Opinion
Opinion filed July 2, 1949.
1. COURTS.
The Chancery Court must determine its own jurisdiction and particular complainant's right to invoke it.
2. BANKRUPTCY.
A bankruptcy trustee may procure assignment of bankrupt's unassigned dower in her deceased husband's realty, so as to make it available to creditors as part of bankrupt estate, in absence of exemption under state law (Bankr. Act, sec. 70, sub. a, 11 U.S.C.A. sec. 110, sub. a).
3. DOWER.
A widow's unassigned dower in her deceased husband's realty is a chose in action, which she may realize through exercise of her power to have it assigned to her, but it may also be transferred to decedent's heirs at law or, after assignment, as other realty to any purchaser, and it may be reached on bill in equity of judgment creditor with nulla bona return, though not subject to levy.
4. BANKRUPTCY.
The provision of Bankruptcy Act, giving trustee right of judgment creditor holding execution unsatisfied as to bankrupt's property not within bankruptcy court's possession, entitles trustee to proceed by bill in equity as judgment creditor with nulla bona return for assignment to bankrupt of her dower in her deceased husband's realty, sale thereof, and payment of proceeds to trustee for administration, as judgment creditor need not have a lien on property (Bankr. Act, sec. 70, sub. c, 11 U.S.C.A. sec. 110, sub. c).
5. BANKRUPTCY.
The fact that bankruptcy trustee's bill in equity for assignment to bankrupt of homestead and dower in her deceased husband's realty, sale thereof, and payment of proceeds to trustee for administration, fails to allege that single creditor in bankruptcy proceeding was qualified to bring such a bill, does not preclude trustee from proceeding, as his rights are not limited to those of creditors filing claims (Bankr. Act, sec. 70, sub. a, 11 U.S.C.A. sec. 110, sub. a).
6. BANKRUPTCY.
A bankruptcy trustee may proceed, at direction of federal bankruptcy court, by bill in state chancery court, having jurisdiction of subject matter, for assignment to bankrupt of homestead and dower in her deceased husband's realty, sale thereof, and payment of proceeds to trustee for administration, in absence of pending proceeding in federal court for same relief, regardless of whether it might have been obtained in bankruptcy proceeding therein (Bankr. Act, sec. 70, sub. a, 11 U.S.C.A. sec. 110, sub. a).
7. COSTS.
In bankruptcy trustee's suit against bankrupt and her daughter, as sole heir of bankrupt's deceased husband, for assignment to bankrupt of homestead and dower in decedent's realty, sale thereof, and payment of proceeds to trustee for administration, defendants' remedy, if security of cost bond, sufficient in form, is insufficient, is not by demurrer to bill (Bankr. Act, sec. 70, sub. a, 11 U.S.C.A. sec. 110, sub. a).
8. BANKRUPTCY.
A bankruptcy trustee's bill in equity for assignment to bankrupt of her homestead and dower in her deceased husband's realty, sale thereof, and payment of proceeds to trustee for administration, was not demurrable on ground of trustee's failure to require cost deposit, as instructed by federal court, which directed filing of bill, as defendants could not know from bill whether trustee failed to require deposit and were not aggrieved if he did not follow such instructions (Bankr. Act, sec. 70, sub. a, 11 U.S.C.A. sec. 110, sub. a).
9. DOWER.
The Chancery Court has jurisdiction to set apart dower in decedent's realty at behest of his widow or one armed with her rights in that regard under law, such as her bankruptcy trustee (Bankr. Act, sec. 70, sub. a, 11 U.S.C.A. sec. 110, sub. a).
10. BANKRUPTCY.
A bankruptcy trustee's bill in equity for assignment of bankrupt's dower in her deceased husband's realty, sale thereof, and payment of proceeds to trustee for administration, need not fail because federal bankruptcy court's order, authorizing trustee to proceed in equity, merely directed him to procure assignment and contemplated sale in bankruptcy proceeding, but since amended authority may be procured, defendants may rely on complainant's want of authority to proceed in their answer and their demurrer to bill will be overruled to such extent with leave to reply (Bankr. Act, sec. 70, sub. a, 11 U.S.C.A. sec. 110, sub. a).
11. DOWER. Homestead.
The code sections conferring jurisdiction on Chancery Court to compel discovery of debtor's concealed assets do not abridge such court's right to set aside to decedent's widow homestead and dower which cannot be reached by execution at law, and there was no occasion for bankruptcy trustee to file bill to compel discovery of bankrupt widow's homestead and dower, instead of bill for assignment and sale thereof and payment of proceeds to trustee for administration, where widow had not released such rights to her daughter as decedent's sole heir nor concealed them fraudulently or otherwise (Code, secs. 6091-6093; Bankr. Act, sec. 70, sub. a, 11 U.S.C.A. sec. 110, sub. a).
