133 F. 363 | 8th Cir. | 1904
after stating the case as above, delivered the opinion of the court.
The appellant is met at the threshold of his case by a motion to dismiss his appeal upon the ground that the judgment which has determined that his mortgage lien upon the property and the proceeds of the property covered by it is void in the face of the
The provisions of the Bankruptcy law which relate to the question presented by this motion are:
“The Circuit Courts of Appeals of the United States * * * are hereby invested with appellate jurisdiction of controversies arising in bankruptcy proceedings from the courts of bankruptcy from which they have appellate jurisdiction in other cases.” Section 24a.
“The several Circuit Courts of Appeals shall have jurisdiction in equity, either interlocutory or final, to superintend and revise in matter of law the proceedings of the several inferior courts of bankruptcy within their jurisdiction.” Section 24b.
“That appeals, as in equity cases, may be taken in bankruptcy proceedings from the courts of bankruptcy to the Circuit Court of Appeals of the United States * * * in the following cases, to-wit: (1) from a judgment adjudging or refusing to adjudge the defendant a bankrupt; (2) from a judgment granting or denying a discharge; and (3) from a judgment allowing or rejecting a debt or claim of five hundred dollars or over. Such appeal shall be taken within ten days after the judgment appealed from has been rendered.” Section 25a.
3 U. S. Comp. St. 1901, pp. 3431, 3432, 30 Stat. 553, c. 541.
Under the judiciary act of March 3, 1891, the Circuit Courts of Appeals had “jurisdiction to review by appeal or by writ of error final decision in the District Court and the existing Circuit Courts in all cases other than those provided for in the preceding section of this act, unless otherwise provided by law.” 1 U. S. Comp. St. 1901, p. 549, section 6, c. 517, 26 Stat. 828.
The case here under consideration was not provided for in the preceding section of the act or in any other way than in section 6. The decision of the District Court that the lien by mortgage claimed by the appellant could not be enforced against the trustee who had seized the property which constituted the security for his debt was a final decision. It rendered the question of the mortgagee’s right to his security res adjudicata. It finally determined a separate collateral controversy distinct from the general subject of litigation in the proceeding in bankruptcy. Withenbury v. U. S., 5 Wall. 819, 18 L. Ed. 613; Williams v. Morgan, 111 U. S. 684, 4 Sup. Ct. 638, 28 L. Ed. 559; Standley v. Roberts, 8 C. C. A. 305, 308, 59 Fed. 836, 839; Salmon v. Mills, 68 Fed. 180, 15 C. C. A. 356; Central Trust Co. v. Marietta, etc., Ry. Co., 48 Fed. 850, 1 C. C. A. 116; Grant v. Railroad Co., 50 Fed. 795, 1 C. C. A. 681. If this controversy had arisen in a federal court when it was not sitting in bankruptcy, the final decision of it would have been reviewable in this court by writ of error or appeal. Section 25a vests the Courts of Appeals with appellate jurisdiction of controversies arising in bankruptcy proceedings of which they have jurisdiction in other cases. As this court has appellate jurisdiction of this controversy in other cases in which it might be presented in a federal court, it has such jurisdiction when it arises in proceedings in bankruptcy.
