In re Campbell

4 F. Cas. 1147 | W.D. Va. | 1877

HUGHES, District Judge.

As to the first exception of the assignee, it is true that, when first presented to the court, the register's report recommended nothing as to Mrs. Campbell's claim; but, on the judge’s suggestion that the register should recommend either the allowance or disallowance of the claim, the words recommending the allowance were inserted by the register in court. This amendment removes the technical objection; and the first exception, which is only a technical one, is overruled. 2. The second exception is also overruled. The claim of Mrs. Campbell was set forth in full, and preferred by her in her petition presented in open court, at the October term. It was one of the matters expressly referred to the register, by the order of the 31st Oct.. 1S77, made on the petition of the assignee. In pursuance of that order, the creditors were convened by the register to show cause against the claim and against a sale free of incumbrances, some time before he made up his report. They accepted legal service of his summons to appear before him. After a full hearing by him and full opportunity given to all for objecting to his report, it was made up on the 8th December, while the lien creditors were still before him, and with their full knowledge. With the knowledge of them all, he filed the report in open court on the 12th; ' and the assignee filed his exceptions to it on that day; and all have now been fully heard by the court in opposition to its allowance. The matter was before the register from 31st of October until the 12th December; and the creditors had the greater part of that time to put in their evidence, and file their arguments and objections against the allowance claimed by Mrs. Campbell. They also, had a day and did make full argument against' it in court.

The bankruptcy proceeding is essentially a summary one. The action of the bankruptcy court, in regard to the real estate of this bankrupt, and to the liens and claims upon it, was invoked by the assignee himself. The proceeding taken on his motion, though necessarily summary in form, has been with full opportunity given for all parties in interest to be fully heard; and it is not competent for the assignee to object that he has failed to avail himself of the opportunities afforded him on his own motion, for making good his case.

3. The third objection is overruled. It was on the petition of the assignee that the reference to the register was made, and that the lien creditors and all persons having claims upon the real estate were convened. It was in consequence of such petition of the assignee to -sell clear of all incumbrances, that Mrs. Campbell presented her claim by petition, and that it was referred, along with other claims, to the register. The assignee had full notice of this claim by the proceedings in court; and as to the proceedings before the register, it was he, virtually, who was summoning and convening incumbran-cers, and not they him. It was his duty to appear before the register without summons; and, in point of fact, he was there diligently, both in person and by counsel. It does not lie in his mouth, therefore, to say that he was not summoned before the register during his action upon a reference which the assignee himself had procured.

4. The fourth objection is overruled. The general creditors are represented, in all matters in bankruptcy, by the assignee. They are generally so numerous that it is not practicable to convene them for any purpose except to vote in the election of an assignee, and on the subject of dividends. It is not the policy of the bankruptcy law to convene them on other questions. It gives them no power to act on other questions. This as-signee was in fact present before the register, and represented all general creditors. The action of the assignee in now resisting the allowance, is the action of the creditors. They could do no more than he is doing for them; and the objection, that they have not been convened each in person, is not well taken. He is, in all respects, their agent, attorney, and representative by statutory appointment.

5. The fifth exception is overruled. In bankruptcy proceedings the bankrupt may be at any time examined by the register and by the court. As to all matters concerning his estate, he is a competent witness; and no objection can lie to his testimony, save to its credibility. See section 5080, Rev. St. U. S., and section 8 of the amended bankruptcy act of June, 1874 [18 Stat. 180], and Bump, Bankr. § 5080a. So also may the wife of a bankrupt be examined in bankruptcy. See Id. §§ 50S7, 5088. And, generally, in the courts of the United States, “no witness shall be excluded in any civil action because he is a party to or interested in the issue tried.” Rev. St. U. S. p. 162, § 858.

6. The question raised by the sixth exception is one of more serious moment. The facts of the case seem to have been misapprehended by the exceptant. There has been no consummated conversion here, by the husband, of the wife’s separate estate, as ex-ceptant claims; and the case of Poindexter v. Jeffries, 15 Grat. 363, and those like it, do not apply. There has been in this case a change of investment, from some other form, into the form of a dwelling-house near Abing-don; but the title of that property has not yet been made to the separate use of the wife according to the agreement or understanding between herself and husband. Whoever, therefore, holds the legal title, holds it for the uses of whatever purpose the husband and wife had agreed that it should be devoted to. The legal title outstands in a third person subject to the decree of a competent court. The assignee cannot get the legal title without coming into a competent court and obtaining a decree for its conveyance to him; and such court will then decree according to the equity of the case. This court is competent under the third clause of section 4972, Rev. St. U. S., to adjudicate specific claims upon the bankrupt’s estate.

It is a general proposition that, in equity, where the conversion of the wife’s property from one form into another has been attempted. or consummated, the court will consider that as having been done which should have been done. I had occasion to examine the law of-this subject very elaborately in the bankruptcy Case of Anderson [Case No. 331,] where a great number of authorities on the subject were reviewed; some of which are referred to in the briefs of counsel in this cause. That was a ease in which, through the fraud of one Robert GJbbory, there had been an actual conversion, by the husband, of the wife’s real estate to his own name and possession, by legal deeds; and it was decreed that he was to.be treated as a trustee for his wife; and that his lands did not pass to his assignee by the assignment in bankruptcy: and were not bound by the liens of his judgment creditors. In the present case, the conversion has been only partially effected; and the court may, with greater propriety, direct that that shall be done which ought to have been done; the more, because it had been agreed by the husband and wife that the investment in the dwell-house should be for her own benefit. The disposition of courts in recent years has been to go very far, and to reach out very diligently and searchingly to preserve a wife’s inheritance to her separate use. It is only where fraud appears, that this policy has not been pursued; or where the rights of bona-fide purchasers, without notice, have intervened between the conversion and the settlement. And the courts invariably hold, in this last class of cases, that the purchase must be actual, and not merely constructive: —that purchase-money must have actually been paid before notice; the giving of a bond on time or the entering into a contract for the future payment of money not being sufficient. See 2 White & T. Lead. Cas. Eq. 62; 2 Atk. 241; 3 Atk. 304, 804. And in this connection the courts hold that a judgment creditor is not a purchaser. 2 White & T. Lead. Cas. Eq. 92, and cases there cited; Id. 101, 102.

