Opinion
No. 5205.
January 26, 1929.
APPEAL from the District Court of the Tenth Judicial District, for Lewis County. Hon. Miles S. Johnson, Judge.
Action for conversion. Judgment dismissing complaint. Reversed.
Benjamin F. Tweedy, for Appellant.
There are two classes of nonexempt property: First, that which "by operation of law" passes to the trustee immediately upon his qualification; second, that which never passes to him "by operation of law," and which he can abandon, as a matter of his own judgment and discretion, without order of the bankruptcy court so to do, to the bankrupt. ( In re Frazin, 183 Fed. 28, 105 C.C.A. 320, 33 L.R.A., N. S., 745, construing the 1898 Act; Sessions v. Romadka, 145 U.S. 29, 12 Sup. Ct. 799, 36 L. ed. 609, where trustee intervened; First National Bank v. Lasater, 196 U.S. 115, 25 Sup. Ct. 206, 49 L. ed. 408; Abo Land Co. v. Tenorio, 26 N.M. 258, 191 Pac. 141, bankruptcy pending; Dow v. Bradley, 110 Me. 249, 85 Atl. 896, 44 L.R.A., N.S., 1041, directly decided that the trustee does not have to have order of Bankruptcy Court to abandon; Lancey v. Foss, 88 Me. 215, 33 Atl. 1071, where title never passed to trustee because he never elected to take it; Greenall v. Hersum, 220 Mass. 278, 107 N.E. 941; Hubbard v. Gould, 74 N.H. 25, 64 Atl. 668, where the trustee refused to sue; Cripple Creek State Bank v. Russell, 75 Colo. 111, 219 Pac. 212.)
Tannahill Leeper, for Respondents.
Immediately upon the filing of the voluntary petition in bankruptcy by plaintiff all of his property not exempt from execution passed absolutely to the trustee, and bankrupt no longer had any interest therein, and no capacity to sue. (Remington on Bankruptcy, pars. 539, 1178, 1203, 1266; In re Jersey Island Packing Co., 138 Fed. 625, 71 C.C.A. 75, 2 L.R.A., N.S., 560; In re Burtis, 188 Fed. 527.)
Bankrupt does not retain title to choses in action by failure to schedule them, nor does title thereto revest in him on discharge. (Remington on Bankruptcy, par. 1267; First National Bank v. Lasater, 196 U.S. 115, 25 Sup. Ct. 206, 49 L. ed. 408; Juden v. Nebham, 103 Miss. 84, 60 So. 45; Jones v. Barnes, 107 Miss. 800, 66 So. 212; Perkins v. Alexander (Tex. Civ.), 209 S.W. 789.)
The court properly dismissed the action for lack of jurisdiction. ( Abrams v. White, 11 Idaho 497, 83 P. 602; Williams v. Sherman, 36 Idaho 494, 212 P. 971.)
Appellant filed a complaint against respondents in the district court of the tenth judicial district, alleging a conversion by respondents of personal property belonging to appellant, and asking for judgment for its alleged value. Respondents' answers denied the allegations of the complaint, and set up as affirmative defenses that appellant had filed a petition in bankruptcy in the United States district court and been adjudicated a bankrupt, and that a duly qualified and acting trustee had been appointed to take charge of the estate.
A demurrer to the affirmative defenses was interposed by appellant, who also filed a motion asking that the trustee in bankruptcy be made a party to the action. The demurrer and motion were overruled, and the court dismissed the action.
The filing of a petition in bankruptcy gives the bankruptcy court jurisdiction of the bankrupt's property (5 Remington on Bankruptcy, p. 452), and a right of action on the part of the bankrupt passes to the trustee. (3 Remington on Bankruptcy, p. 8, sec. 1178, note 1.) The proper ruling on the demurrer, therefore, was to overrule the same. But, after the demurrer had been overruled, the new matter in the answers was deemed denied. (C. S., sec. 6717), and appellant had the right of requiring respondents to establish on the trial the truth of their affirmative allegations, and to combat such proof by any competent evidence of abandonment of the property or any right of action by the trustee. The court erred in dismissing the action.
It is a matter of discretion with the trustee whether he accept or abandon disputable or burdensome claims or property of the bankrupt, and if the trustee, with knowledge and after a reasonable time, declines to accept property of an onerous or unprofitable character, the bankrupt may reassert title. (2 Remington on Bankruptcy, pp. 494, 497, secs. 1154, 1157.) The court did not err in denying the motion to make the trustee in bankruptcy a party to the action.
The judgment is reversed. Costs to appellant.
Givens, Taylor and Wm. E. Lee, JJ., and Hartson, D.J., concur.
Petition for rehearing denied.