The jurisdiction of the court of bankruptcy to render its judgment in this case was derived from section 2 (7) of the bankruptcy act of 1898, which empowers that court to “cause the estates of
Counsel for the appellee have persuasively argued in opposition to this conclusion that this appeal ought not to be maintained (1) because the allowance of appeals by section 25a from the decisions of courts of bankruptcy within ten days after their rendition in the three classes of cases there specified excludes appellate jurisdiction in those courts in all other cases, and the case at bar does not belong to either of these three classes (In re Whitener, 105 Fed. 180, 186, 44 C. C. A. 434, 440; In re Columbia Real Estate Co., 112 Fed. 643, 50 C. C. A. 406; Fisher v. Cushman, 103 Fed. 860, 43 C. C. A. 381, 51 L. R. A. 292; Hutchinson v. Le Roy, 113 Fed. 202, 51 C. C. A. 159) ; and (2) because, as they contend, no appeal may be maintained from any decision which may be superintended and revised in matter of law under section 24b, and the judgment in this case is susceptible of such superintendence and revision (In re Worcester County, 102 Fed. 808, 813, 42 C. C. A. 637; Hutchinson v. Le Roy, 113 Fed. 202, 51 C. C. A. 159; In re Good, 99 Fed. 389, 39 C. C. A. 581). They have called attention to some of the cases which have been cited, and some of these cases tend to sustain the premises upon which this argument is based. Nevertheless these premises have never appeared to this court to be sound. The provision for appeals within 10 days from the renditions of the decisions in the three classes of cases treated in section 25a has never seemed to us to repeal, revoke, or exclude the plenary appellate power vested in the Courts of Appeals by section 24a to review the decisions of separable controversies in reference to the title, possession, or distribution of the estates of bankrupts which the courts of bankruptcy may render in the course of their proceedings. Steele v. Buel, 104 Fed. 968, 969, 44 C. C. A. 287, 288.
The purpose of Congress in the enactment of the judiciary act of 1891, and the effect accomplished by that law, were to provide an opportunity for a review either in the Supreme Court or in the Circuit Court of Appeals of the final decisions by the Circuit Courts and by the District Courts of all the controversies which they might determine. It was not, in our opinion, the purpose of Congress to strike down any portion of this grant or to impair in any way the appellate jurisdiction thus given by the enactment of the bankruptcy law. On the other hand, the provisions of the bankrupt act clearly show that it intended thereby to preserve this jurisdiction over the controversies to which it had already attached in other cases, and to supplement it with the grant of authority to review the decisions of controversies which had not theretofore been within that jurisdiction. Before the passage of the bankrupt act the Courts of Appeals had appellate, jurisdiction of controver
Nor is there anything in the grant by section 24b of the power to revise and superintend in matter of law the proceedings of the inferior courts of bankruptcy which in any way affects or limits the general appellate jurisdiction vested by the sections of the law which have been considered. The act of 1898 does not grant the appellate and the revisory jurisdiction in the alternative. It does not give to disappointed litigants the right of appeal or the right of revision in matter of law. It grants the right of appeal and the right of superintendence and revision in matter-of law only. It gives both rights freely and without limitation. The two grants are not inconsistent, and on familiar principles both must stand, and in a proper case either may be invoked.
Any other construction of the bankruptcy law would- deprive litigants in the courts of bankruptcy of a review of the decisions of the most important controversies determined by those courts, of controversies between the trustee and third parties over the title to, and the liens upon the alleged property of the estate. A revision as a matter of law is not equivalent to nor is it adequate to take the place of an appeal. Many controversies of the nature of that here under consideration arise which involve large interests in which there is little doubt of the law, but in which the correctness of the finding of facts is both crucial and doubtful. The act plainly declares that the final decisions of such controversies may be reviewed by appeals, and no persuasive reasons convince that this declaration should not have its full effect.
The late decision of the Supreme Court in Hewit v. Berlin Machine Works, 194 U. S. 296, 24 Sup. Ct. 690, 691, 48 L. Ed. 986, as we understand it, is an adjudication of this question in accord with these views. In this case the Berlin Works had sold and delivered to the bankrupt certain machines under a contract that the title to them should remain in the corporation until the vendee had performed his agreement to pay the purchase price. The trustee had taken possession of the machines. Thereupon the vendor filed a petition for the possession of the property or for a preference in
The claim of the appellant in the case at bar is of the same nature, and it was presented in substantially the same way. It was brought to the attention of the court of bankruptcy by a verified statement of the mortgagee which set forth his mortgage, the claim it secured, and the specific property upon which he claimed a lien under it. The issue it presented was whether or not the mortgage, which was valid between the parties, was voidable by the trustee. That issue was separate and distinct from the general subject-matter of the proceedings in bankruptcy, and it presented a controversy of which the Circuit Court of Appeals would have had jurisdiction if it had arisen in any other case in a federal court. The conclusion is that the Circuit Courts of Appeals have jurisdiction to review the final decisions by the courts of bankruptcy of controversies arising between the trustees in bankruptcy and third parties over the title to, or over liens upon the alleged property of the bankrupt or its proceeds under section 24a; that this jurisdiction is not excluded or revoked by the grant of appellate jurisdiction over the three classes of cases specified in section 25a; but the effect of that section is to limit the time within which appeals may be taken in the cases there treated, and to increase to some extent the appellate jurisdiction of the Courts of Appeals; that the general appellate jurisdiction vested by section 24a is not impaired or affected by the grant of the power of revision and supervision in matter of law contained in section 24b; and that the motion to dismiss this appeal must be denied.
