96 F. 579 | D. Ky. | 1899
This court in March last, for reasons stated in the opinion then announced (92 Fed. 904), refused to permit the filing of the answer then tendered by the defendants. The time for answering had previously expired, and the court, upon that as one of the grounds and in the exercise of its discretion, thought the answer should not be filed. This discretion was largely influenced by the view that the answer did not state a defense, and possibly by some suspicion that its averments were exaggerated. Overruling this exercise of discretion upon appeal by one only of the alleged bankrupts, namely, D. G-. Simonson, the circuit court of appeals reversed this judgment. 95 Fed. 948. In its opinion the court said:
“Coming to apply our conclusions to the case at bar, we cannot doubt that the answer tendered made a case of estoppel against the petitioners. They are alleged to have become parties to the assignment proceedings, to have filed their claims under the assignment, and to have requested a reference to pass upon their claims, the accounts of the assignee, and the questions of distribution. They waited three months and a half before filing their petition. By their acquiescence, they certainly induced the assignors, the as-signee, and the purchasers of the assets from the assignee, to believe that they would not seek to set aside the assignment. Were the assignment to be set aside now, it would avoid every sale the assignee has made, and revest in the trustee in bankruptcy the title of the assignors. It is conceded that the distribution, under the assignment, would be exactly the same as under the bankruptcy proceedings. The bankruptcy proceedings will only increase the costs, and possibly defeat the payment of the costs already earned in the state court proceedings. Had these creditors filed their petition soon after the assignment, all the unjust results of their delay pointed out would have been avoided; for then the assignee would not have sold the assets, and the state officers would not have rendered the services, and the creditors would not have distribution delayed by four months.”
Since the return of the case issues have been formed, and upon the trial the evidence was heard orally before the court, and much latitude was purposely allowed. It took a somewhat wide range, but the hearing gave the court good opportunities for weighing it, and forming some conclusion as to its value and credibility. It did not escape attention that only one of the alleged bankrupts testified, although the others were present' in court, and he seemed to have less interest in it than might have been expected. He alone had taken the appeal, he alone had sworn to the original answer,_ and he alone, by the later pleadings, has raised the issues now to be determined.
In passing upon the questions involved, the circuit court of appeals had necessarily assumed that the averments of the answer were true, and, being so, it was held that the facts stated would estop the petitioners from claiming the relief prayed for in the petition. But in an amended answer, filed by D. G-. Simonson since the return of the case, one, at least, of the material averments upon which the circuit court of appeals had acted was withdrawn, and on the trial there was not even an offer to prove either that the petitioners had become parties to the assignment proceedings in the state court, or had filed
lipón this substituted contention of the defendant I). G. Simonson, the issues were formed, and the court has been in some doubt as to the proper practice, — whether to make findings of fact, or whether to file a full stenographic report of the evidence, and, treating it as the depositions of the witnesses, malee it part of the record. As being besi in this particular instance, the doubt will be solved by doing both.
