Opinion
No. 77-60065
March 20, 1979
Bankruptcy Court — Jurisdiction — Accounts Receivable
The Bankruptcy Court has jurisdiction to consider a matter brought by a Chapter XI receiver to collect an account claimed to be under the Michigan Contractor's Trust Fund statute, but reduced to a consent judgment in a state court, despite the fact that defendants did not consent to the jurisdiction of the court and deny liability under the Trust Fund statute.
Defendants subcontracted with bankrupt for performance of work on a housing development. Bankrupt completed performance, was not paid by defendants, and sought and received a consent judgment in this matter in the amount of $25,957.75 plus interest in state court, which judgment remained unsatisfied. Proceedings were commenced under Chapter XI and bankrupt's receiver filed the instant action to recover the $25,957.75 plus interest, alleging that during the course of the construction project, defendants received certain "draws" which should have been used to pay bankrupt for work performed but were not, contrary to the Michigan Contractors Trust Fund Act, Mich. Stat. Ann. § 26.331 (1970).
Defendants objected to the court's jurisdiction over this matter under Section 23(b) of the Bankruptcy Act, and further maintained that their liability, if any, was in the nature of an account receivable. Defendants contended that while intangible assets, such as choses in action are in the constructive possession of the bankruptcy court, a disputed account receivable removes the matter from the summary jurisdiction of the bankruptcy court because there is no debt within the court's constructive possession.
The court first held that while the bankruptcy court has not jurisdiction to enforce choses in action unless they are within the actual or constructive possession of the court, as long as any adverse claim is merely colorable, it is within the constructive possession of the court. Since the fact of the liability of the defendants to the bankrupt had been established in state court, any contention that the debt was not real was not made in good faith and is unworthy of consideration. The court also noted that collection of the accounts receivable of a debtor corporation by a Chapter XI receiver is one of the more important roles which the receiver plays in an arrangement. Finally, Section 311 of the Act clearly grants to the court "exclusive jurisdiction of the debtor and his property, wherever located" and this is reinforced by Rule 11-44 which broadens jurisdiction of the court in an arrangement situation. See Sec. 23(b) at ¶ 2228, Sec. 311 at ¶ 3313 and Rule 11-44 at ¶ 20,744.