Supreme Court of the United States

McHenry v. La Société Française D'Épargnes

1877 U.S. LEXIS 2133 · 24 L. Ed. 370 · 95 U.S. 58

November 18, 1877 · Docket 45

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Headnotes

Generated summaries

Headnote 1
The Court explained that the statute expressly authorizes a secured‑creditor suit in a state forum when the bankruptcy assignee does not raise an objection, giving the creditor a choice of forum.
Headnote 2
Citing *Claflin v. Houseman*, the Court held that federal courts never obtained exclusive jurisdiction over property disputes in bankruptcy, and state courts remain competent to hear such suits.
Headnote 3
The Court reaffirmed the principle from *Mays v. Fritton* that an assignee who consents to state‑court jurisdiction cannot later contest the judgment issued there.
Headnote 4
Relying on *Eyster v. Gaff*, the Court held that the filing of a bankruptcy case does not strip state courts of authority to adjudicate enforcement actions concerning estate property.
Headnote 5
The Court observed that where the assignee does not protest the creditor’s choice of a state forum, the court may validly exercise jurisdiction and its judgment is not reversible on jurisdictional grounds.
Headnote 6
10.20.4 Banking Law > International and Cross-Border Banking Law > Foreign Bank Branch and Agency Law
The statute gives the secured creditor a choice of forum; the State court route is permissible unless the assignee formally objects to the creditor’s election.
Headnote 7
10.20.4 Banking Law > International and Cross-Border Banking Law > Foreign Bank Branch and Agency Law
State courts may continue to hear suits concerning property of the estate even while bankruptcy is pending, preserving the creditor’s ability to enforce liens.
Headnote 8
10.20.4 Banking Law > International and Cross-Border Banking Law > Foreign Bank Branch and Agency Law
The assignee’s silence is treated as acceptance of the State court’s authority, so the court’s judgment is enforceable despite the parallel bankruptcy proceeding.
Headnote 9
10.20.4 Banking Law > International and Cross-Border Banking Law > Foreign Bank Branch and Agency Law
The assignee’s voluntary submission to State court jurisdiction creates an obligation to accept the court’s final decree, even though bankruptcy proceedings are ongoing.
Headnote 10
10.20.4 Banking Law > International and Cross-Border Banking Law > Foreign Bank Branch and Agency Law
State courts retain authority to order the enforcement or sale of mortgaged assets, despite the existence of a bankruptcy case covering the same estate.

Opinion

Mr. Chief Justice Waite

delivered the opinion' of the court. ■

In Claflin v. Houseman, 93 U. S. 130, we decided that, under tbe law as it stood previous to the adoption of tbe Revised Stafcútes, tbe courts of tbe United States did not have exclusiye jurisdiction of suits for tbe settlement of conflicting claims to property belonging to tbe estate of a bankrupt, and that an assignee in bankruptcy might sue in a State court to collect the assets. In Mays v. Fritton, 20 Wall. 414, we also held, that if an assignee in bankruptcy submitted himself to tbe jurisdiction of a State court in a suit affecting tbe estate which was pending when tbe proceedings in bankruptcy were commeácéd, be was bound by any judgment that might be rendered. And in Eyster v. Gaff, 91 U. S. 525, Mr. Justice Miller, speaking for the court, said: —

“ The debtor of a bankrupt,’ or the man who contests the right to real or personal property with him, loses none of his rights by the bankruptcy of his adversary.. The same courts remain open to him in such contests, and the statute has not divested those courts of jurisdiction in such actions. If it has for certain classes of actions conferred jurisdiction for the benefit of the' assignee in the Circuit arid District Courts of -the United States, it is concurrent, and does not divest that of the State courts.”.