First, nowever, it may be well to dispose of one phase of the case. On February 14, 1899, this proceeding was brought by Sinsheimer, Levenson & Go., Freeman Bros., and 3sT. Snellenburg & Go., three creditors whose claims aggregated about 810,000. On April 1, 1899, the Louisville Banking Company, A. Meinecke & Son, the Kenton Hardware 'Manufacturing Company, the Scotland Keck Cotton-Mills Company, and Rowe & Cronin, five creditors whose debts aggregated about $20,000, filed another petition, having for its object the same relief as was asked in the first proceeding, and based upon the same alleged act of bankruptcy. Before the hearing, the court directed that the five last-named creditors should be added as petitioners in this case, and then entered an order consolidating the two proceed
Limiting its consideration to them, the court, upon the evidence, finds the material facts to be as follows, namely: On December 5, 1898, the co-partnership firm of Simonson, Whiteson & Co., composed of D. G-. Simonson, I. Whiteson, and Leo Stern, being then insolvent, executed and delivered to L. Comingor, their head bookkeeper, a general assignment for the benefit of their creditors, which, being recorded, was accepted by said Comingor, who, pursuant to law, qualified and entered upon the discharge of his duties. On December 7th, the assignee mailed to creditors of the assigned firm a request that they send a statement of account, so that he could see if it agreed with the firm’s books. ' Pursuant to this request, tw.o of the petitioners mailed statements, but did not prove their claims, nor make the affidavit upon them required by Ky. St. §§ 90, 3870. On December 8, 1898, the assignee instituted an action against the debtors in the Jefferson circuit court, common pleas division, for the purpose of having his trust administered and settled under the direction of that court. The trustee’s counsel in that action were the firm of M. A., D. A. & J. G. Sachs, who were also the counsel of the firm of Simonson, Whiteson & Co. Subsequently an application was made to the court in that case by the said firm’s attorneys for an order directing the sale of the remáining portions of the merchandise and the fixtures in the store, and, pursuant to a promise made under the circumstances detailed in the evidence, the judge of that court would not enter the’ order until the law firm of Kohn, Baird & Spindle had been informed of it. The proposed order was shown to D. W. Baird, a member of the latter firm, by D. A. Sachs, but all concern in the matter, and all purpose to interfere in it, were then disclaimed by Mr. Baird, who at first refused to have anything to do with it. However, at the earnest request of Mr. Sachs, he finally wrote upon it the words, “Seen. Kohn, Baird & Spindle.” This was done for the accommodation of Mr. Sachs, and upon his assurance that otherwise he would have more trouble in getting the order. On the 9th day of December, 1898, a committee of the Eastern creditors of the firm reached Louisville, and, after looking over the ground and the books of the firm, agreed to advise creditors to accept an offer of settlement at 50 ⅜ cents on the dollar. A writing was drawn for creditors to sign, agreeing accordingly, but it was, by its terms, not to be binding unless 90 per cent, in value signed it. A large number signed, but not 90 per cent, of them. The whole indebtedness was about $110,00:0, the gross assets something over $90,-000, without excluding the expense of reducing them to cash, and one of the largest creditors was the Louisville Banking Company, whose claim was about $19,000. It failed to enter into the agree
These being the material facts, the question for the court to determine is, are they, together or separately, sufficient to estop the petitioners from insisting upon the right given to them as creditors by the express provisions of the bankruptcy act? It seems to the court that sound judgment and just principles of law demand a negative answer, unless the opinion and judgment of the circuit court of appeals in this case require otherwise. But, as we have seen, the case now "under consideration is not the one passed upon by the appellate tribunal, but an entirely different one. And it may be well to observe that, when this case was first before the court, the question of estoppel was not argued. Counsel laid the stress of their case upon other grounds, and in passing upon it the court, probably unfortunately, treated the question somewhat after the manner of counsel. And, indeed, the question of estoppel has turned out to have been altogether a moot question in the case until now. However, in considering it, we are to be guided by the ratio deci-dendi of the court’s opinion. If correctly apprehended, this was that a creditor of an alleged bankrupt, who made a general assignment for the benefit of his creditors, could not first claim under the assignment, and then against it; that if he procured the making of the assignment, or if, after it was made without his procurement, he consented to it, by proving his claim under it, or if he asserted his claim in a suit for a settlement brought by the-assignee, or if he entered his appearance in such a suit, or if in any manner he actively asserted his claim under the assignment, he was estopped from availing himself of the right of action given him by the bankrupt law. < It must be conceded that these general principles are correct, but the court is clearly of opinion that the facts of this case do not bring it within them.
