14 F. Cas. 760 | U.S. Circuit Court for the District of Rhode Island | 1871
District courts are constituted courts of bankruptcy by the act of congress establishing the existing system upon that subject, and the provision is, that those courts shall have original jurisdiction in their respective districts in all such matters and proceedings, and they are authorized to hear and adjudicate upon the same according to the provisions of the bankrupt act. 14 Stat 517. Such courts are considered as always open for the transaction of business under that act, and the first section also provides that the powers and jurisdiction therein granted and conferred may be exercised as well in vacation as in term time, and that a judge sitting at chambers shall have the same powers and jurisdiction as when sifting in court. Provision is also made by the same section that the jurisdiction conferred by the act shall extend to all cases and controversies arising between the bankrupt and his creditors; to the collection of all the 'assets of the bankrupt; to the ascertainment and liquidation of the liens and other specific claims thereon; to the adjustment of the various priorities and conflicting interests of all parties, and to the marshaling and disposition of the different funds and assets, so as to secure the rights of all parties and the due distribution of the assets among all the creditors. Superadded to that clause is the further provision that the jurisdiction shall extend to all acts, matters and things to be done under and in virtue of the bankruptcy, until the final distribution and settlement of the estate of the bankrupt and the close of the proceedings in bankruptcy. On the fifth of October, eighteen hundred and sixty-eight, Josiah D. Hunt, of Providence, in this district, on the petition of his creditors, previously filed in the district court, was adjudged bankrupt, and the record shows that the respondent before the court was, on the twenty-fourth of the same month, duly chosen assignee of the bankrupt’s estate. Due assignment of all the bankrupt’s estate was also made to the assignee on the day of his appointment. Subsequently the as-signee claimed a large stock of merchandise in the possession of a certain firm doing business in the city of Providence, and the parties in the possession of the goods refused to deliver the same, claiming to hold the goods in. full property as purchased from the bankrupt, and thereupon the as-signee presented a petition to the district court praying that a citation might issue to that firm and to the several persons composing the same to appear and show cause why the pretended sale and transfer of the merchandise should not be adjudged void. His representations were that the sale and transfer were not made by the bankrupt in the usual and ordinary course of business; that the transfer was made by a gross bill of sale, without any enumeration of the articles; that the bill of sale was executed on the second of September next before the grantor was adjudged bankrupt; that the goods were removed from his possession on the following day, and that the purchasers had reasonable cause to believe that the grantor was insolvent, or that he was acting in contemplation of insolvency and in fraud of the provisions of the bankrupt act.
Amendments were subsequently made to the petition by which the present petitioner and one David Millard were made, parties respondent to that proceeding. They were severally made parties, for the reasons assigned in the first amendment, which are as follows:
1. That the present petitioner was at that time under large liabilities on account of the bankrupt; that the bankrupt within four
2. That the purchasers of the goods gave the bankrupt a money check for the sum of twenty thousand dollars as payment for the goods sold, and that the bankrupt put the same into the hands of the other respondent named in the amendment, with directions to apply the proceeds to the payment of the debts of the bankrapt then outstanding, and upon which the present petitioner was liable as surety, and that the payment, transfer and conveyance of the same were made with a view to give a preference to the petitioner in this case, and with the knowledge and under the same circumstances as set forth in the charge against the other respondent. Payment of the proceeds of the check as directed by the bankrupt, is also alleged, and that the other respondent was also a creditor of the bankrupt, and that he applied the proceeds of tlie check in- whole or in part, to the payment of the amount due to himself as such creditor. Based on these representations, the prayer for relief is, that each respondent may account to the petitioner as such assignee, for the stock of goods or for the proceeds of the money check, and that they may deliver and pay over the same to the said assignee. Certain other proceedings took place in the case not material to be noticed, and on the twenty-. third of August, in the same year, the present petitioner filed a motion to dismiss the petition of the assignee, upon the ground that the district court, in that form of proceeding, had no jurisdiction to hear and determine the matter in controversy, but the district court being of a different opinion, overruled the motion on the day it was filed and entered a decretal order directing the petitioner for revision to answer the allegations of the as-signee’s petition. Dissatisfied with that decision and decree, the respondent, in that proceeding, filed the present petition in the circuit court, and prays that that decision and decretal order may be revised and reversed. Examined separately, the language of the first section of the bankrupt act would furnish some support to the theory of the assignee, that all the powers and jurisdiction of the district courts when sitting as courts in bankruptcy may be exercised on petition in a summary way. first giving notice to the party opposed in interest to the prayer of the petition, as in a rule to show cause in a proceeding of common law or iu a suit in equity. Support