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In re Crystal Associates Inc.

UNITED STATES COURT OF APPEALS FOR THE THIRD CIRCUIT


decided: December 12, 1969.

IN THE MATTER OF CRYSTAL ASSOCIATES, INC., A NEW JERSEY CORPORATION, AND VALLEY PARK, INC., A NEW JERSEY CORPORATION. LEO S. MEHLMAN, AS TRUSTEE OF THE GOODS AND PROPERTY OF LOUIS DORFMAN, BANKRUPT, APPELLANT

Hastie, Chief Judge, and Van Dusen and Adams, Circuit Judges.

Author: Per Curiam

Opinion OF THE COURT

Appellant seeks reversal of a District Court order of February 24, 1969,*fn1 providing that he was not entitled to institute a state court action to establish two claims filed by the bankrupt (Louis Dorfman) for whom he was acting, which claims had been expunged by the Referee's order of September 1, 1966.*fn2 A Petition to Review this September 1, 1966, order had been dismissed, after hearing held June 17, 1968, by District Court order of August 15, 1968, "for failure to prosecute same". Although the transcript of the June 17, 1968, hearing (N.T. 5 ff. of Document 7 in No. 931-65 in Bankruptcy) and the opinion filed by the District Court in July 1968 made clear that appellant might press any rights he might have in a plenary proceeding against the debtor corporations, this order did not hold that the two claims in this bankruptcy proceeding could be determined in the New York state courts.

The order of February 24, 1969, was designed to make abundantly clear that no state court action could be instituted on the subject matter of the abovementioned two claims filed in this federal bankruptcy proceeding. The federal courts have original and exclusive jurisdiction with respect to claims in bankruptcy proceedings. See United States Constitution, Clause 4, Section 8 of Article 1; 11 U.S.C. § 11(a) (2) and 28 U.S.C. § 1334. In Pepper v. Litton, 308 U.S. 295, 60 S. Ct. 238, 84 L. Ed. 281 (1939), the Supreme Court of the United States said at page 304, 60 S. Ct. at page 244: "* * * In such respects [i.e., with respect to allowance and disallowance of claims] the jurisdiction of the bankruptcy court is exclusive of all other courts. * * * See also, International Shoe Co. v. Pinkus, 278 U.S. 261, 263-266, 49 S. Ct. 108, 73 L. Ed. 318 (1929); cf. Katchen v. Landy, 382 U.S. 323, 328-329, 86 S. Ct. 467, 15 L. Ed. 2d 391 (1966); Leiman v. Guttman, 336 U.S. 1, 69 S. Ct. 371, 93 L. Ed. 453 (1949).

The order of the District Court dated February 24, 1969, will be affirmed.


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