164 F. 749 | E.D. Pa. | 1908
Unfortunately the true nature of this proceeding seems not to have been clearly realized, with
Instead of abandoning the special reference, however, the referee and the parties interested went on with it for 12 or 15 months, taking a mass of testimony, and adding to the confusion by proceeding at the same time with the statutory examination of the bankrupt under the
Upon this record the court is asked to make the order recommended by the first report, directing the bankrupt to deliver certain property, or pay its value, and to pay certain cash to his trustee. Clearly, as I think, no such action should be taken. The receiver’s petition of September 23d, which is the foundation of the whole proceeding, does not contemplate such an order, but simply asks for a general inquiry concerning the whereabouts of the bankrupt estate. If it had appeared in the course of this inquiry that the bankrupt probably controlled or was possessed of money or property that rightfully belonged to his estate, the correct proceeding to compel delivery would have been begun by presenting a petition making definite averments upon this subject and offering a definite issue. To such a petition the bankrupt would have been entitled to reply, and upon the issue raised by his answer both parties would have had the right to offer evidence, not only that which had been already taken, but such further evidence as might be relevant. The facts would thus appear, and the proper order 'would have the necessary support. Here, however, there was neither an appropriate petition nor an answer thereto, and therefore no issue to which the evidence can be definitely applied. On such a record I must decline to make an order that might be followed by the imprisonment
“Dispatch in judicial proceedings is commendable; but in proceedings involving the liberty of a citizen be has a right, not only to be informed of the precise claim against him, but, after receiving that information, he has a right to a reasonable time to prepare his answer and present his proofs, and, lastly, to be heard by counsel on the law and facts of the case. While proceedings in bankruptcy may be summary, they should not be too summary; in other words, they should not be so summary as to deprive the bankrupt of those fundamental rights and privileges that belong to every citizen, among which are the right to be advised of the demand made upon him, and the right, after being so advised, to have a reasonable time to prepare his defense and produce his witnesses. The bankrupt act does not do away with these rights, and no citizen forfeits them by being adjudged a bankrupt. The bankrupt act contemplates that proceedings in bankruptcy shall go forward with all reasonable dispatch compatible with the due and orderly administration of justice and a proper regard for the fundamental rights of the citizen.”
So, also, in Re De Gottardi (D. C.) 114 Fed. 332, numerous authorities are collected in support of the proposition that a bankruptcy court has jurisdiction, “on issues properly joined,” to determine whether or not a bankrupt has in his possession or under his control money or other property belonging to his estate in bankruptcy, and, “if the issues be found against the bankrupt,” to make an order requiring him to pay or deliver to the trustee, etc.
Moreover (whatever may have been the fact seven years ago, when these proceedings were begun), I am by no means satisfied that the bankrupt has now in his possession, or under his control, the money and property referred to in the reports of the special referees, and that he could comply with an order to deliver to his trustee. In such a situation,- the duty of a District Court is thus declared by Judge Gray, speaking for the Court of Appeals of this circuit in American Trust Co. v. Wallis, 126 Fed. 466, 61 C. C. A. 344:
“The powers vested in courts of bankruptcy to accomplish the'general purposes of the bankrupt law, to wit, to segregate the estate of the bankrupt and provide for its equitable distribution amongst the creditors, are plenary and far-reaching. The court may, by summary order, direct the delivery and turning over to the trustee by the bankrupt, or by any third person holding the same by his order and control, any property which, prior to the filing of the petition, the bankrupt could by any means have transferred, or which might have been levied upon and sold under judicial process against him. For dis-cbedience of such an order the court in bankruptcy undoubtedly has the power, by attachment for contempt, to enforce compliance with such order, and punish refusal to comply. This power, however, is far-reaching and drastic, and must be exorcised with cautious discretion. If the bankrupt denies that he has possession or control of the property, or, if a third person in possession thereof claim to hold it, not as the agent or representative of the bankrupt, but by title adverse to him, and there is no evidence to indisputably show that such denial or claim is false or fraudulent, and that the case is one of simple concealment or refusal on the part of the bankrupt, or the one in possession, to deliver up the property as ordered, it would be an unwarranted stretch of power on the part of the court to resort to a summary proceeding for contempt for the enforcement of its order. In the absence of fraud or concealment, the bankrupt court can only order the delivery of property to the trustee which the bankrupt is physically able to deliver up, having the same in his possession or control. If it shall appear that he is not physically- able to deliver the property required by the order, then, confessedly, proceedings for contempt, by fine and imprisonment, would result in nothing, certainly not*753 in compliance with the order. The contempt in this case could only be purged by a reiteration of the physical impossibility to comply with the order whose disobedience is being thus punished. An order made under such circumstances would be as absurd as it is inconsistent with the principles of individual liberty.”
The motion to direct the bankrupt to deliver and pay must be refused.