to the same theory in respect to the powers and jurisdiction of the circuit courts in cases and questions arising under the bankrapt act, may also be derived from the first clause of the second section of the same act, if that clause of the section is examined without any reference to the constitution, and the other provisions of the bankrupt act, which show to a demonstration that such a theory is erroneous. Circuit courts, by the very terms of the same section, also have concurrent jurisdiction with the district courts of the same district of all suits at law or in equity, which may or shall be brought by the assignee in bankruptcy against any person claiming an adverse interest, of by ' such person against such as-signee, touching any property or rights of property of said bankrupt, transferable to or vested in such assignee, provided the suit at law or bill in equity shall be brought within two years from the time the cause of action accrued. 14 Stat. 518.- Controversies, in order that they may be cognizable under that clause of the section, must have respect to some property or rights of property of the bankrupt, transferable to or vested in such assignee, and the suit, whether it be a suit at law or in equity, must be in the name of one of the two parties described in that clause and against the other as appears by the express words of the provision. All three of the conditions must concur to give the jurisdiction, but where they all concur, the party suing may, at his election, commence his suit either in the district or circuit court, and if in the former, it is clear that the case, when it has proceeded to final judgment or decree, may be removed into the circuit court for reexamination by writ of error if it was an action at law, or by appeal if it was a suit in equity, provided the debt or damages claimed amounts to more than five hundred dollars, and the writ of error is seasonably sued out or the appeal is claimed and the required notices are given within ten days from the rendition of the judgment or decree.
Suits in equity, between such parties in the case therein described, as well as actions at law, may be commenced and maintained in the district courts, and it is clear that final decrees in such suits in equity, as well as final judgments in such civil actions where the debt or damages as claimed amount to more than five hundred dollars, may be reexamined in the circuit courts, and that the final decrees and judgments rendered in the circuit courts in such cases where the sum or value exceeds two thousand dollars, may be re-examined in the supreme court by appeal or writ of error, as provided in the judiciary act and the act allowing appeals in cases of equity and of admiralty, and maritime jurisdiction. 1 Stat. 84; 2 Stat. 244. Where the debt or damages claimed in such a case do not exceed five hundred dollars, and the suit, whether it be a suit at law or in equity, is commenced in the district court.
Special provision. is made for the revision in the circuit court of controversies like the one before the court, and for several other classes of controversies, and the opinion of the court is that such causes of action cannot be determined by the district courts in a summary way without due process of law, subject, perhaps, to one or two exceptions of a special character. Such controversies must be determined by suit in equity or by an action at law, as the case may be, and where an action at law is the proper remedy, the parties are entitled to a trial by jury, if “the value in controversy shall exceed twenty dollars.” Cases of the kind before the court, fall directly within the third clause of the section under consideration, and where the property in controversy at the time the debtor was adjudged bankrupt, was in the actual possession of a third person claiming absolute title and dominion of the same, the question of ownership, if the same is claimed by the assignee of the bankrupt, must be determined by a suit in equity or by an action at law, subject to reexamination as provided in the law of the forum where the suit is commenced. Concurrent jurisdiction in such cases is certainly vested in the circuit and district courts, and it is equally clear that either party, in a proper case, may remove the cause into the supreme court for re-examination, as provided in other controversies outside of the bankrupt act. Strong support to that conclusion may also be derived from the several special provisions of the act referred to in the exception contained in the first clause of the second section, as they show that judgments or decrees rendered in such cases cannot be revised by the circuit courts under the summary power conferred by the first clause of that section.
Plain and well supported as these several propositions appear to be, still it is contended that the twenty-fifth section of the act shows that they are all erroneous; that the district court possessed in this case full power to direct the petitioner in revision to appear for the purpose specified in the citation and to order that the goods should be sold, and that the proceeds should be held in place of the goods, as the measure of value in any subsequent controversy between the parties. Perishable estate of the debtor may be sold by order of the district court under the direction of the messenger or assignee, the fund received to be held in place of the estate sold, and the provision is made in case the estate of the debtor is liable to deterioration in value. Corresponding provision is also made in respect to the estate of the debtor which has come into the possession of the assignee, or which is claimed by him, where it appears to the satisfaction of the court that the title to the same is in dispute, and the enactment is that “the court may, upon the petition of the assignee,” after reasonable notice to the claimant, his agent or attorney, “order it to be sold under the direction of the assignee,” the funds received to be held in place of the estate, as in the case of the sale of perishable property.
