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Steelman v. All Continent Corp., 301 U.S. 278 (1937)

Steelman v. All Continent Corp.

No. 638

Argued March 29, 30, 1937

Decided April 26, 1937

301 U.S. 278


1. Jurisdiction of a bankruptcy court to administer a bankrupt estate draws to itself, when once it has attached, an incidental or ancillary jurisdiction to give protection to the estate against waste or disintegration while frauds upon its integrity are in process of discovery. P. 301 U. S. 289.

2. Pending bankruptcy proceedings in New Jersey in which examinations were being carried on under § 21(a) of the Bankruptcy Act at the instance of the trustee for the purpose of exposing the relations of the bankrupt to a corporation formed and controlled by him, to which he had transferred valuable securities and which, there was ground to believe, was a mere instrument for defrauding his creditors, the corporation, having already filed a claim in the bankruptcy case, brought suit in a federal court in Pennsylvania for the alleged purpose of quieting its title to part of

Page 301 U. S. 279

the securities then in custody of brokers in that State, and served the Trustee, under Jud.Code, § 57, as an absent party. There was probable cause to believe that the suit was a step in a fraudulent conspiracy of the bankrupt, his relatives, and the corporation, impeding and perhaps frustrating the administration of the assets, and that only by a plenary suit to be brought (and which later was brought) by the Trustee in New Jersey could the danger of obstruction be averted and the estate be kept intact, pending inquiry into the alleged fraud. Held that the court of bankruptcy had power to enjoin the corporation from prosecuting the suit in Pennsylvania. Pp. 301 U. S. 285, 301 U. S. 288.

3. Restraint of a plaintiff from prosecuting his case is not restraint of the court. P. 301 U. S. 290.

86 F. 2d 913 reversed.

Certiorari, 300 U.S. 648, to review the reversal of a decree of the District Court, in bankruptcy, 16 F.Supp. 949, which restrained the prosecution against the Trustee of a suit in another federal court.

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