The principles, upon which those cases rest are decisive of this. The complainant, having a-debt against the bankrupt secured by mortgage, proved the claim against the estate. This, under sect. 20 of the bankrupt law, 14 Stat. 526, Rev. Stat., sect. 5075, admitted the complainant as a creditor, of the general estate only for the balance of the debt after deducting the value of the mortgaged property, to be ascertained by agreement, sale, or in such other manner as the bankrupt court might direct. .The assignee is not required to take measures for the sale of mortgaged property, unless its value is greater than the. incumbrance. His duties relate chiefly to unsecured creditors, and he need not trouble himself about incumbered property, unless something may be realized out of it on their account, or unless it becomes necessary .to do so in order to ascertain the rights of the secured creditor in the general estate. If he does, and it becomes necessary to adjust the liens before his sale, he may, under the ruling in Claflin v. Houseman, institute the necessary proceedings for that purpose in the 'courts of the United States, or of the State, as h.e chooses. If he. does not, the secured creditor who wishes to make'his security available must act; and, Having obtained leave of the bankrupt court to bring his action for that purpose, he may proceed in the State court, if the assignee does not object, or in the courts of the United States, at his election. Here the necessary leave to sue was obtained before the decree was rendered, and the assignee, instead of .objecting to the'jurisdiction of the State court, consented to that mode of proceeding. The bankrupt and his wife alone objected; but as to them, as we held in Eyster v. Gaff, the jurisdiction of the State court .was not divested by the proceedings in bankruptcy.

Judgment affirmed.

Case brief

Citation data as of August 6, 2026

Summary

The plaintiff‐complainant, a creditor secured by a mortgage on the debtor’s real property, proved his claim in the debtor’s bankruptcy case and was admitted as a creditor for the balance after the value of the mortgaged land was deducted. Under § 20 of the Bankruptcy Act, a creditor admitted to the general estate may pursue enforcement of his lien in either federal court or a state court of his choice unless the assignee in bankruptcy objects. The creditor obtained leave from the bankruptcy court and elected to sue in state court; the assignee made no objection, while the debtor and his wife contended that the pending bankruptcy stripped the state court of jurisdiction. The state trial court allowed the action to proceed and entered judgment for the creditor, and the debtor appealed to the United States Supreme Court on the jurisdictional ground. The Supreme Court held that the filing of a bankruptcy case does not divest state courts of concurrent jurisdiction over a secured‐creditor action to enforce a mortgage lien or to obtain sale or disposition of the property. Because the assignee did not object, the creditor’s election of a state forum was proper and the state court’s jurisdiction was valid. Accordingly, the Court affirmed the state‐court judgment and rejected the debtor’s jurisdictional challenge. The decision establishes that, absent an assignee’s objection, state courts may hear secured‐creditor enforcement suits even while a bankruptcy case is pending.

Updated August 6, 2026

Statement of Facts

The plaintiff‐complainant was a creditor whose claim against the debtor‐bankrupt was secured by a mortgage on the debtor’s real property. After the debtor entered bankruptcy, the complainant proved his claim and, under § 20 of the Bankruptcy Act (14 Stat. 526, Rev. Stat. § 5075), was admitted as a creditor of the general estate for the balance of the debt after deducting the value of the mortgaged property. The assignee in bankruptcy, who succeeded to the rights and duties of the bankrupt estate, was responsible primarily for the administration of unsecured claims and was not required to take action with respect to mortgaged (encumbered) property unless its value exceeded the lien or the property needed to be dealt with in order to determine the secured creditor’s rights. The complainant, wishing to enforce his security and to have the mortgaged property sold or otherwise dealt with, obtained leave of the bankruptcy court to bring an action for that purpose. The statute permitted the complainant, in the absence of objection by the assignee, to pursue the action either in a federal court or in a state court of his choosing. The assignee did not object to the complainant’s election to sue in state court; only the bankrupt and his wife objected, asserting that the bankruptcy proceedings had divested the state court of jurisdiction. The lower court allowed the state‐court action to proceed, and the judgment entered there was affirmed by this Court. The cause of action therefore was the complainant’s suit to enforce his mortgage lien and to obtain the sale or other disposition of the mortgaged property. The relief sought was the enforcement of the security interest and the receipt of the balance due after accounting for the property’s value. The sole defense raised was the bankrupt’s (and his wife’s) claim that the state court lacked jurisdiction because of the pending bankruptcy case; the assignee, who could have objected to jurisdiction, consented to the state‐court proceeding. The Court held that the bankruptcy proceedings did not divest the state courts of jurisdiction over such actions, and affirmed the judgment in favor of the complainant.

