203 F. 210 | 8th Cir. | 1913
Lead Opinion
The D. F. Le Master Brokerage Company claims to have been established in 1903. It was incorporated in January or February, 1908. It carried on business at Denver. E. L. Le Master was president, Mrs. Clara Josephine Le Master was vice president, and David F. Ee Master was secretary and treasurer, and these three constituted the board of directors. Early in the spring of 1910 Edward L. Le Master, being sick, tendered his resignation as president, but no action was taken upon it. David E. Le Master and Clara Josephine Le Master were husband and wife, and thereafter had sole charge of the business.
David F. Le Master was general manager. Upon the letter head of the company it was stated that their capital stock was $20,000; that they were, merchandise brokers, and made a specialty of fruits and produce. On June 6, 1910, they wrote the Mulvaue Mill & Elevator that they believed themselves worth $30,000. August 24, 1910, David E. Le Master was arrested by the sheriff of the city and county of Denver under a warrant issued by the clerk of the state district court charged with larceny and obtaining money by means of the confidence game. Upon being taken to the jail, he was told to place what property he had upon the desk. He then deposited six silver dollars, four quarters, one nickel, and three pennies, three diamond rings, one ring having a red setting, a diamond stud and horseshoe scarf pin set with diamonds, a gold watch, a pair of diamond set cuff buttons, and a pair of gold plated cuff buttons. Upon being asked if that was all he said, “Just wait a minute, let’s talk this over.” Upon being informed he would be searched, he went behind the desk, opened his trousers, and, after some difficulty, extracted from within them a wallet containing eight one hundred dollar bills, two fifty-dollar bills, and forty-five ten-dollar bills. He also turned over to the sheriff a Port Arthur Route railroad ticket, one receipt from Will A. Collins for “Pride of the Valley Flour,” one duebill from A. M. Earhart, and other property not necessary to mention. He stated to the officers that all the property belonged to his wife. The same day the Phillipsburg Mill & Elevator Company, the Buhlar Mill & Elevator Company, and the Iiaven Milling Company prepared a petition in involuntary bankruptcy against the D. F. Le Master Brokerage Company, alleging that the Brokerage Company owed the Phillips-burg Mill & Elevator Company for flour $1,715, the Buhlar Mill & Elevator Company for flour $1,747.20, the Haven Milling Company for flour $1,128. This petition was filed August 25th, and was ac
Clause 3 of section 2 of the Bankruptcy Act provides that the courts of bankruptcy are hereby vested with jurisdiction to “(3) appoint receivers or the marshals, upon application of parties in interest, in case the court should find it absolutely necessary, for the preservation of estates, to take charge of the property of bankrupts after the filing of the petition and until it'is dismissed or the trustee is qualified.”
The following appears in sectipn 3, subdiv. “e”:
“(e) Whenever a petition is filed by any person for the purpose of having another adjudged a bankrupt, and an application is made to take charge of and hold the property of the alleged bankrupt, or any part of the same, prior to- the adjudication and pending a hearing on the petition, the petitioner or applicant shall file in the same court a bond with at least two good and sufficient sureties who shall reside within the jurisdiction of said court, to be approved by the court or a judge thereof, in such sum as the court shall direct, conditioned for the payment, in case such petition is dismissed, to the respondent, his or her personal representatives, all costs, expenses, and damages occasioned by such seizure, taking, and detention of the property of the alleged bankrupt.”
A warrant was issued and the property seized in the custody of the sheriff. September 12, 1910, the D. F. Le Master Brokerage Company was adjudged a bankrupt, and Fermor J. Spencer was subsequently duly appointed and qualified as trustee. On October 10th David F. Le Master filed a petition alleging that none of said money, goods, or chattels, except the railroad ticket, belonged to or was the property of the D. F. Le Master Brokerage Company; that the same were his and never had at any time been owned by the D1. F. Le Master Brokerage Company; and that such company had never had at any time any right, title, or interest in or to any of said property, and asked an order that said property be turned over to him, but he did not specially question the jurisdiction of the court. October 21, 1910, Fermor J. Spencer, trustee, filed his answer, alleging that said property belonged to said D. F. Le Master Brokerage Company, and that he was now entitled to the same as held by the marshal.