Obviously the first two provisions are supererogatory, if the theoi-y of the assignee is correct, as he has nothing to do in any ease where he claims the estate but to apply to the district court to order a sale of the same if he can satisfy the district judge that the title to the same is in dispute. For these and many other reasons which might be given, the theory of the assignee must be rejected, but it is equally clear that the phrase “or which is claimed by him” cannot be rejected as surplusage, nor can the language employed be treated as without meaning. Those words are not contained in the fifty-fourth section of the insolvent laws of Massachusetts, from which the provisions in other respects were substantially borrowed. Similar provision is there made where it appears that the title to any portion of an estate which has come into the possession of the assignee, is in dispute, and that the property is of a perishable nature or liable to deteriorate in value, but the words “or which is claimed by him” are not contained in the section. Gen. St. Mass. p. 588. Beyond doubt that phrase was incorporated into the bankrupt act for the purpose of enlax-ging the power of sale as compared with the corresponding provision in the state law. Although the title to the estate is in dispute, still the case would not fall within the state law unless the estate in question had “come into the possession of the assignee,” but the provision of the bankrupt act authorises the sale, though the estate may not have come to the possession of the assignee if it is claimed by him and the title is in dispute, as where pei-sonal estate is found in the hands of a mere depositary, carrier or bailee for safe keeping or transportation, without claim of title or interest in the goods, or what more frequently occurs, where pei-sonal property is subsequently discovered in the possession
Controversies, such as are described in the third clause of the second section of the bankrupt act, if prosecuted in the district court by a suit in equity, and the debt or damages claimed is more than five hundred dollars, may be appealed into the circuit coúrt, or if prosecuted by action at law, may be removed into that court by writ of error, and there are many other differences between the old law and the one now in force, which show that the rules of construction adopted by the courts in cases arising under the prior act, are not applicable to the provisions of the present law. Every point and question arising in the administration of the law might, in the discretion of the district judge under the prior act, be adjourned into the circuit court to be determined there in a summary way, but it is clear that cases where special provision is otherwise made, cannot be revised by the circuit court under the first clause of the second section of the law now in force. Objection may be made that if the construction adopted is correct, then no revision can be had in that class of cases where the debt or damages claimed does not exceed five hundred dollars, but the conclusive answer to that objection, if made, is that congress possesses the sole power to determine whether or hot an appeal shall be allowed, and in what cases the judgment or decree of the subordinate court shall be final and conclusive. Ex parte Christy, 3 How. [44 U. S.] 317. Unquestionably congress might provide that a decree in equity rendered in the district court should' be revised in the circuit court in a summary way; but it is clear to a demonstration that judgments in actions at law rendered in that court, if founded upon the verdict of a jury, can never be revised in that way, as the constitution provides that “no fact tried by a jury shall be otherwise re-examined in any court of the United States than according to the rule of the common law.” Two modes only were known to the common law to re-examine such facts, to wit, the granting of a new trial by the court where the issue was tried or to which' the record was returnable, or, secondly, by the award of a venire facias de novo by an appellate court for some error of law which intervened in the proceedings. 2 Story, Const. (3d Ed.) 584; Parsons v. Bedford, 3 Pet [28 U. S.] 448.
Congress could not provide that a judgment of the district court, founded upon the verdict of a jury in a civil action, whether for a less or greater sum than five hundred dollars, should be revised in the circuit court in a summary way, and inasmuch as suits in equity, such as are mentioned in the third clause in the second section of the bankrupt act, are placed in the same category as actions at law, the court is of the opinion, as no provision for appeal is made where the debt or damage claimed does not exceed five hundred dollars, that it was the intention of congress that the decrees of the district court in such case should be final and conclusive. Viewed in any light, the court is of the opinion that the district court does not possess the power under that provision to order in a summary way the sale of an estate, real or personal, although the same is claimed by the assignee, even though the title to the same is in dispute, if it also appears that the estate in question is in the actual possession of a third person, holding the same as owner and claiming absolute title to and dominion over the same as his own property, whether derived from the debtor before he was adjudged bankrupt or from some other former owner. The decision and decree of the district court [case unreported] is reversed.