Appeal from the District Court of the United States for the Northern District of Indiana, Fort Wayne Division; Thomas W. Slick, Judge.
Before SPARKS, MAJOR, and TREANOR, Circuit Judges.
This is an action brought by the United States against the Peoples Trust & Savings Company of Fort Wayne, Indiana, executor of the estate of Earl L. Martin, deceased, to recover a judgment for income taxes for the calendar years 1929 and 1930, which was prior to decedent's death.
Defendant demurred to the complaint on the ground that the District Court was without jurisdiction, inasmuch as decedents estate was being administered in the Probate Court of Indiana. The demurrer was sustained, the court holding that it was without jurisdiction, but even if it had jurisdiction, it was discretionary, and such discretion was exercised by relegating the parties to the State Court having probate jurisdiction. This appeal thus raises solely the jurisdictional question.
Plaintiff relies upon Section 24(1) of the Judicial Code, U.S.C., title 28, § 41(1), 28 U.S.C.A. § 41(1), which confers original jurisdiction upon United States District Courts "of all suits of a civil nature, at common law or in equity, brought by the United States." It is conceded by plaintiff that the Probate Court of Indiana has jurisdiction to entertain the suit in question. On the other hand, it is the contention of defendant that the Federal Court is without jurisdiction and that exclusive jurisdiction is vested in the Probate Court of Indiana. The applicable provision of the Statute of that state is found in footnote.*fn1
Many cases are cited wherein the Federal Courts have considered and determined their jurisdiction to entertain suits against administrators and executors for the purpose of establishing claims against estates and wherein the rights of such persons have been determined, but no case cited and none which we are albe to find decides the precise question here involved.
In Byers v. McAuley, 149 U.S. 608, 13 S. Ct. 906, 37 L. Ed. 867, the Court held that an administrator appointed by a State Court might properly be sued in a Federal Court. In discussing the question, however, the court on page 615, 13 S. Ct. on page 908, said:
An administrator appointed by a state court is an officer of that court. His possession of the decedent's property is a possession taken in obedience to the orders of that court. It is the possession of the court, and it is a possession which cannot be disturbed by any other court."
The court concluded that jurisdiction was in the Federal Court and permitted the recovery of a judgment, yet at the same time found that such judgment gave no prior lien on the property but simply fixed the status of the parties and compelled the administrator to recognize it in the administration of the affairs of the estate.
In Waterman v. Canal-Louisiana Bank Co., 215 U.S. 33, 30 S. Ct. 10, 54 L. Ed. 80, the Court in discussing a similar question, on page 43, 30 S. Ct. on page 12, said:
"The rule stated in many cases in this court affirms the jurisdiction of the Federal courts to give relief of the nature stated, notwithstanding the statutes of the state undertaken to give to state probate courts exclusive jurisdiction over all maters concerning the settlement of accounts of executors and administrators in the distribution of estates. This rule is subject to certain qualifications, which we may now notice. The courts of the United States, while they may exercise the jurisdiction, and may make decrees binding upon the parties, cannot seize and control the property which is in the possession of the state court."
After citing and discussing a number of cass, the court further said on page 46, 30 S. Ct. on page 13:
"The United States circuit court, by granting this relief, need not interfere with the ordinary settlement of the estate, the payment of the debts and special legacies, and the determination of the accounts of funds in the hands of the executor, but it may, and we think has the right to, determine, as between the parties before the court, the interest of the complainant in the alleged lapsed legacy and residuary estate, because of the facts presented in the bill. The decree to be granted cannot interfere with the possession of the estate in the hands of the ...