Opinion
No. 78-507EG
December 27, 1978
Courts of Bankruptcy — Jurisdiction — Ownership Interest in Property — Third Party
A bankruptcy court does not have jurisdiction to entertain an action to determine the estate's ownership interest in property which is in the possession of a third party absent that party's consent. The bankrupt's schedules indicated that the bankrupt corporation owned no real property. However, the receiver filed a complaint against the president of the bankrupt and a third party seeking a determination of the ownership interest of the bankrupt estate in certain real property in which the bankrupt corporation had conducted its business. The property was titled in the name of the president and at the time the involuntary petition was filed, the bankrupt corporation was no longer in possession of the property as a tenant since it had been evicted by the third party who was a lienholder of record. The defendants filed motions to dismiss the action asserting that the bankruptcy court did not have summary jurisdiction over the matter. At the hearing on the motion to dismiss, the receiver sought to file an amended complaint alleging plenary jurisdiction under Sections 67e and 70e of the Bankruptcy Act. The defendants also opposed plenary jurisdiction. Generally, where the controversy, such as here, is one involving property in the actual or constructive possession of a third party asserting a bona fide adverse claim, the bankruptcy court has no jurisdiction to determine the third party's claim, unless by that third party's consent. Without such consent, a plenary suit must be brought in an appropriate forum. This case falls squarely within those principles. Thus, if there is jurisdiction in the bankruptcy court, it must be plenary. A district court may exercise plenary jurisdiction over suits instituted under Sections 67e and 70e of the Bankruptcy Act. However, a bankruptcy court has no such jurisdiction. Thus, absent consent, jurisdiction does not exist in this court and the complaint is dismissed. See Secs. 2a at ¶ 2041, 23 at ¶ 2227, 67e at ¶ 2665 and 70e [§ 544B] at ¶ 9523.