7. The seventh exception is not well taken, in alleging that there is, in this case, no property out of which the wife can claim a settlement; for the allegation is that the dwelling-house property is the result of the expenditure of her' separate estate. That is, of course, therefore, the property out of which her settlement must be made, if made at all.

As to the objection that the allegations of Mrs. Campbell’s petition cannot be taken as true, because process was not served, nor opportunity given to the assignee or creditors to answer, that objection has already been considered in connection with exceptions two and three. In the summary proceeding, the exception takes the place of the answer, and the reference offers full opportunity for counter testimony. The sworn petition of Mrs. C., supported by the sworn, testimony of the bankrupt, and of the witnesses Kreger and Fields, taken by the register, with full opportunity of cross-examination afforded to the assignee and to the creditors, all of whom had been summoned before the register, constitute the proof on which the register based his report. It is sufficient proof in form and substance to justify a decree. If the as-signee and lien creditors failed, in the period of six weeks, to make answer to the petition, and to adduce testimony in refutation of the allegations of the petition and of the testimony of the bankrupt and other witnesses, the court has a right to presume that no counter testimony was available, and that no denial by answer could be made to the allegations of the petition. .These allegations are themselves sufficient, if true, to warrant the court in decreeing a settlement; at least to the extent of requiring that the separate means of the wife, which have been expended upon the dwelling-house property by the husband, under the circumstances set forth in the wife’s petition, shall not be diverted to the payment of the husband’s debts.

On the merits, I think there can be no difficulty in this case. The only question admitting of doubt is, whether it was competent for the wife to come into the bankruptcy proceeding for the adjudication of the matters set forth in her petition; and whether it is competent for the district court, on its bankruptcy side, in the summary bankruptcy proceeding, to adjudicate her rights on the petition, on the reference to the register and on the exceptions of the assignee to the register’s report. It is well settled that the assignee could not, by his petition, have brought the wife and the person holding the legal title in the dwelling-house, into the bankruptcy court against their will; nor required them, without their consent, to submit to a summary adjudication of the wife’s rights by that court. The case of Smith v. Mason, 14 Wall. [81 U. S.] 419, settles that point; and the case of Humes v. Scruggs, 4 Otto [94 U. S.] 22, somewhat similar in its facts to the present one, shows that a plenary proceeding is the proper one to be employed where the interests of third parties are to be affected. But if third parties who are incidentally connected with the estate and assets in bankruptcy, are proceeded against summarily by the assignee, and choose to come in voluntarily, thereby waiving the rights which they have under the ruling in Smith v. Mason, then we have the authority of Stickney v. Wilt, 23 Wall. [90 U. SJ 150, for holding that that consent of theirs gives jurisdiction to the court in bankruptcy. Just as clearly may such parties (as Mrs. Campbell for instance, in this case), come in by their own petition, and ask an adjudication of their rights. Here the assignee himself invoked the authority of the court to take the summary proceeding before the register and to sell real estate free of incumbrances. Spurred to action by this petition of the as-signee for authority to sell the property in which she claimed a settlement free of incum-brances, the wife of the bankrupt, in favor of whose equitable right to a settlement out of one parcel of the bankrupt’s real estate a legal title outstands, comes voluntarily in, by petition, and prays that that right may be adjudicated by this court. The ease of Stick-ney v. Wilt affords authority for the court to proceed in the summary manner when invoked by the assignee, and concurred in by the bankrupt’s wife.

The court referred both petitions, by the same order, to the register, and all parties have had the period of six weeks to make good their cases by testimony; they have had a hearing, after personal notice, before the register; and they now have a day in court foi- final argument and all proper motions. The interlocutory petition and the rule nisi are the principal instruments of pleading in the summary proceeding, and correspond with the bill and answer in the plenary one, which they substitute. As to general creditors in bankruptcy, even the petition and rule are unnecessary. See In re Judkins [Case No. 7,560],

On the pleadings and proceedings, therefore, as well as on the merits, I feel warranted in overruling the seventh exception and making a decree in the case. I do so in view of section 4972 of the Revised' Statutes of thé United States, which extends the jurisdiction of the bankruptcy courts of the United States, amongst other things, to “the ascertainment and liquidation of the liens and other speciiic claims” on the assets of the bankrupt. Having, under this section, full jurisdiction over the subject-matter of the claim, the authority of the bankruptcy court was defective only in respect to such persons as are but incidentally connected with the bankrupt’s estate. The case of Stickney v. Wilt [supra], removes any difficulty which the court might have on that score, by deciding that, where such persons come voluntarily into the bankruptcy court, as Mrs. Campbell has done here, that court may bind them by its decrees. The seventh exception of the assignee is therefore overruled.

Decree entered directing the assignee to pay to Mrs. Campbell the sum of six thousand dollars out of the proceeds of said house and lot, and that the stocks, etc., set forth in her petition be set apart to her for her sole and separate use in lieu of her contingent right of dower.