The case was heard October 21, 1910, four witnesses being examined for the claimant and three for the trustee, and on October 26th the court held that all the money, the horseshoe scarf pin, the diamond cuff buttons, one gentleman’s solitaire diamond tooth setting-ring, one receipt from Will A. Collins for “Pride of the Valley Flour,” pne duebill from A. M. Earhart, and the Port Arthur Route railroad ticket, were the property of the bankrupt, and ordered the marshal to turn them over to the trustee, and directed the balance of the property turned over to David F. Le Master, and he appeals.
Le Master testified that about the 1st of August he received $246 and some cents from F. W. Woodrow, a student of a business college at Ashland, Or., which had been owed to him since in February, 1910; that early in August he received $579.15 from Walt James, who had been owing him for nearly five years; that at the same time Warrier Grayson and Alfred Brown paid him $516.50 upon a note
“Suits by the trustee shall only he brought or prosecuted lit the courts where the bankrupt, whose estate is being administered by such trustee, might have brought or prosecuted them if proceedings in bankruptcy had not been instituted, unless by consent of the proposed defendant, except suits Cor the recovery of property under section sixty, subdivision ‘b,’ and section sixty-seven, subdivision ‘e.’ ”
The third clause of the second section of the Bankruptcy Act of 1867 expressly gave to the Circuit and District Courts jurisdiction of such suits by or against the trustee (Eyster v. Gaff et al., 91 U. S. 521, 23 L. Ed. 403), and the conferring of such exclusive jurisdiction upon 1he federal courts in the excepted cases in subdivision b of section 23 of the present law is valid (In re Wood and Henderson, 210 U. S. 246, 28 Sup. Ct. 621, 52 L. Ed. 1046). It is therefore not
In Doyle v. Sharpe, 74 N. Y. 154, where a similar seizure had been made under the act of 1867, it appeared that the bankrupts, Legrave and Otis, authorized their shipping clerk and salesman to dispose of certain goods, and pay themselves from the proceeds. They sold them to. Landers and delivered to him the bill of lading at 9 a. m., May 30th. ’Not until 11 a. m. of the same day was a petition even filed in bankruptcy. Subsequently Landers sold the goods to Doyle, 'filie Court of Appeals of New York start their opinion with the statement that:
“The sale of the goods to the plaintiff’s assignor Landers was complete and the transfer of the same was made before the proceedings in bankruptcy were instituted against Legrave & Co.”
'The marshal was sued in the state court, which under that act had concurrent jurisdiction with the federal court, and it was held by the Court of Appeals that the law did not authorize the marshal to take possession of the goods of the bankrupt in possession of third persons claiming title thereto. The Supreme Court of the United States reversed this holding. Sharpe v. Doyle, 102 U. S. 686, 26 L. Ed. 277, and followed that holding in Feibelman v. Packard, 109 U. S. 421, 3 Sup. Ct. 289, 27 L. Ed. 984. The question came before the Supreme Court in Bryan v. Bernheimer, 181 U. S. 188, 21 Sup. Ct. 557, 45 L. Ed. 814, as to whether the rule was the same under the act of 1898, and the court said:
“Bankr. Act March 2, 1867, c. 176, § 40, provided that upon the filing of a petition for an adjudication of involuntary bankruptcy, if probable cause should appear for believing that the debtor was about to remove or conceal, or to make any fraudulent conveyance of his property, the court might issue a warrant to the marshal commanding him to ‘forthwith take possession provisionally of all the property and effects of the debtor, and safely keep the same until the further order of the court.’ 14 Stat. 536; Rev. Stat. § 5024. It was held by the Court of Appeals of New York that this did not authorize the marshal to take possession of the goods of the bankrupt in possession of third persons claiming title thereto. Doyle v. Sharpe, 74 N. Y. 154. But that decision was overruled by this, court, and Mr. Justice Miller in delivering its opinion said: " ‘The act of Congress was designed to secure the possession of the property of the bankrupt, so that it might be administered under the proceedings in the bankrupt court. Between the first steps initiating proceedings in the bankrupt court and the appointment of the assignee a considerable time often passes. During that time the property of the bankrupt, especially in a case commenced by creditors, may be surreptitiously conveyed*215 beyond the reach of the court or of the assignee, to whose possession it should come when appointed. If the bankrupt does not voluntarily aid the court, or is inclined to defeat the proceedings, lie can, with the aid of friends or irresponsible persons, sell his movable property and put the money in his pocket, or secrete his goods or remove them beyond tiie reach of his assignee or the process of the court, and defy the law. The evidence in this case shows the manner in which this can be done. It was the purpose of the act of Congress to prevent this evil. It therefore provides that, as soon as the petition in bankruptcy is