Opinion
October, 1905.
Roger Foster, for the appellants.
Francis B. Mullin [ J. Frank Yawger with him on the brief], for the respondent.
The judgment appealed from cancels and annuls a chattel mortgage given by the bankrupt to the appellants within four months of the filing of the petition in bankruptcy, on the ground that it was given with intent to hinder, delay and defraud creditors. The evidence is sufficient to support the judgment. Many interesting points are ably presented in behalf of the appellants, but I find none which necessitates a reversal.
The action was brought by the trustee in bankruptcy, and as tried was confined to an investigation of the validity of the chattel mortgage. It is to be regarded on this appeal as an action in equity only, and the appellants were not entitled to a jury trial. Such an action is the proper remedy for the destruction of the voidable lien. ( Houghton v. Stiner, 92 App. Div. 171.)
Prior to the commencement of the action an order was made in the United States District Court upon consent of all parties interested, providing for a sale of the mortgaged chattels and the deposit of the purchase money with a trust company. The order further provided that such deposit should be made "as a special fund, there to await the further order of the court, upon due notice to all creditors who have or may hereafter appear, * * * and that the lien, if any, of the said alleged chattel mortgage of the said S.L. S. Frank, be transferred to and attached to said special fund or deposit in lieu of, and to the same extent that it attached to the said property hereinbefore directed to be sold." The order was made before the plaintiff's appointment as trustee, while the administration of the bankrupt estate was in charge of a temporary receiver.
The action is within the jurisdiction of the State court. ( Small v. Muller, 67 App. Div. 143.) I do not think the possession of the fund by the Federal court deprived the State court of jurisdiction over the question of the validity of the chattel mortgage. The jurisdiction of the State court was originally and when this action was commenced exclusive unless the proposed defendant consented to allow the Federal courts to entertain jurisdiction ( Bardes v. Hawarden Bank, 178 U.S. 524), but it is now concurrent with that of the Federal courts. (Bankruptcy Law [30 U.S. Stat. at Large, 552], § 23, subd. b, as amd. by 32 id. 798, § 8; 30 id. 564, § 67, subd. e, as amd. by 32 id. 800, § 16.) The plaintiff, however, could only invoke the jurisdiction of the State court because no consent conferring jurisdiction on the Federal courts appears to have been given, and the amendments made to the Bankruptcy Law in 1903 do not apply to this action. (32 U.S. Stat. at Large, 801, § 19.) As a necessary incident to the cancellation of the chattel mortgage the judgment appealed from adjudges that the mortgage is not a lien upon the special fund but there is nothing beyond that adjudication which in any way interferes with the disposition or control of the fund. The destruction of the lien would have followed the cancellation of the mortgage without a specific adjudication to that effect.
The trust company and the temporary receiver are not necessary parties to the litigation, and a complete determination of the controversy between the trustee and the appellants could be, and has been, had without their presence. ( Shanks v. National Casket Co., 95 App. Div. 187.)
The judgment should be affirmed.
BARTLETT, JENKS, RICH and MILLER, JJ., concurred.
Judgment affirmed, with costs.