12. STATUTES.
The code sections, conferring jurisdiction on Chancery Court to compel discovery of debtor's concealed assets, provide special equitable remedy where property is fraudulently concealed and should be read in connection with section requiring bill in equity to contain clear orderly statement of facts on which suit is founded and prayer for required process and appropriate relief without averring insufficiency of remedy at law or other mere formal matters (Code, secs. 6091-6093, 10391).
13. CREDITORS' SUIT.
The code gives Chancery Courts exclusive jurisdiction to aid creditor, by judgment or decree, to subject debtor's property, which cannot be reached by execution, to satisfaction of judgment or decree, and equitable realty may be reached in chancery on strength of judgment with as little formality as is required to reach legal estate at law.
14. EQUITY.
A pro confesso against bankrupt in trustee's suit for assignment to bankrupt of homestead and dower in realty of her deceased husband, of whose estate she was administratrix, was valid, though judgment pro confesso against administrator is not permitted, as no administrator was sued and bankrupt, after entry of pro confesso, could be heard only on motion to set aside pro confesso and proceedings based thereon.
15. BANKRUPTCY.
State court's agency may be used in collection of bankrupt's assets for purpose of aiding federal courts in administration and distribution of bankrupt's estate, and state courts, in so doing, assume no jurisdiction under Bankruptcy Act, but simply exercise their ordinary jurisdiction in suits between parties.
FROM SULLIVAN.Appeal from Chancery Court, Sullivan (Bristol) County. — HON. JOE W. WORLEY, Chancellor.
Suit in equity by Roscoe L. Edwards, as trustee in bankruptcy of the estate of Fannie Mattox, against the bankrupt and Willie Joe Hawks for assignment of homestead and dower in realty of J.B. Mattox, deceased, to the bankrupt, sale thereof, and payment of the proceeds to complainant for administration as trustee in bankruptcy. From a decree pro confesso against defendant bankrupt and a decree overruling defendant Hawks' demurrer to the bill and appointing commissioners to assign dower and homestead, defendants appeal. Affirmed.
CALDWELL BROWN, of Bristol, for complainants.
J.L. STERN and ERNEST B. KING, of Bristol, for defendant.
The complainant Edwards as Trustee in Bankruptcy of the estate of Fannie Mattox filed his original bill in the Chancery Court to have homestead and dower assigned to the said Bankrupt. It is charged in the bill that he was duly appointed Trustee of the said Fannie Mattox when she filed her petition in bankruptcy in the U.S. District Court and that he files the bill at the direction of the said Court. It appears from the record that J.B. Mattox died intestate in 1934, and was survived by his widow Fannie Mattox and a daughter, Willie Joe. On March 12, 1934, letters of administration upon his estate were issued to Fannie Mattox and she qualified as Administratrix. The record however fails to show that she ever made a final settlement of her administration. This however is not important in the present controversy. The deceased J.B. Mattox died seized and possessed of certain lands in Sullivan County, the same being fully described in the original bill.
According to the averments in the original bill her daughter, Willie Joe, became the owner in fee of all the lands of J.B. Mattox as his sole heir, subject to homestead and dower of her mother, Fannie Mattox. No homestead and dower has ever been assigned and set apart to her.
The bill not only prayed for the appointment of commissioners to set aside homestead and dower of the bankrupt but "that it be sold and the proceeds paid over to complainant to be administered by him as Trustee in Bankruptcy" etc.
The defendant Fannie Mattox filed a plea in bar to the effect that "she was duly discharged from the debt or demand set forth in complainant's bill." The plea was ruled to be insufficient as a defense and the defendant refused to make further answer to the bill. A pro confesso was thereupon taken against her.
The defendant Willie Joe Hawks, who had married Clifford Hawks, demurred to the bill upon the grounds:
(1) "That there was another suit pending for the same matter between the parties, i.e. in the U.S. Bankruptcy Court."
(2) "That the bill seeks to litigate only a part of the controversy."
(3) There is no equity in the bill; "that the bill fails to show any equitable jurisdiction in this court of the subject matter in controversy."
The Chancellor overruled the demurrer, denied an appeal by defendants and after due notice to them appointed commissioners to assign dower and homestead as prayed for in the bill.
A writ of supersedeas was applied for to one of the Justices of this Court which was denied.
