of his compensation has been determined by the State court before the filing of the petition in bankruptcy, the Court of Bankruptcy will not disallow the same provided at least that he has received and spent the amount of such compensation.11 The Court of Bankruptcy may, by summary proceedings, make the assignee account for a fund still in his hands out of which he claims a right to be paid for fees and expenses.12 It is customary in the absence of special circumstances to permit the assignee to remain in possession until the election of a trustee or receiver, and ordinarily, when a competent assignee is in possession no receiver should be appointed.18 An assignment made in accordance with the State law more than four months before the filing of the petition in bankruptcy is not invalidated by the bankruptcy proceedings. 14 State statutes granting resident creditors priority in the distribution of the assets of a foreign corporation transacting business there 15 and forbidding preferential transfers 16 were enforced by Courts of Bankruptcy.

§ 613. Jurisdiction of State courts in cases affecting bankruptcy proceedings. The Bankruptcy Law provides: "A lien created by or obtained in or pursuant to any suit or proceeding at law or in equity, including an attachment upon mesne process or a judgment by confession, which was begun against a person

It has been held, however, that where the creditors permit the assignee to continue in possession operating the business of the bankrupt he may be relieved from liability from a resulting loss provided he satisfies the court of bankruptcy that he acted in good faith and with sound business judgment, the burden of proof in this respect being upon him. Re Karp, 228 Fed. 798.

11 Louisville Trust Co. v. Comingor, 184 U. S. 18, 46 L. ed. 413, 22 Sup. Ct. 293; Re Stewart, C. C. A., 179 Fed. 222.

12 Re Deiswig, 253 Fed. 390, infra, § 635.

18 But see Re D. & E. Dress Co., 244 Fed. 885.

14 Mayer v. Hellman, 91 U. S.

496, 23 L. ed. 377; Re Boner, 169 Fed. 727; Re Farrell, C. C. A., 176 Fed. 505; both under the Ohio Statute; Boese v. King, 108 U. S. 379, 2 Sup. Ct. 765, 27 L. ed. 760. Where the State court prior to the bankruptcy entered a decree setting aside such an assignment and directing a sale and distribution of the property among lienors, it was held that the Court of Bankruptcy had no jurisdiction to interfere. Frazier v. Southern Loan & Dr. Co., C. C. A., 99 Fed. 707.

15 Re Standard Oak Veneer Co., 173 Fed. 103.

16 Gen. Code Ohio, § 11104; Stellwagen v. Clum, 245 U. S. 605, 38 Sup. Ct. 215, 62 L. ed. 507; Irwin v. Maple, C. C. A., 252 Fed. 10.

within four months before the filing of a petition in bankruptcy by or against such person shall be dissolved by the adjudication of such person to be a bankrupt if (1) it appears that said lien was obtained and permitted while the defendant was insolvent and that its existence and enforcement will work a preference, or (2) the party or parties to be benefited thereby had reasonable cause to believe the defendant was insolvent and in contemplation of bankruptcy, or (3) that such lien was sought and permitted in fraud of the provisions of this Act; or if the dissolution of such lien would militate against the best interests of the estate of such person the same shall not be dissolved; but the trustee of the estate of such person, for the benefit of the estate, shall be subrogated to the rights of the holder of such lien and empowered to perfect and enforce the same in his name as trustee with like force and effect as such holder might have done had not bankruptcy proceedings intervened."1 After declaring that fraudulent conveyances are void when made within four months prior to the filing of the petition in bankruptcy, it expressly provides: that for the purpose of the recovery of property conveyed or encumbered by a bankrupt within four months prior to the filing of the petition, with the intent and purpose on his part to hinder, delay or defraud his creditors, and all conveyances, transfers or encumbrances, made by him within such four months while insolvent, “any court of bankruptcy as hereinbefore defined, and any State court which would have had jurisdiction if bankrupt had not intervened, shall have concurrent jurisdiction." 2 The State courts have

§ 613. 130 St. at L. 544, § 67, subd. c. See infra, § 644. It has been held that where a receiver has been appointed for insolvency more than four months before the filing of the petition in bankruptcy the Court of Bankruptcy has exclusive jurisdiction over the property in the hands of the receiver. Graham Mfg. Co. v. Davy-Pocahontas Coal Co., C. C. A., 238 Fed. 448; Re Grafton Gas & Electric Light Co., 253 Fed. 668. Contra Re Williams, 240 Fed. 788, 794; Frazier v. Southern Loan & D. R. Co., C. C. A.,

99 Fed. 707, where the receiver was appointed because of a fraudulent transfer. The possession of the assets of a bank by a State officer does not give the State court jurisdiction thereof after proceedings in bankruptcy are instituted. State of Missouri v. Angle, C. C. A., 236 Fed. 644. A sale under such an attachment made by a State court subsequent to the appointment of a trustee in bankruptcy is void. De Friece v. Bryant, 232 Fed. 233.