filed, the court may issue to the marshal a provisional warrant directing him to take possession of the property and effects of the bankrupt and hold them subject to the further order of the court. To have limited this right or duty of seizure to such property as he might find in the actual possession of the bankrupt would have manifestly defeated in many instances the purposes of the writ. There is therefore no such limitation expressed or implied. As in the writ of attachment, or the ordinary execution on a judgment for the recovery of money, the officer is authorized to seize the property of the defendant, wherever found; so here it is made Ms duty to take into his possession the property of the bankrupt wherever he may find it. It is made his duty to collect and hold possession until the assignee is appointed or the property is released by some order of the court, and he would ill perform that duty if he should aceei>t the statement of every man in whose custody he found the property which ho believed would belong to the assignee, when appointed, as a sufficient reason for failing to lake possession of it.’ Sharpe v. Doyle, 102 U. S. 686, 689. 690 [26 L. Ed. 277]. A like decision was made in Feibelman v. Packard, 109 U. S. 421 [3 Sup. Ct. 289, 27 L. Ed. 984]. These considerations are equally applicable to an application, after the adjudication in bankruptcy and before the qualification of a trustee, for an appointment of the marshal, under clause 3 of section 2 of the Bankrupt Act of 1S98, to take charge of “the property’ of the bankrupt ‘after the filing of the petition and until it is dismissed or the trustee qualified.’ It is true that under this provision the appointment is only to be made ‘in case the court shall find it absolutely necessary for the preservation of the estates.’ But that condition of things is shown in the present case by the allegation of the application, and (he finding of the court of bankruptcy, that it was necessary to the interest of the creditors of the bankrupt to take immediate possession of his property. In the opinion in Bardes v. Hawarden Bank, 178 U. S. 524, 538 [20 Sup. Ct. 1000, 1006 (41 L. Ed. 1175)], it was indeed said: ‘The powers conferred on the courts of bankruptcy by clause 3 of section 2, and by section 69, after the filing of a petition in bankruptcy, and in case it is necessary for the preservation of property of the bankrupt, to authorize receivers or the marshals to take charge of it until a trustee is appointed, can hardly be considered as authorizing the forcible seizure of such property in the possession of an adverse claimant, and have no bearing upon the question in what courts the trustee may sue him.’ But the remark, ‘can hardly be considered as authorizing the forcible seizure of such property in the possession of an adverse claimant,’ was a,n inadvertence, and upon a question not: arising in the case then before the court, which related exclusively to jurisdiction of a suit by the trustee after his appointment.”
We are fully aware that in Babbitt v. Dutcher, 216 U. S. 102, 30 Sup. Ct. 372, 54 L. Ed. 402, 17 Ann. Cas. 969, in which the basic question was “whether in a case in which the original court of bankruptcy could act summarily another court of bankruptcy, sitting in another district, can do so in aid of the court of original jurisdiction,” Mr. Chief J ustice Fuller said:
“There are two classes of cases arising under the act of 1898 and controlled by different principles. The first class is where there is a claim of adverse title to property of the bankrupt based upon a transfer antedating the bankruptcy. The other class Is where there is no claim of adverse title based on any transfer prior to the bankruptcy, but where the property is in*216 the physical possession of a third party or of an agent of the bankrupt, or of an officer of a bankrupt corporation, who refuses to deliver it to the trustee in bankruptcy. In the former class of cases a plenary suit must be brought, either at law or in equity, by the trustee, in which the adverse claim of title can be tried and adjudicated. In the latter class it is not necessary to bring a plenary suit, but the bankruptcy court may act summarily, and may make an order in a summary proceeding for the delivery of the property to the trustee, without the formality of a formal litigation. The former class falls within the ruling in the case of Bardes v. Hawarden Bank, 178 U. S. 524 [20 Sup. Ct. 1000, 44 L. Ed. 1175]. and in the case of Jaquith v. Rowley, 188 U. S. 620 [23 Sup. Ct. 369, 47 L. Ed. 620], which hold that such a suit can be brought only in a court which would have had jurisdiction of a suit by the bankrupt against the adverse claimant, except where the defendant consents to be sued elsewhere. In the latter class of eases a plenary shit is not necessary, but tbe case falls within the rule laid down in Bryan v. Bernheimer, 181 U. S. 188 [21 Sup. Ct. 557, 45 L. Ed. 814], and Mueller v. Nugent, 184 U. S. 1 [22 Sup. Ct. 269, 46 L. Ed. 405], which held that the bankruptcy court could act summarily. The question was not discussed as to whether a court other than the court of adjudication could exercise this summary jurisdiction.”