Updated August 6, 2026

Procedural History

State‐court trial court – After the creditor obtained leave of the bankruptcy court, the state court was presented with the creditor’s suit to enforce his mortgage and to have the mortgaged property sold or otherwise dealt with. The court allowed the action to proceed and entered a judgment in favor of the creditor, ordering enforcement of the lien (and, by implication, the sale of the property and payment of the balance due). No specific monetary award is stated in the opinion.

Appeal to the United States Supreme Court – The bankrupt debtor and his wife appealed the state‐court judgment, contending that the pending bankruptcy proceeding had divested the state court of jurisdiction over the suit. Their ground for review was a jurisdictional challenge based on the bankruptcy statutes. The assignee in bankruptcy did not object to the state‐court proceeding.

United States Supreme Court – The Supreme Court affirmed the state‐court judgment, holding that the bankruptcy proceedings did not divest state courts of jurisdiction over actions to enforce a secured creditor’s lien, and that the assignee’s consent (or lack of objection) validated the creditor’s election to sue in state court.

The opinion does not identify the specific state court, the precise terms of the judgment (e.g., the amount awarded), or any intermediate appellate review; thus the procedural record is limited to the trial‐court decision and the Supreme Court’s affirmation.

Updated August 6, 2026

Issues

I. Substantive Issue
1. Jurisdiction over a secured‐creditor action:
Does the filing of a bankruptcy case divest a State court of jurisdiction to hear a secured creditor’s suit to enforce a mortgage lien and to obtain sale or other disposition of the mortgaged property when the assignee in bankruptcy has not objected to the creditor’s election to sue in that State court? II. Procedural Issue
1. Lower‐court jurisdictional ruling:
Did the trial‐court (and the assignee’s failure to object) err in allowing the State‐court action to proceed by incorrectly concluding that the bankruptcy proceedings had stripped the State court of jurisdiction over the creditor’s enforcement suit?

Updated August 6, 2026

Judgment

The United States Supreme Court affirmed the judgment of the state court entered for the creditor, holding that the bankruptcy proceedings did not divest the state court of jurisdiction over the secured‐creditor action. Consequently, the creditor’s judgment remains in force.

Updated August 6, 2026

Holding

Substantive jurisdiction: The commencement of a bankruptcy case does not divest state courts of jurisdiction to adjudicate a secured‐creditor action to enforce a mortgage lien and to obtain sale or other disposition of the mortgaged property; state‐court jurisdiction is concurrent with, and not displaced by, the bankruptcy proceedings.

Procedural jurisdiction: Where the assignee in bankruptcy fails to object to the creditor’s election to bring the enforcement action in a state court, that court may validly exercise jurisdiction over the suit, and a judgment entered by the state court is not reversible on the ground that the bankruptcy case has stripped the court of jurisdiction.

