176 F. 189 | 9th Cir. | 1910
This is a petition for revision, under section 24b of the bankruptcy act (Act July 1, 1898-, c. 541, 30 Stai. 553 [U. S. Comp. St. 1901, p. 3432]), of the proceedings of the United States District Court for the District of Montana. The question presented is .whether the bankruptcy court had power, by summary proceedings, to order the petitioner to surrender and turn over certain real and personal property, standing in his own name, to the trustee of the bankrupt.
The amended petition of the trustee for the order alleged, in effect, that certain real estate therein specifically described, situated in the state of Montana, stood upon the records of the several counties of the state in which the various pieces of property were respectively situate in the name of John W. Cooney, the petitioner here, and also alleged that certain personal property, specifically described in the petition of the trustee, also stood in the name of John W.’ Cooney, but averred, upon information and belief, that all of the property so mentioned and described was purchased by the bankrupt, Frank Henry Cooney,'with his own money, and that no part of the consideration therefor was paid by the said John W. Cooney, and that the said Frank Henry Cooney has at all times been in possession of all of the property, having absolute control and.management thereof, and tha,t the taking of the title to the described property in the name of the said John W. Cooney “was and is colorable only and for the purpose of evading the creditors.of the said Frank Henry Cooney.”
The answer of John W. Cooney to the trustee’s amended petition put in issue the averments in respect to fraud and the interest of Frank Henry Cooney, and alleged, among other things, that the real property described in the trustee’s petition as lot 5 in block 2, AVest Excelsior addition to the city of Butte, “does stand in the name of this defendant and respondent, and has stood in his name for approximately four years, and that this defendant and respondent is the owner thereof by virtue of a deed, and that he built a house on said property himself, and that the said bankrupt, Frank H. Cooney,-has not any interest in or possession of the said property, that the said property was not taken in the'name of this defendant and respondent for the purpose of evading the creditors of the said Frank H. Cooney, but alleges that the said property was purchased by John W. Cooney, this defendant and respondent, and the whole of said consideration therefor was paid by said John W. Cooney with his own money, and that he now has, and at all times herein mentioned has had, possession of said prop
His objections to the determination, in such summary proceedings, of the right to the properties in question, were overruled by the referee in bankruptcy, which officer found, in effect, upon the conflicting evidence introduced before him, that all of the property in question really belonged to the bankrupt, Frank Henry Cooney, was paid for with his money, and put in the name of John W. Cooney for the purpose of defrauding the creditors of Frank Flenry Cooney. The matter being brought before the court upon petition for revision of the action of the referee, like objections were there made by John W. Cooney to the jurisdiction of the referee, and of the power of the bankruptcy court to thus determine the property rights in question, resulting, m the af-firmance by the court of the referee’s order. Hence the present petition for revision.
In so ruling we are of the opinion that the learned judge of the court below was in error. That court, as well as the counsel for the respondents here, largely rely in support of their position upon the case of Mueller v. Nugent, 184 U. S. 1, 22 Sup. Ct. 269, 46 L. Ed. 405, which case was subsequently reviewed in the case of Jaquith v. Rowley, 188 U. S. 620, 624, 625, 23 Sup. Ct. 369, 371, 372, 47 L. Ed. 620, where the Supreme Court thus concluded its review of it:
“In other words, Nugent’s Case simply holds that where the agent held 'money belonging to the bankrupt to which he had no claim, but simply refused to give up the property, which he acknowledged belonged to the bankrupt, the bankruptcy court had power, by summary proceedings, to order him to deliver such property to the trustee in bankruptcy”
—which was not only a “wholly different” case from that of Jaquith v. Rowley, but also from that now before us. Like the surety in the case of Jaquith v. Rowley, the petitioner here, John W. Cooney, by his verified answer not only claims the absolute right to hold all of the property in question as against everybody, but specifically alleges the reasons for his claim of ownership of it. Of course, his allegations in that behalf may not be true; still they make a case of adverse claim to the property on his part, to overcome which it was essential for the
We do not think there is anything in the cases of In re McMahan, 147 Fed. 684, 77 C. C. A. 668, In re Noel (D. C.) 137 Fed. 694, or In re Michie (D. C.) 116 Fed. 749, in conflict with what we here hold. In the McMahan Case it was an undisputed fact that the actual possession of the land upon which McMahan asserted an adverse lien was in the trustee of the bankrupt, arid it was, as we think, very properly held that, as the bankruptcy court had through its trustee the actual possession of the land, it was not only within its power, but it was its duty, to determine all questions in reference to the validity of liens upon the property. In the case at bar, however, one of the main questions raised by the adverse claimant was as to the possession of the property by the trustee; he setting forth under oath, not only that the bankrupt never had any title to or interest in the property in question, but never had any possession of it.
The cases of In re Noel and In re Michie seem to us to be in direct line with our conclusion. In the Noel Case (D. C.) 137 Fed. 698, Judge Morris said:
“I think the distinction between the controversies arising in bankruptcy which must be determined by plenary independent suits and those which may be heard on summary petition depends upon who has possession of the subject-matter of the controversy. If the bankruptcy court has possession, then, as a rule, the matter may be heard upon petition and answer. If a stranger lias possession, and is holding by adverse claim, then an independent plenary-suit is in most oases proper. In this case the property was in the possession of the bankrupt, and upon his adjudication Ms title and possession passed to the trustees. The possession of the trustee could not be disturbed by any form of adverse legal proceedings without the concurrent sanction of the court of bankruptcy. That court, having possession of the property, had jurisdiction, upon notice to those claiming to have liens and incumbrances upon it, to order the property to be sold by the trusteed free of all incumbrances, if the court, in its discretion, should determine that such a sale was for the benefit of the unsecured creditors; and after such a sale, having in its control the fund arising from the sale, it would have jurisdiction to determine the conflicting claims of the parties whose liens had been displaced as to the property sold, and transferred to the fund in the court. Ray v. Norseworthy, 23 Wall. 128, 23 L. Ed. 116.”
And in trie Michie Case Judge Rowell held that a court of bankruptcy has no jurisdiction over a controversy between the trustee and one to whom the bankrupt conveyed property, as to such property, where such person has possession, and makes a real, though fraudulent and voidable, adverse claim, and does not consent to the jurisdiction.
_ The judgment of the District Court is reversed, with costs, and with directions to order the dismissal of the trustee’s petition.