A decree was later entered confirming the report of the commissioners, who had complied with the orders of court in assigning homestead and dower.
The defendants appealed from the Chancellor's decree and have assigned as error the following:
(1) "The Chancellor erred in overruling the demurrer to jurisdiction."
(2) "The Chancellor erred in assuming jurisdiction of a summary proceeding, i.e. The assignment of dower, upon the petition of a Trustee in Bankruptcy and rendering a decree therefor upon an erroneous judgment pro confesso."
The opinion of the learned Chancellor is so clear, concise and unassailable that we quote it in full and adopt it as the opinion of this Court.
"In the Chancery Court at Bristol, Tennessee "Memo
"This cause was argued on demurrer and submitted on briefs. Complainant is the Trustee in Bankruptcy of the first named defendant, having been appointed in a pending proceeding in the U.S. District Court for the Eastern District of Tennessee, Northeastern Division. He brings this proceeding at the direction of that Court to procure assignment of the unassigned dower right of the bankrupt defendant in realty aggregating 81.6 acres in the second Civil District of Sullivan County. The allegations of the bill are sufficient to establish the bankrupt's right to dower. The demurrer questions only the complainant's right to procure the assignment. It appears that this question was also fully litigated, and decided adversely to demurrant, in the Federal Court, but it is insisted that the decision there is erroneous and not binding on this Court. It is doubtless correct that this Court must determine its own jurisdiction and the right of a particular complainant to invoke it, but I have examined the opinion of the District Judge and agree with his conclusion that a Trustee in bankruptcy may by proper proceeding procure the assignment of the bankrupt's unassigned dower to the end that it may be made available to creditors as a part of the bankrupt estate, there being no exemption under the state law. The Bankruptcy Act confers rights upon the Trustee in bankruptcy which may be exercised in this, as well as in the Federal Court. Under Section 110(A) of the Act (U.S.C.A. Title 11, Section 110), the Trustee in bankruptcy is vested with the bankrupt's title to `property, including rights of action, which — he could by any means have transferred or which might have been levied upon and sold . . . or otherwise seized, impounded, or sequestered . . . (emphasis supplied) and also to powers which he might have exercised for his own benefit'.
"Unassigned dower is a chose in action which the bankrupt might have realized through exercise of her power and right to have it assigned. It also, though unassigned, might have been transferred to the heirs at law, or after assignment, as other realty to any purchaser. Certainly there were `means' by which the bankrupt might have obtained its assignment and transfer. While not subject to levy it could have been reached on the bill in equity of a judgment creditor with nulla bona return. North v. Puckett, 164 Tenn. 100, 46 S.W.2d 73 [81 A.L.R. 1107].
"Complainant's solicitors cite Section 70 (c) of the Bankruptcy Act (11 U.S.C.A. 110(c)) providing that as to property not within the possession of the Bankruptcy Court the trustee shall have the right of a judgment creditor holding an execution unsatisfied. This alone would appear to entitle the complainant to proceed under the authority of North v. Puckett, supra. Demurrant's insistence that the judgment creditor must also have a lien is not sound. It may be doubted whether a lien on a chose in action could be obtained in the manner suggested, recordation of a memorandum of judgment.
"Demurrant's solicitor further argues that there is only a single creditor in the bankruptcy proceeding, and that since the bill does not allege that such creditor was qualified to bring a bill such as this, the trustee may not proceed. The argument goes beyond the bill, and no authority is cited for limiting the rights of the trustee to those of the creditor or creditors filing claims. It would appear to be untenable.
"Further ground for demurrer is that the same relief might have been obtained in the Federal Court in the Bankruptcy proceeding. Whether or not this is true, it would be no bar to this proceeding. The trustee proceeds here, in a Court having jurisdiction of the subject matter, at the express direction of the Federal Court. No proceeding for the same relief is there pending.
"Objection is also raised, in the brief, to the cost bond. If in fact the security is insufficient, the defendants have their remedy. It is not by demurrer, the bond being sufficient in form. The objection is apparently that the trustee did not require a cost deposit as instructed by the Federal Court. Demurrants could not know from the bill whether this is true, and if it is true that the trustee did not follow instructions in this regard, defendants would not be aggrieved.
"It is also urged that the bill prays assignment of dower and sale thereof following assignment, whereas the order authorizing the trustee to proceed here merely directs him to procure assignment, it being contemplated that sale would be had in the Bankruptcy proceeding. This objection to lack of authority would appear sound, but the bill need not fail. This Court has jurisdiction to set apart dower at the behest of a widow or one who, as complainant here, is armed with her rights in that regard under the law. Because amended authority may be procured, the defendant may rely upon complainant's want of authority to proceed here to sale in their answer, and to this extent the demurrer will be overruled with leave to reply. Otherwise it appears to be without merit and must be overruled.