When we turn to a consideration of the merits of the case wc find ourselves embarrassed by the state of the record. The evidence and many of the proceedings before the referee and in the court below appear before us only by means of a bill of exceptions which the record contains. This is a proceeding in bankruptcy, and a proceeding in bankruptcy is a proceeding in equity. Bardes v. Hawarden Bank, 178 U. S. 524, 535, 20 Sup. Ct. 1000, 44 L. Ed.
It appears, however, that this bill of exceptions was presented by the appellant to the court below, that it bears the written approval of counsel for the appellee, and that it was filed in the case by the order of the District Court. In view of these facts, we have concluded, with some hesitation, that the paper called a “Bill of Exceptions” may be deemed a written stipulation of the parties to the effect that it correctly portrays the evidence and the proceedings below, and upon this basis we proceed to consider the case it presents.
The mortgage provided that until default the mortgagor might retain possession of the goods and chattels and use and enjoy them, but that in case of default, or if the mortgagor should attempt to sell or remove the mortgaged property without the written permission of the mortgagee, the latter might take possession of and sell the property to pay the debt. The chief business of the mortgagor was the manufacture of machines upon the orders of its customers, but it was also engaged in repairing machinery, in manufacturing-water registers for sale, and in the purchase and sale of the materials used in its manufacturing business, and of dry batteries and electrical fixtures and supplies which were not used in its business of manufacturing. It did not hold itself out as a dealer in any of these materials, but it sold them in the usual course of business to any one who came and inquired for them. During the existence of the mortgage the Modern Machine AVorks Company sold about 3,000 or 4,000 pounds of steel, which was worth about $175, and various small amounts of materials and of electrical supplies. The mortgagee testified that he never gave his consent to the sale of any of this property with the exception of one machine; that he consented to that sale on condition that the proceeds should be applied to the payment of the mortgage debt; that he did not know that the mortgagee had sold any of the property covered by the mortgage until litigation began; that he visited the mortgagor’s place of business two or three times after the mortgage was given; that he did not notice the business particularly; that he was there for the purpose of having his automobile repaired; and that he did not know that he knew that the mortgagor was buying and selling merchandise. The mortgage covered machinery used in the manufacturing business of the mortgagor, electrical fixtures and supplies and materials used in the manufacturing business.
It is assigned as error that in this state of the case the court below held the mortgage voidable at the option of the trustee upon
The argument of counsel for the appellant that the rule of law-adopted by the Supreme Court of Colorado is inapplicable to this case because the mortgagor was a manufacturer, and not a merchant, has not been overlooked in reaching this conclusion. This argument has not prevailed, because, while the chief business of the mortgagor was that of manufacturing machinery, there is testimony that it was also engaged in the business of buying and selling finished goods, and because the courts of Colorado hold that if a mortgage is voidable as to any part of the property which it describes it is voidable as to all of it. If a mortgage of a soda fountain and certain goods and merchandise is voidable because there was a consent to the sale of the goods and merchandise, as in Wilson v. Voight, it is not perceived why a mortgage of machinery and of electrical supplies is not made voidable by a consent to the sale of the electrical supplies from day to day in the ordinary course of business.
The judgment below must be affirmed, and it is so ordered.