John M. Russell, Inc., was the owner of an apartment house in New York. On August 13, 1940, a foreclosure suit by a third mortgagee was filed. On August 17, 1940, the state court appointed respondent receiver of the rents and profits of the apartment house. On August 31, 1940, an involuntary petition in bankruptcy was filed against John M. Russell, Inc., of which petitioner was subsequently appointed as trustee. Respondent collected the rents from the premises from the time of his appointment in August, 1940, to and including August, 1941. While that foreclosure suit was pending, mechanics liens, subordinate to the third mortgage, were foreclosed, a sale was had, and the property purchased by Apartment Investing Corporation. That was in February, 1941. Judgment in the mortgage foreclosure suit was entered in June, 1941, and on August 13, 1941, before the sale was held, the judgment was paid and satisfied by Apartment Investing Corporation. Thereafter, respondent presented his accounts to the state court for settlement. Petitioner applied to the bankruptcy court for an order directing respondent to file his account in that court. While that motion was pending, the motion in the state court came on for a hearing. Petitioner appeared and filed his objections to respondent's accounts. His objections were overruled, the accounts approved, and respondent discharged by the state court. Thereafter the bankruptcy court denied petitioner's motion. D.C., 43 F.Supp. 128. The Circuit Court of Appeals affirmed by a divided vote. 2 Cir., 130 F.2d 369. We granted the petition for a writ of certiorari because of the importance of the problem in the administration of the Bankruptcy Act. 317 U.S. 621, 63 S.Ct. 436, 87 L.Ed. --.
Petitioner contends that § 2, sub. a[21] and § 69, sub. d make it obligatory on the respondent as a non-bankruptcy receiver to account to the bankruptcy court. These provisions of the Bankruptcy Act are new. They were added in 1938 by the Chandler Act. 52 Stat. 840, 11 U.S.C. § 11(a)(21), § 109d, 11 U.S.C.A. § 11, sub. a(21) § 109, sub. d. Sec. 2, sub. a(21), gives to the bankruptcy court the power in straight bankruptcy proceedings to require 'receivers or trustees appointed in proceedings not under this Act (title)' within four months of bankruptcy (1) 'to deliver the property in their possession or under their control to the receiver or trustee appointed under this Act (title)', and (2) 'to account to the court for the disposition by them of the property' of the bankrupt. Sec. 69, sub. d makes a 'receiver or trustee, not appointed under this Act (title), of any of the property' of the bankrupt 'accountable' to the bankruptcy court for 'any action taken by him subsequent to the filing of such bankruptcy petition.' These sections are in part declaratory of the law as it existed prior to the Chandler Act, 11 U.S.C.A. § 1 et seq. Thus § 2, sub. a(21), plainly includes the case where a lien against the debtor's property was acquired by some legal or equitable proceeding within four months of bankruptcy. Prior to 1938 such liens did not survive bankruptcy (Straton v. New, 283 U.S. 318, 322, 51 S.Ct. 465, 467, 75 L.Ed. 1060); and bankruptcy superseded the proceedings out of which they arose. Remington, Bankruptcy (4th ed.) §§ 2067-2071. But the accountability of the non-bankruptcy receiver or trustee presented some difficulties prior to the Chandler Act. When bankruptcy superseded the prior proceedings, all disbursements subsequent thereto were, of course, subject to the exclusive control of the bankruptcy court. In re Diamond's Estate, 6 Cir., 259 F. 70; Moore v. Scott, 9 Cir., 55 F.2d 863; Lion Bonding & Surety Co. v. Karatz, 262 U.S. 640, 642, 43 S.Ct. 641, 642, 67 L.Ed. 1151; Gross v. Irving Trust Co., 289 U.S. 342, 53 S.Ct. 605, 77 L.Ed. 1243, 90 A.L.R. 1215. While such disbursements were generally subject to the summary power of the bankruptcy court (Taylor v. Sternberg, 293 U.S. 470, 55 S.Ct. 260, 79 L.Ed. 599), an accounting for disbursements made prior to bankruptcy required a plenary suit. Loveless v. Southern Grocer Co., 5 Cir., 159 F. 415; 1 Collier, Bankruptcy (14th ed.) pp. 320-321. And see Galbraith v. Vallely, 256 U.S. 46, 41 S.Ct. 415, 65 L.Ed. 823; In re Jack Stolkin, Inc., 2 Cir., 42 F.2d 829. Sec. 2, sub. a(21) by substituting a summary proceeding was designed to eliminate the delay and cost of a plenary suit and to provide a more effective control over prior disbursements. See H.Rep.No. 1409, 75th Cong., 1st Sess., p. 20; Weinstein, The Bankruptcy Law of 1938, pp. 16-17.