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sumption upon which the cases relied upon proceeded and therefore also demonstrates the inapplicability of the theory of burden of proof applied in those cases. In other words, even putting aside for the sake of argument the effect on the doctrines announced in the decisions relied upon of the enactment of the act of 1875 as to the duty to dismiss to which we have referred, the burden of proof to establish that the court was vested with power to act, we think, in a case like this, in the nature of things rested upon the complainant.
Second. Even although the court rightly applied the burden of proof, did it nevertheless err in dismissing the bill?
The insistence on this subject is in substance this, that as the plea admitted the probate of the will, the appointment of the executors in New York, and the purchase and possession of the bonds, even although there was no proof that the bonds were actually within the district, the pleadings were adequate to show property within the district, even under the requirements of $ 8 of the act of 1875. Asserting that what was sought was a decree establishing "the title" of the complainant to property within the district; counsel argue as follows:
“This narrows the question down to what is meant by property within the district; and it is submitted that for all purposes connected with the administration of an estate, at least that portion of the personal property which was received by the executor within the district is within the meaning of the law within that district.
The decree sought is only a determination of the rights of complainant against the estate of Gustave J. Wetzlar, deceased. This estate is, in the eye of the law, within the County of New York, where any and all suits pertaining to the distribution of the estate, and to accounting therefor, must be brought. Respondent cannot, certainly, by setting up an absolutely illegal act (removing the property to Germany), be heard to deny that within the
contemplation of law the estate is for purposes of distribution within the County of New York. . The proceeding in this case is a proceeding to enforce an equitable lien upon personal property which is within the intendment of the law in gremio legis within this district, and therefore within the jurisdiction of the United States Circuit Court for the Southern District of New York."
It requires no close analysis to sustain the interpretation given by the court below to the statute, viz., that it exclusively deals with property which is within the district where a suit is brought and which property is therefore capable of being made subject to the dominion and resulting control of the court. No other interpretation is in reason possible in view of the terms of the section causing its provisions to come into play only when there is “real or personal property within the district where such suit is brought.” The meaning is additionally illustrated by the requirement that the service of the order to appear, etc., must be made not only upon the absent defendant or defendants “wherever found," but also “upon the person or persons in possession or charge of said property,” that is, the property within the district and within the dominion of the court which is made the essential foundation for the jurisdiction to be exercised over the property in a case where the court cannot acquire personal jurisdiction because of the absence of the defendant. The meaning of the statute and the limited jurisdiction which it confers is further clearly shown by the provision that an adjudication against an absent defendant or defendants shall “affect only the property which shall have been the subject of the suit and under the jurisdiction of the court therein, within such district."
We think there is no basis for the contention that the section contemplates the exercise of jurisdiction by a Federal court upon the assumption of its control over property when there is no property subject to control within
the jurisdiction. In other words the power conferred rests upon a real not an imaginary base. This being true, we are of opinion that a Federal court has not jurisdiction over a person not within its territorial jurisdiction or over property in the custody of such person not within such territorial jurisdiction, merely because a state court may as to such person and such property, because of some proceeding pending before it, have the authority to treat both the person and property as constructively present and subject to its jurisdiction. The power which a state court may exert in a particular contingency affords no basis for the assumption that the act of Congress extends to a subject which the language of the act does not embrace. Indeed, if because a state court had the power to treat in a given case a person and his property outside of the territorial jurisdiction as constructively within it in order to afford particular relief, a like power must be imputed to a Federal court under the act of Congress it would result that in such a case the act of Congress, would become inapplicable, since there would be no absent defendant, as the person as well as the property would be constructively present.
Argument for Appellant.
SEXTON, TRUSTEE IN BANKRUPTCY OF KESSLER & COMPANY, v. KESSLER & COMPANY, LIMITED.
APPEAL FROM THE CIRCUIT COURT OF APPEALS FOR THE
No. 92. Argued December 12, 13, 1911.-Decided May 27, 1912.
The conduct of business men acting without lawyers and in good faith,
attempting to create a personal security for an actual debt, should be fairly construed as actually effecting what the parties meant; and so held, in this case, that an escrow of securities made by a banking firm in New York to secure its drafts upon a foreign bank amounted to a lien on the securities to be preferred to the claim of the trustee in bankruptcy, notwithstanding that the New York firm retained physical power over the securities, as agent for the foreign house, and had the right to substitute other securities for those withdrawn and
sold. Under the decisions of this court, and the courts of New York, a cus
tomer has such an interest in securities carried for him by a broker that a delivery to him after the insolvency of the broker is not necessarily a preference under the bankruptcy law. Richardson v. Shaw,
209 U. S. 365. 172 Fed. Rep. 535; 97 C. C. A. 161, affirmed
The facts, which involve the question of whether under the Bankruptcy Act of 1898, certain transfers of securities by the bankrupt constituted a fraudulent preference, are stated in the opinion.
Mr. John Larkin, with whom Mr. Alexander S. Andrews, was on the brief, for appellant:
There was no valid legal pledge to the defendants because possession was not given until October 25, 1907. Casey v. Caveroc, 96 U. S. 467; Wilson v. Little, 2 N. Y. 443; Buffalo German Ins. Co. y. Third National Bank, 162 N. Y. 170; Security Warehousing Co. v. Hand, 206 U. S. 415.
225 U. S.
Argument for Appellant.
Possession is of the essence of a pledge; without it no privilege can exist as against third persons. Casey v. Caveroc, 96 Ü. S. 467; Casey v. Natl. Park Bank, 96 U. S. 492; Casey v. Schuhardt, 96 U. S. 494.
The legal pledge having failed, it cannot be supported either as an equitable pledge, an equitable mortgage or a declaration of trust. There was no equitable pledge. In re Great Western Mfg. Co., 18 Am. B. R. 259; Page v. Rogers, 211 U. S. 575; Wilson v. Nelson, 183 U. S. 191; Security Warehousing Co. v. Hand, 206 U. S. 415; Fourth Street Bank v. Millburne, 172 Fed. Rep. 177; Re Sheridan, 98 Fed. Rep. 406; Copeland v. Barnes, 147 Massachusetts, 388; Bank of Leavenworth v. Hunt, 11 Wall. 394; Griswold v. Sheldon, 4 Comst. 581; Wood v. Lowry, 17 Wendell, 492.
A court of equity will not uphold, on the theory of equitable lien, an attempted pledge which fails at law, when the rights of creditors are involved. Casey v. Caveroc, 96 U. S. 467; Security Warehousing Co. v. Hand, 206 U. S. 415; Wilson v. Little, 2 N. Y. 446; Buffalo G. I. Co. v. Third Natl. Bank, 162 N. Y. 163; Ryttenberg v. Schefer, 11 Am. Bk. Rep. 664; Nisbit v. Macon Bank, 12 Fed. Rep. 686; Fourth St. Natl. Bank v. Milburne Mills Co., 172 Fed. Rep. 177; Zartman v. Bank, 189 N. Y. 267.
What the courts have defined as “the inexorable rule of law” is that possession of the pledge must be in the pledgee. Van Zile's Bailments and Carriers, § 237a; Skelton v. Codington, 185 N. Y. 88; Frank v. Volkommer, 205 U. S. 529.
There is no such thing as an equitable pledge; one either has made a pledge or he has not. Support for the existence of such a contradiction as “equitable pledge” must be found, if at all, in the fact that equity in some circumstances will consider as done what was agreed to be done. But that doctrine has no application where bankruptcy intervenes.