In re Michie

• Decision Date: 15 July 1902
• Docket Number: 1,470.
• Citation: 116 F. 749
• Parties: In re MICHIE.
• Court: U.S. District Court — District of Massachusetts

116 F. 749

In re MICHIE.

No. 1,470.

United States District Court, D. Massachusetts.

July 15, 1902

F Rockwood Hall, pro se.

Hurlburt Jones & Cabot, for creditor.

LOWELL District Judge.

In this case the trustee filed a petition with the referee, alleging that one Cressey, a creditor of the bankrupt to the amount of $5,100, had received conveyances from the bankrupt of property having a value greater than the debt; that Michie was insolvent at the time of the conveyances, which were without present or future consideration, and were made for the purpose of securing to Cressey the full payment of his claim, and of enabling him to obtain a greater percentage of his debt than other creditors of Michie of the same class, and were in fraud of the provisions of the bankrupt act, and were made for the further purpose of hindering, delaying, and defrauding Michie's creditors; that the most important conveyance was made within four months of the time when Michie signed the petition in bankruptcy and directed his attorney to file it; that the attorney, at Cressey's instance, delayed filing the petition until the four-months period had run. Wherefore the trustee prayed that the conveyances to Cressey be declared null and void, and that Cressey be ordered to deliver the property to the petitioner. This petition was improperly joined with a petition to reopen the estate, but the formal error in proceeding need not be further noticed. Upon this petition the referee issued an order of notice to Cressey. Cressey filed a general appearance on February 25, 1901. On February 27th he filed a paper, styled a 'demurrer,' in which he set up that the court was without jurisdiction to grant the relief prayed for, and that the petition did not set forth sufficient facts. On the same day he filed an answer on the merits, denying, among other matters, that the conveyances were without consideration, or were for the purpose of hindering, delaying, and defrauding creditors. The referee, after hearing, found that Cressey had received fraudulent payments and preferences to the amount of over $6,000, and ordered that the principal conveyance be declared fraudulent and void, and that Cressey surrender to the trustee the various articles fraudulently conveyed, or their value, together with interest to the date of the decree. Cressey thereupon sought a review by the judge, and here contended that the referee had no jurisdiction in the matter.

The jurisdiction of the court of bankruptcy under the present bankrupt act over controversies between the trustee and third parties is uncertain and ill-defined, and the decisions of the various circuit courts of appeals and district courts are in such conflict that it is well to confine the consideration of cases as far as possible to those decided by the supreme court. In Bardes v. Bank, 178 U.S. 524, 20 Sup.Ct 1000, 44 L.Ed. 1175, it was decided that under the present bankrupt act the district court is without that general jurisdiction over controversies between the trustee and a third person which had been exercised by the court of bankruptcy under preceding acts. Following that case, this court decided in Re Ward, 104 F. 985, that the court of bankruptcy was without any jurisdiction of controversies between the trustee and a third person, except where (1) the property was in the possession of the court of bankruptcy, or (2) the third person had consented to the jurisdiction. In Mueller v. Nugent, 184 U.S. 1, 22 Sup.Ct. 269, 46 L.Ed. 405, it was decided, however, that the referee, sitting as a court of bankruptcy, has jurisdiction to compel the delivery to the trustee of property belonging to the bankrupt's estate in the hands of an agent of the bankrupt, or of one whose holding is not adverse to the bankrupt; i.e., in the hands of a person who had no 'adverse claim' to the property in question when the petition in bankruptcy was filed. In that case the supreme court decided, furthermore, that the court of bankruptcy was not ousted of this jurisdiction by a claim formally adverse set up by a third person. 'But suppose that respondent had asserted that he had the right to possession by reason of a claim adverse to the bankrupt, the bankruptcy court had the power to ascertain whether any basis for such claim actually existed at the time of the filing of the petition. The court would have been bound to enter upon that inquiry, and in doing so would have undoubtedly acted within its jurisdiction, while its conclusion might have been that an adverse claim, not merely colorable, but real, even though fraudulent and voidable, existed in fact, and so that it must decline to finally adjudicate on the merits. If it erred in its ruling either way, its action would be subject to review.' 184 U.S. 15, 22 Sup.Ct. 269, 46 L.Ed. 405. It is true that the rule thus laid down differs from that which ordinarily governs cases of contested jurisdiction. Ordinarily speaking, the claim of a party to a suit is determined from his pleadings, and from his pleadings alone, while his rights are determined upon a consideration of his proofs as applied to his pleadings. In this particular case the supreme court held that, in order to determine if a third person has a 'real, even though fraudulent and voidable,' claim, and not a claim 'merely colorable,' the court should inquire as to the facts and consider proofs offered. For the purposes of jurisdiction over proceedings...