Updated August 6, 2026

Rule of Law

Section 20 of the Bankruptcy Act (14 Stat. 526, Rev. Stat. § 5075) permits a creditor who has been admitted as a creditor of the general estate “to proceed in the State court, if the assignee does not object, or in the courts of the United States, at his election.” The statute therefore authorizes a secured‐creditor action in state court unless the assignee objects. (§ 20, 14 Stat. 526, Rev. Stat. § 5075)

The filing of a bankruptcy case does not confer exclusive jurisdiction on federal courts over suits concerning property of the estate; state courts retain concurrent jurisdiction. This principle was articulated in Claflin v. Houseman, 93 U.S. 130 (1876). (Claflin v. Houseman, 93 U.S. 130 (1876))

When an assignee in bankruptcy submits himself to the jurisdiction of a state court in a suit affecting the estate, the assignee is bound by any judgment rendered by that court. The rule was stated in Mays v. Fritton, 20 Wall. 414 (1872). (Mays v. Fritton, 20 Wall. 414 (1872))

Bankruptcy proceedings do not divest state courts of jurisdiction over actions to enforce a secured creditor’s lien or to obtain sale or disposition of mortgaged property. The Court affirmed this rule in Eyster v. Gaff, 91 U.S. 525 (1875). (Eyster v. Gaff, 91 U.S. 525 (1875))

The assignee’s failure to object to the creditor’s election to sue in state court constitutes consent to the state court’s jurisdiction, thereby validating the state court’s authority to hear the secured‐creditor action. (derived from § 20, 14 Stat. 526, Rev. Stat. § 5075, and the foregoing cases)

Updated August 6, 2026

Reasoning

The Court began by stating the controlling statutory rule: § 20 of the Bankruptcy Act (14 Stat. 526, Rev. Stat. § 5075) authorizes a creditor who has been admitted as a creditor of the general estate “to proceed in the State court, if the assignee does not object, or in the courts of the United States, at his election.” This provision makes the creditor’s election to sue in state court valid so long as the assignee in bankruptcy refrains from objecting.

Relying on Claflin v. Houseman, 93 U.S. 130 (1876), the Court reiterated that, even before the Revised Statutes, federal courts did not possess exclusive jurisdiction over disputes concerning property of a bankrupt estate; state courts retained concurrent jurisdiction and could hear suits to settle conflicting claims to such property.

The Court then cited Mays v. Fritton, 20 Wall. 414 (1872), which held that when an assignee in bankruptcy submits himself to the jurisdiction of a state court in a suit affecting the estate, the assignee is bound by any judgment that the state court may render. Thus, the assignee’s consent to the forum gives the state court full authority over the matter.

Eyster v. Gaff, 91 U.S. 525 (1875) was invoked to emphasize that the filing of a bankruptcy case does not divest state courts of jurisdiction over actions to enforce a secured creditor’s lien or to obtain sale or disposition of mortgaged property; any jurisdiction conferred on federal courts is concurrent, not exclusive.

Applying these precedents to the facts, the Court noted that the creditor had proved his claim, obtained leave from the bankruptcy court to enforce the mortgage, and that the assignee made no objection to the creditor’s election to sue in state court. Under § 20 and the earlier cases, the creditor’s choice of forum was therefore lawful and the state court possessed proper jurisdiction.

The bankrupt debtor and his wife argued that the bankruptcy proceeding stripped the state court of jurisdiction, but the Court held that their objection was insufficient because the statute places the decisive gate‐keeping function on the assignee, not on the debtor. Since the assignee did not object, the state court’s jurisdiction remained intact, consistent with Eyster.

The Court underscored a policy rationale: secured creditors must be able to enforce their liens without being forced into federal court where the assignee’s duties are limited to unsecured claims. Allowing state‐court enforcement promotes efficient resolution of secured claims and respects the statutory scheme that gives creditors a choice of forum.

From these authorities the Court inferred that the assignee’s lack of objection operates as an implied consent to the state‐court proceeding, binding the assignee to any judgment and precluding the debtor’s jurisdictional challenge. Consequently, the state court’s judgment could not be set aside on the ground that bankruptcy had removed its authority.

Accordingly, the Supreme Court affirmed the lower judgment, holding that the bankruptcy case did not divest the state court of jurisdiction over the secured‐creditor action and that the creditor’s election to sue in state court was proper and binding.

