The District Court for Southern West Virginia entered an order in the bankruptcy of the Fall Branch Coal Company enjoining commissioners appointed by a West Virginia state court from proceeding with the sale of certain real estate of the bankrupt pursuant to a decree of that court. The petitioners were the trustee in bankruptcy and two mortgagees.
The petition alleged that the commissioners were advertising for sale only the property of the bankrupt in West Virginia, that it would be advantageous to all parties to have this property sold with property of the bankrupt situate in Kentucky, and that the bankruptcy court had exclusive jurisdiction to make the sale. The respondents in their answer denied the right of the District Court to enjoin the proceedings in the state court, and appealed from an order awarding an injunction.
April 11, 1927, one Alley obtained judgment against the coal company in the Circuit Court of Mingo County, West Virginia, which was docketed May 5, 1927, and thus became a lien on its estate in that county. February 20, 1928, Alley filed in the same court a judgment creditors' suit against the coal company, and made parties thereto all creditors having liens against its real estate, including the two mortgagees who were co-petitioners with the trustee in the bankruptcy court. In his bill he prayed that the liens and assets be marshalled and that the company's real estate be sold and the proceeds distributed among the lien claimants according to their respective rights. The cause was duly matured and, at April term, 1928, was referred to a commissioner in chancery to report the real estate owned by the debtor and the liens thereon. At the July term, 1928, the commissioner presented his report, and thereupon the respondents were appointed to make sale of the property. August 4, 1928, sixteen months after rendition of Alley's judgment, and five and one-half months after the filing of the creditors' bill, the coal company filed its voluntary petition in bankruptcy, and on October 11, 1928, while the commissioners of the state court were proceeding to carry out its order of sale, the petition was filed to enjoin them from frthe r proceeding.
Upon these facts the question certified is:
Where creditors have obtained and docketed judgments constituting liens on the real estate of defendant, and have instituted a creditors' suit in a state court to marshal and enforce the liens and sell the real estate subject thereto, does the bankruptcy of defendant occurring more than four months after the institution of the creditors' suit oust the state court of jurisdiction, or vest in the court of bankruptcy power to enjoin further proceedings in the state court?
The purpose of the Bankruptcy Act (11 USCA) passed pursuant to the power of Congress to establish a uniform system of bankruptcy throughout the United States, is to place the property of the bankrupt, whereever found, under the control of the court, for equal distribution among the creditors. The filing of the petition is an assertion of jurisdiction with a view to the determination of the status of the bankrupt and a settlement and distribution of his estate. This jurisdiction is exclusive within the field defind by the law, and is so far in rem that the estate is regarded as in custodia legis from the filing of the petition. Acme Harvester Co. v. Beekman Lumber Co., 222 U.S. 300, 32 S.C.t. 96, 56 L. Ed. 208. It follows that liens cannot thereafter be obtained nor proceedings be had in other courts to reach the property, the district court having acquired the exclusive right to administer all property in the bankrupt's possession. Lazarus, Michel & Lazarus v. Prentice, 234 U.S. 263, 34 S.C.t. 851, 58 L. Ed. 1305; White v. Schloerb, 178 U.S. 542, 20 S.C.t. 1007, 44 L. Ed. 1183; Murphy v. John Hofman Co., 211 U.S. 562, 29 S.C.t. 154, 53 L. Ed. 327; U.S. F. & G. Co. v. Bray, 225 U.S. 205, 32 S.C.t. 620, 56 L. Ed. 1055; Hebert v. Crawford, 228 U.S. 204, 33 S.C.t. 484, 57 L. Ed. 800. It may inquire into the validity of liens, marshal them, and control their enforcement and liquidation. Isaacs v. Hobbs Tie & Timber Co., 282 U.S. 734, 51 S.C.t. 270, 75 L. Ed. 645, and authorities cited; Whitney v. Wenman, 198 U.S. 539, 25 S.C.t. 778, 49 L. Ed. 1157; Remington, Bankruptcy (3d Ed.) § 2472.