278 F. 355 | 2d Cir. | 1921
James T. Wood, Isaac G. Terry, and Morris J. Terry owned, as tenants in common, real property situated at Sayville, Long Island. The property is a two-story frame store building and barn. The Terrys each owned a one-fourth interest, and Wood owned the other one-half. This one-half interest vested in Wood on September 9, 1911. Prior to that time he had a less interest in this one-half, together with other members of his family. The Terrys became vested of their oné-half of the property through the death of their father in 1893. The property Was vested in the family of Wood since 1849, and was used by the petitioners as a place of business until May 15, 1915. For years prior to the adjudication in bankruptcy of Wood, the petitioners paid the Wood owners an annual rental of $200, less one-half of the taxes, insurance, and repairs. There was no lease or other formal agreement entered into. From May 15, 1915, until the commencement of this proceeding, it was not occupied continuously, but it was rented to various tenants from time to time. On May 8, 1912, Wood conveyed his interest in the property to Nancy Harrison, and on July 19, 1912, he was adjudicated a bankrupt on an 'involuntary petition dated June 4, 1912, and the present trustee in bankruptcy was appointed September 26, 1912. The conveyance to Nancy Harrison was adjudicated fraudulent and void as to the trustee on January 10, 1920. During this ownership in common, the care of the property devolved entirely upon the petitioners. They paid the taxes and repairs, and kept the property insured for the benefit of themselves and the members of the Wood family during their respective ownership, and later for the benefit of Nancy Harrison after the conveyance to her.
On January 14, 1920, the referee in bankruptcy granted an order ex parte, which was served upon the petitioners, directing them to show cause why they should not account for all income, receipts, and profits of the property heretofore jointly owned by the bankrupt herein and the said petitioners, and “then and there to pay over in cash to the trustee herein all the amounts due or found to be due to said trustee.” Other relief was prayed for. On July 20, 1920, the petitioners, on application to the District Court, obtained a stay of these proceedings under the referee’s order, and directed that cause be shown on July 29, 1921, before the court, why the order should not be wholly vacated and the petition dismissed. On July 24, 1921, on an ex parte application, the District Judge modified his order, so as to allow the referee to proceed with the accounting ordered by the referee, and directed the petitioners to appear for that purpose before the referee on July 27, 1921. It thus appears that the accounting was summarily ordered without the petitioners’ opposition having been heard, and counsel for them, believing that he had a legal excuse for not appearing on July 27th, advised his clients accordingly, and they did not
One of the petitioners appeared on the 29th before the referee, and was examined as to the matters relating to the account. When the motion to vacate the referee’s order was heard, it resulted in the petitioners being directed to account “for the use, income, receipts, profits, .and enjoyments, occupancy, and benefits of the property of the bankrupt,” and they were directed to file a statement of all moneys and property “received by them in their hands for which they are accountable, having to do with the property of the bankrupt herein,” and to appear before the referee on September 24, 1920, and thereafter submit to an examination as to said accounting and, upon full compliance therewith, it was ordered that the motion to punish them for contempt be denied. By a separate order, the motion to vacate the referee’s original order was in all respects granted, except as to the accounting. Under the direction of these orders, an account was filed, to which the trustee filed objections. Hearings were, had, and it resulted in an order of the District Court directing the petitioners to pay the balance of $2,809.25.
These and other questions which were argued at bar satisfy us that the petitioners have a defense to the claim for the rents which they collected, and which they are now in part directed to pay over to the trustee. It is more than colorable, and is substantial. It is a controversy which should be determined in a plenary action, and not by summary order. The remedy pursued by the trustee is erroneous.
The mere fact that the order entered recites it was granted on motion of the attorney for the petitioners does not constitute a waiver. They had succeeded in part and were defeated in part on their application. No mere recital of the order having been granted on motion of their attorney, under these circumstances, can be said to be a waiver of the right to object to the procedure. A petitioner can appeal from an order which is entered on his application. Butte Co. v. Montana Co., 121 Fed. 524, 58 C. C. A. 634. That part of the order which required an accounting was interlocutory, and not final. They may have filed a petition to revise, and this court may have considered the question of jurisdiction. In re Schaffner (C. C. A.) 267 Fed. 978. But. it is apparent that, upon the hearing of the motion to confirm the report of the referee in the District Court, the question of jurisdiction was argued. The want of jurisdiction is now assigned as error. We think it clear that, under the facts disclosed by the record, there was no jurisdiction to proceed in this summary manner. The petitioners did not lose their right to question this j urisdiction by waiting for the final order confirming the report of the referee.
For these reasons, the order is reversed.