2 Ibid. Subd. e, as amended 32 St. at L. 797. See infra, § 644.

concurrent jurisdiction of suits by the trustee to recover an unlawful preference, and to set aside a fraudulent transfer,♣ even of an action to set aside a chattel mortgage, which the mortgagee claims to be a lien upon a fund in the possession of the Court of Bankruptcy.5 But in neither of such suits in a State court can the validity of all other claims against the bankrupt be litigated; nor can it be determined whether others have received voidable preferences and have not been required to Surrender them. Such matters must be decided by the Court of Bankruptcy. A State court has jurisdiction of a suit against a trustee in bankruptcy, to reform a contract between the plaintiff and the bankrupt; or an action of trover against a trustee or receiver in bankruptcy; but not of an action of replevin against a trustee or a receiver, at least without leave of Court of Bankruptcy.10 A State court has no jurisdiction to restrain from filing a petition of voluntary bankruptcy 11 nor to issue an execution against a trustee in bankruptcy.12

the

A State court has jurisdiction to continue a suit to foreclose a mortgage or other lien upon the bankrupt's property instituted before the filing of the petition in bankruptcy, even if this was instituted during the four preceding months; provided, at least,

This rule was applied to a suit in the State court by the executor of a bankrupt to recover life insurance which he had concealed in the bankruptcy proceedings when the trustee in bankruptcy was made a party thereto. Doolittle v. Mutual Life Ins. Co. of N. Y., 249 Fed. 491.

8 Eau Claire Nat. Bank v. Jackman, 204 U. S. 522, 51 L. ed. 596.

4 Frank v. Vollkommer, 205 U. S. 521, 51 L. ed. 911, in which the author was counsel.

5 Ibid.

6 Eau Claire Nat. Bank v. Jackman, 204 U. S. 522, 537, 51 L. ed. 596, 605; New River Coal Land Co. v. Ruffner Bros., C. C. A., 165 Fed. 881.

8 Zartman v. First Nat. Bank of Waterloo, 216 U. S. 134, 54 L. ed. 418. It has been held that a State court has jurisdiction of a suit by the member of a firm for an ac. counting by the trustee of his bankrupt partner. Williams v. Lane, (Cal. 1910) 109 Pac. 873. 9 Re Kanter & Cohen, C. C. A., 121 Fed. 984. But see § 633, infra. 10 Re Russell & Birkett, 104 Fed. 248; Murphy v. John Hofman 211 U. S. 562, 53 L. ed. 327; Wellmade Gas Mantle Co., 230 502; Re Stringer, 230 Fed. 177, 183. 11 Re Harga dine-M 'Kittrick Dry

Goods Co., 239 Fed. 155.

12 Re Stringer, 230 Fed. 177.

Co.,

Re Fed.

that the lien previously accrued; 13 although the proceedings in such a suit may be stayed by a court of bankruptcy in a proper case.14 It has been even held that such a suit may be sustained when not instituted until after the adjudication of the mortgagor a bankrupt.15 The State court retains jurisdiction of an action in replevin or other suit or proceeding, to enforce a claim of ownership in specific property, where the chattels were seized before the petition in bankruptcy was filed,16 but after the filing

of the petition no new proceeding can be instituted in a State court to take possession of the bankrupt's property, either by replevin,17 detinue,18 attachment,19 or otherwise, even prior to the adjudication and before any officer of the Court of Bankruptcy has taken possession. It has been suggested that where the property was reclaimed by the bankrupt prior to the institution of the proceedings, the title might be determined in Court of Bankruptcy.20

the

arge

be

are

Pending suits upon debts which are discharged by a disch in bankruptcy must be stayed until after an adjudication or the dismissal of the petition and after adjudication they maj stayed until twelve months after the date of such adjudication or if at that time an application for a discharge is pending until the question of the discharge is determined,21 unless they brought to enforce a lien, which is not discharged by the bankruptcy law,22 or to assert a right in rem; 23 but a sale of perishable property without notice of the proceedings in bankruptcy was not thereby invalidated although it was seized under an attachment thereby vacated. In a suit to quiet title, a State court has jurisdiction to determine a claim, set up by a trustee in bankruptcy, that the conveyance to the plaintiff is void as an illegal preference; 25 and it has been held that where the trustee there set up his claim by answer; the Federal court should stay a suit subsequently begun therein by him to obtain the relief.26 A judgment in a State court against a trustee in bankruptcy cannot be collaterally attacked in the bankruptcy

17 Re Wellmade Gas Mantle Co., 230 Fed. 502; Re Weinger, Bergman & Co., 126 Fed. 875; Re Hymes Buggy & Implement Co., 130 Fed. 977. Contra, Re Wells, 114 Fed. 222; Remington on Bankruptcy, § 1585. It has been held that a landlord cannot institute proceedings for distress after the adjudication. Re Printograph Sales Co., 210 Fed. 567.

18 Corbett v. Riddle, 209 Fed. 811.' 19 Re Wellmade Gas Mantle Co., 230 Fed. 502.

20 Re Munro, 195 Fed. 817.

21 30 St. at L. 546, § 11a; Re

same