"Decree accordingly.
"JOE W. WORLEY, Chancellor."
Contention is made that the Chancellor committed error in assuming jurisdiction in a "summary proceeding" and that error was also committed in entering a pro confesso against Fannie Mattox as administratrix.
The question of the jurisdiction of the Chancery Court to assign dower was settled in the case of North v. Puckett, 164 Tenn. 100, 46 S.W.2d 73, 81 A.L.R. 1107, as pointed out by the Chancellor and we can add nothing to what was said in that case. Moreover the reasoning of the Chancellor and the authorities cited seem to be conclusive of the question. There is no merit in the contention that the complainant's exclusive remedy was to compel a discovery as provided in Code Sections 6091, 6092 and 6093. The object of these code sections was to confer jurisdiction upon the Chancery Court to compel a discovery of concealed assets of the debtor. But they in no wise abridge the right of the court to set aside homestead and dower, which cannot be reached by execution at law. In the instant case there was no occasion for a bill to compel a discovery of homestead and dower. The widow had not released it to the heir. It was not concealed in fraud or otherwise.
The case of Bryan v. Zarecor et al., 112 Tenn. 503, 81 S.W. 1252, relied on by appellant, is not in point. In that case both the original and amended bills showed that the property was subject to execution at law and the creditor's legal remedy had not been exhausted. The creditor was contending that the Chancery Court had jurisdiction even though the property was subject to execution at law. This was denied upon the authority of the foregoing sections of the Code. The opinion simply holds that the equitable remedy is not available where there was an adequate remedy at law.
The Code Sections referred to in Bryan v. Zarecor, supra, provide a special equitable remedy where property is fraudulently concealed. They should be read in connection with Code Section 10391, which reads as follows:
"Substance of bill. — The bill should contain a clear and orderly statement of the facts on which the suit is founded, without prolixity or repetition, and conclude with a prayer for the required process and appropriate relief, without averring any formal combination or confederacy by the defendants or others, the insufficiency of the remedy at law, or other mere formal matter."
See also Gibson's Suits in Chancery, Section 1018:
"Suits in Aid of a Judgment Creditor where no Fraud is Alleged. — The Code gives the Chancery Courts exclusive jurisdiction to aid a creditor by judgment or decree, to subject the property of the defendant which cannot be reached by execution, to the satisfaction of the judgment or decree under the provisions of the Code. . . . (and) subject to their satisfaction all property of the defendant, that cannot be levied on under execution." (Italics ours.)
Citing Stark v. Cheathem, 2 Tenn. Ch. 300, wherein it was held: "It may be considered the settled law of this State that equitable realty may be reached in Chancery, upon the strength of the judgment, with as little formality as is required to reach the legal estate at law."
It is next argued by counsel for appellant that the pro confesso is invalid "because a judgment pro confesso against an administrator is not permitted." We concede, upon the authority of Gibson, Section 206, that this is true. But no administrator was sued in this case. In these circumstances the defendant Fannie Mattox could be heard for only one purpose following the entry of pro confesso against her, which was "on motion to have the pro confesso, and the proceedings based thereon set aside." Gibson's Suits, Section 206.
We are here reminded by counsel for the Trustee that the appellants continued to appear before the Chancellor and "assert themselves in one way or another after the pro confesso but never asked for it to be set aside, or made any exception to its having been taken."
Adverting to the question of the jurisdiction of the Chancery Court to assign dower, we find, in addition to the leading case of North v. Puckett, supra, Barton v. Geiler, 71 Tenn. 296, wherein it was said:
"There does not seem to be any sound reason why the agency of the State courts should not be used, in the collection of the assets of the bankrupt, for the purpose of aiding the Federal Courts in the administration and distribution of the bankrupt's estate. They assume no jurisdiction under the bankrupt act in so doing, but simply exercise their ordinary jurisdiction in suits between parties.
In a recent decision by the Court of Appeals, Wyrick v. Hale, Tenn. App., 209 S.W.2d 50, 52, it was held: "A court of equity, in a suit for partition, has inherent power to do complete justice between the parties, including the right to appoint Commissioners for the setting aside of homestead and dower." (Italics ours.)
The assignments of error are overruled and the decree of the Chancellor is affirmed, except that the costs which have accrued will be paid by the Trustee out of funds arising from the sale of the property in controversy.
All concur.