed.
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