Updated August 6, 2026

Concurring/Dissenting Opinions

Authoring Justice: No separate concurring or dissenting opinions were filed.
Type of Opinion: None — the decision reflects a single majority opinion authored by Chief Justice Waite.
Summary of Reasoning: The opinion text contains only the majority reasoning of Chief Justice Waite, with no additional opinions authored by other justices; therefore, the Court’s judgment was issued without any concurring or dissenting opinions.

Updated August 6, 2026

Case Relevance

This decision is authoritative for the principle that, under § 20 of the Bankruptcy Act (14 Stat. 526, Rev. Stat. § 5075), the filing of a bankruptcy case does not divest state courts of concurrent jurisdiction over a secured‐creditor suit to enforce a mortgage lien or obtain disposition of the mortgaged property, and that the assignee’s failure to object to the creditor’s election of a state forum constitutes consent that validates the court’s jurisdiction and binds the assignee to any judgment; the Holding directly resolves the substantive issue of jurisdiction and the procedural issue of the lower court’s ruling by affirming that the creditor’s election was proper and the state‐court judgment cannot be set aside on jurisdictional grounds. The rule applies broadly to any secured‐creditor action arising in a bankruptcy case where the statutory election is exercised and the assignee does not object, regardless of the particular state or the nature of the underlying property, but it is limited to actions covered by § 20 and does not extend to claims that fall outside the secured‐creditor context or to situations where the assignee timely objects. Consequently, the case is a valuable source for litigants and courts seeking a clear, categorical statement that state‐court jurisdiction survives bankruptcy filings absent an assignee objection, thereby closing a procedural loophole, providing a uniform standard for forum‐selection disputes, and supporting policy arguments favoring efficient enforcement of secured claims; it does not, however, address how jurisdiction is allocated when the assignee does object or when the creditor seeks a federal forum, issues that remain for separate analysis.

Updated August 6, 2026

Relevant Quotes

Quoted text: "neral estate. If he does, and it becomes necessary to adjust the liens before his sale, he may, under the ruling in Claflin v. Houseman, institute the necessary proceedings for that purpose in the 'courts of the United States, or of the State, as h.e chooses. If he. does not, the secured creditor who wishes to make'his security available must act; and, Having obtained leave of the bankrupt court to bring his action for that purpose, he may proceed in the State court, if the assignee does not object, or in the courts of the United States, at his election. Here the necessary leave to sue was obtained before the decree was rendered, and the assignee, instead of .objecting to the'jurisdiction of the State court, consented to that mode of proceeding. The bankrupt and his wife alone objected; but as to them, as we held in Eyster v. Gaff , the jurisdiction of the State court .was not divested by the proceedings in bankruptcy."
Bluebook pinpoint citation: 95 U.S. 58
Explanation: The passage applies the statutory rule to the facts: the creditor obtained leave, the assignee did not object, and the Court affirms that the state court retained jurisdiction, citing Eyster to reject the argument that bankruptcy divested it.

Updated August 6, 2026

Synthesis

Not available

All jurisdictions

Not available.

Additional Comments

Claflin v. Houseman · 93 U.S. 130Mays v. Fritton · 20 Wall. 414

Monetary awards

No monetary awards found.

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Brown v. La Société Française De Bienfaisance Mutuelle
138 Cal. 475 · 1903 Cal. LEXIS 705 · 71 P. 516
McHenry v. McHenry
150 Kan. 498 · 1939 Kan. LEXIS 157 · 95 P.2d 261
McHenry v. McHenry
1981 R.I. LEXIS 1023 · 424 A.2d 1067
McHenry v. McHenry
108 S.E. 522 · 152 Ga. 105 · 1921 Ga. LEXIS 18
McHenry v. McHenry
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Metadata

Court

Supreme Court of the United States

Decided

November 18, 1877

Docket

Precedential status

Published

McHenry v. La Société Française D'Épargnes

Citing opinions

Headnotes

Opinion