While, upon principles entirely correct, it can be held that a party has estopped himself from asserting a right against another, whether it be founded upon a contract or a statute, yet in passing upon the- question the court should not exclude any person from a right given by congress, except upon the strongest reason, nor in
Granting that, upon the facts as they appeared to the circuit court of appeals, it would be unconscionable for these creditors to throw these debtors into bankruptcy, and that they may, for that reason, be held to be estopped from doing it, still it seems to me it would be entirely inexcusable for the court to say that the petitioners in ¡his case shall be denied their plainly-given statutory right, either because of the insignificant matter of their counsel, at the request of the alleged bankrupts and (heir attorneys, writing the word “Seen” upon an order in a case to which they were not parties, and with respect to which they had given their counsel neither authority nor instructions, and in which their counsel claimed neither; or because, under the circumstances detailed in the evidence and pending a proposition of compromise, the assignee purchased a small quantity of merchandise from them; or because they sent to the assignee, at his request and for a specific purpose, an unproved and unverified statement of their debts, in order to see if they agreed with the firm’s books; or because they delayed, not three and a half months, as suggested in the opinion of the circuit court of appeals, but two months and nine days, to institute proceedings, when the statute, in plain and unambiguous terms, unconditionally gave them four months within which to do it, and extended no power to the courts to curtail or abridge the period; or because the administration of the estate would be more or less
Upon the subject of the costs and expenses, it may be remarked that congress in no way made the right of the creditor dependent upon the relative expensiveness of the two proceedings, nor upon the fact that the assignee had incurred expenses. Logically, that should not, per se, affect the question, and it is not believed that what was said in that connection by the circuit court of appeals in its opinion in this case was meant to be more than an illustration to enforce the views it had expressed upon the other facts appearing to be true when the case was before it. That this is the correct view may be assumed from the circumstance that the remarks in that connection of the learned judge who delivered the opinion were probably not necessary to a decision of the question of estop-pel based upon the allegations of the pleadings before the court. Otherwise, we should have to assume that the appellate court meant to assert the power of the courts to say that, when congress declared the creditors should have four months in which to get others to act with them, and then elect whether they would sue in bankruptcy, it only meant that they should have this right provided no expenses had been incurred in the state court, or that the expenses in this court did not exceed those of the state court. The court ■could not have so thought, because, while petitioners in cases like this may be estopped by some act of their own, the doctrine of •estoppel could not' be made to rest 'upon the question of the costs ■of the proceedings here or elsewhere; and especially should the petitioners not be estopped from doing what would clearly decrease the cost and expenses of winding up the bankrupt’s estate, which is known to have been one of the objects congress intended to achieve.
Coming to the question of acquiescence, it seems to the court that the creditor has the right to ascertain all the facts, and consider them for the statutory period, before he is bound to act, or lose any right by mere nonaction, and he may at any time within four months sue, unless meanwhile he has done some positive act (such as those which, without warrant, were imputed to petitioners by the original answer) which would malee it inconsistent with good faith for him to claim the right the law gave him. If he did this, the four-months period would no longer concern him, as the estoppel would work from the time he did the things which estopped him. Otherwise, the law expressly gives him the right to remain silent for four months, and then to sue within that period. This being so, his mere silence, even with full knowledge of all that the as-signee is doing, cannot defeat him. The law gives him the right to acquire information, and to silently acquiesce four months, and he ■should not be estopped by exercising this statutory privilege.
It seems to the court that the doctrine of estoppel in this connection must be based upon the idea that the creditor has in some positive way ratified the assignment. Ratification, or some act which is equivalent to it, must be the basis for applying the doctrine. It would rarely be fair or just to impute ratification to a creditor in a case of this character unless he had shown some intention to
It may be proper to observe that, whatever may have been the practice elsewhere under the old bankrupt act, in this district there was never any difficulty in adjusting, upon a fair and equitable basis, the accounts between the trustee in bankruptcy and the as-signee in the state court. And it should not be forgotten in such cases that the state assignee, and all who deal with him, have full notice of the provisions of the bankrupt law and of the rights of creditors thereunder. T’o entirely exempt them from the consequences of this notice would be to repeal quoad hoc the bankrupt act itself. And it would be a most strained conclusion which attributed the costs of the state court proceeding instituted within three days after the assignment, or the expenses of the assignee, to any act of the petitioners. The assignment was made without their consent, and the suit was brought wholly without their aid. At all events, in the opinion of the court, the evidence has developed no