It must be borne in mind, however, that the question of the power of the marshal was in no wise involved in that case, and this statement, as said by the court in Bryan v. Bernheimer, 181 U. S. 188, 21 Sup. Ct. 557, 45 L. Ed. 814, was “upon a question not arising in the case then before the court.” In Sharpe v. Doyle, 102 U. S. 686, 26 L. Ed. 277, the Supreme Court had reversed the Court of Appeals of New York for holding that, when the sale of the goods “was complete and the transfer of the same was made before the proceedings in bankruptcy were instituted,” a levy could not be made by the marshal, and it followed its holding in that case under the Act of 1898 in Bryan v. Bernheimer, 181 U. S. 188, 21 Sup. Ct. 557, 45 L. Ed. 814.
Assuming that a plenary suit was necessary, the District Court has a summary jurisdiction, and in a proper case has jurisdiction of a plenary suit, and the Supreme Court has repeatedly held that when under authority of the statute property is seized by receivers or the marshals, and thus comes into the lawful custody of the court, it has not only jurisdiction, but exclusive jurisdiction to determine the questions of title. Whitney v. Wenman, 198 U. S. 539, 25 Sup. Ct. 778, 49 L. Ed. 1157; Murphy v. Hofman Co., 211 U. S. 562, 29 Sup. Ct. 154, 53 L. Ed. 327. The bankruptcy court is ordinarily a court of equity, and no objections were made, .and no exceptions were taken to the method of trial. The marshal had the right, and it was his duty, to seize the property in question, and, if after such seizure the court must turn back the property to the third person claiming it without reference to the evidence, then “the purpose of Congress to prevent this evil is itself defeated.” See Clay v. Waters, 178 Fed. 385, 392, 101 C. C. A. 645, 21 Ann. Cas. 897, and In re Franklin Suit & Skirt Co. (D. C.) 197 Fed. 591, 600.
“The District Court, has such jurisdiction by tbe consent of the proposed defendant, hut not otherwise.”
It is true that D. P. Le Master could not have brought replevin to recover the property in a state court. White v. Schloerb, 178 U. S. 542, 20 Sup. Ct. 1007, 44 L. Ed. 1183. But it does not follow that he could not have maintained a suit for damages against the marshal. Appellant cites In re Sunseri, 156 Fed. 103, but in that case the claimants pleaded:
"Tliat it was beyond the jurisdiction oí this court to seize any goods outside its territorial limits (the said town of Huntingdon lining in the middle district of Pennsylvania); and that for the reasons above stated, as to their claiming this property adversely and with more than colorable title, this court is without jurisdiction to determine the title to it in this summary manner.”
Le Master not only consented that the federal court exercise jurisdiction in this matter, but asked it so to do. It did so, and the statement of the evidence shows the decision of the court was fully sustained.
This being true, if the state authorities took tangible property from Le Master by an unreasonable search, that is no reason why it could not be lawfully seized by the United States under 'a warrant to the marshal. Bacon v. United States, 97 Fed. 35, 38 C. C. A. 37.
The decree of the District Court was correct, and is affirmed.
Concurrence Opinion
(concurring). I think this record presents a clear case of consent to the summary jurisdiction exercised by the