In re Friend

• Decision Date: 03 January 1905
• Docket Number: 1,088.,1,087
• Citation: 134 F. 778
• Parties: In re FRIEND et al. TALLCOTT v. FRIEND et al. PONTOOSUC WOOLEN MFG. CO. v. SAME.
• Court: U.S. Court of Appeals — Seventh Circuit

134 F. 778

In re FRIEND et al. TALLCOTT v. FRIEND et al. PONTOOSUC WOOLEN MFG. CO. v. SAME.

Nos. 1,087, 1,088.

United States Court of Appeals, Seventh Circuit.

January 3, 1905

The petitioners seek to have this court review and revise in matter of law certain rulings which culminated on May 7 1904, in the confirmation of a composition offered by the bankrupts. The petitioners prayed and were allowed an appeal but failed to perfect it. On May 17, 1904, they filed these petitions. The bankrupts interpose a motion to dismiss for want of jurisdiction.

The following sections of the bankruptcy act are referred to in the opinion:

'Sec 14c. The confirmation of a composition shall discharge the bankrupt from his debts, other than those agreed to be paid by the terms of the composition and those not affected by a discharge.'

'Sec. 23a. The United States Circuit Courts shall have jurisdiction of all controversies at law and in equity, as distinguished from proceedings in bankruptcy, between trustees as such and adverse claimants concerning the property acquired or claimed by the trustees, in the same manner and to the same extent only as though bankruptcy proceedings had not been instituted and such controversies had been between the bankrupts and such adverse claimants.'

'Sec. 23b. Suits by the trustee shall only be brought or prosecuted in 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 for the recovery of property under section sixty, subdivision 'b,' and section sixty-seven, subdivision 'e." 'Sec. 24a. The Supreme Court of the United States, the Circuit Courts of Appeals of the United States, and the Supreme Courts of the territories, in vacation in chambers and during their respective terms, as now or as they may be hereafter held, are hereby invested with appellate jurisdiction of controversies arising in bankruptcy proceedings from the courts of bankruptcy from which they have appellate jurisdiction in other cases. The Supreme Court of the United States shall exercise a like jurisdiction from courts of bankruptcy not within any organized circuit of the United States and from the Supreme Court of the District of Columbia.'

'Sec. 24b. The several Circuit Courts of Appeals shall have jurisdiction in equity, either interlocutory or final, to superintend and revise in matter of law the proceedings of the several inferior courts of bankruptcy within their jurisdiction. Such power shall be exercised on due notice and petition by any party aggrieved.'

'Sec. 25a. That appeals, as in equity cases, may be taken in bankruptcy proceedings from the courts of bankruptcy to the Circuit Courts of Appeals of the United States, and to the Supreme Courts of the territories, in the following cases, to-wit, (1) from a judgment adjudging or refusing to adjudge the defendant a bankrupt; (2) from a judgment granting or denying a discharge; and (3) from a judgment allowing or rejecting a debt or claim of five hundred dollars or over. Such appeal shall be taken within ten days after the judgment appealed from has been rendered, and may be heard and determined by the appellate court in term or vacation, as the case may be.'

Bankr. Act July 1, 1898, c. 541, 30 Stat. 550, 552, 553 (U.S.Comp.St. 1901, pp. 3428, 3431, 3432).

Horace Kent Tenney and David Campbell, for petitioners.

S. O. Levinson, for respondents.

Before GROSSCUP and BAKER, Circuit Judges, and BUNN, District Judge.

BAKER Circuit Judge (after stating the facts).

By virtue of section 14c, Bankr. Act July 1, 1898, c. 541, 30 Stat. 550 (U.S.Comp.St. 1901, p. 3428), a judgment confirming a composition is a judgment granting a discharge. United States ex rel. Adler v. Hammond, 104 F. 862, 44 C.C.A. 119; Ross v. Saunders, 105 F. 915, 45 C.C.A. 123; Marshall Field & Co. v. Wolf Dry Goods Co., 120 F. 815, 57 C.C.A. 326; Wilmot v. Mudge, 103 U.S. 217, 16 L.Ed. 536.

So the question becomes this: Has a party who feels himself aggrieved by a judgment rendered by the court without the intervention of a jury, granting the bankrupt a discharge, his choice between presenting the matter for review by original petition and by appeal?

The Supreme Court, so far as we are advised by counsel and our own researches, has not furnished an explicit answer.

Looking to the bankruptcy act, in connection with the Evarts act of March 3, 1891, c. 517, 26 Stat. 826 (U.S.Comp.St. 1901, p. 547), creating the Circuit Courts of Appeals, we have reached the following conclusions, which, as premises, in turn, require the result that these petitions be dismissed, namely:

That section 23 (30 Stat. 552 (U.S.Comp.St. 1901, p. 3431)) establishes a clear distinction between 'proceedings in bankruptcy' and 'controversies at law and in equity arising in the course of bankruptcy proceedings'; the former, broadly speaking, covering questions between the alleged bankrupt and his creditors, as such, commencing with the petition for adjudication, ending with the discharge, and including matters of administration generally, such as appointment of receivers and trustees, sales, exemptions, allowances, and the like, to be disposed of summarily, all of which naturally occur in the settlement of the estate; and the latter, broadly speaking, involving questions between the trustee, representing the bankrupt and his creditors, on the one side, and adverse claimants, on the other, concerning property in the possession of the trustee or of the claimants, to be litigated in appropriate plenary suits, and not affecting directly the administrative orders and judgments, but only the question of the extent of the estate.

That the same distinction is maintained in section 24a (30 Stat. 553 (U.S.Comp.St. 1901, p. 3431)), on the one hand, and sections 24b and 25a (30 Stat. 553 (U.S.Comp.St. 1901, p. 3432)), on the other.

That section 24a gives, if the grant be necessary in view of section 6 of the act of March 3, 1891, c. 517, 16 Stat. 828 (U.S.Comp.St. 1901, p. 549), this court appellate jurisdiction of controversies at law and in equity between trustees and adverse claimants, to be invoked by writ of error or by appeal, as may be appropriate.

That section 24b confers upon this court 'jurisdiction in equity' to revise in matter of law 'proceedings in bankruptcy,' to be invoked by original petition.

That section 25a confers upon this court jurisdiction in equity to review in matter of law and fact three specific 'proceedings in bankruptcy,' to be invoked by appeal within ten days.

That if, in any 'proceeding in bankruptcy,' a trial by jury be had under section 19, a review in this court cannot be entertained under section 24b or section 25a, because that section relates exclusively to 'controversies,' as distinguished from 'proceedings'; and that, if a review lies, it must come by writ of error under the act of March 3, 1891.

That, in 'controversies' involving the rights of those not directly concerned in the settlement of the estate, the right of review should be extended to six months, under or in analogy to the act of March 3, 1891.

That 'proceedings in bankruptcy,' involving directly the settlement of the estate, should be disposed of promptly, even if not always summarily, and the right of review should be limited to 10 days, under or in analogy to section 25a.

In this way all 'controversies' and all 'proceedings' are reviewable under one or another provision that is specifically applicable. But the very fact that specific methods are provided for specific situations is conclusively indicative to our minds that Congress did not intend that an aggrieved party should be at liberty to disregard the course definitely opened for him, and to choose some other that might better suit his inclination or convenience. There is no evidence of an intent, for example, to jumble up writs of error with appeals. Why should an inference be entertained that original petitions to review and appeals were intended to be interchangeable at the election of the suitor? The matters now sought to be presented for review are 'proceedings in bankruptcy' on the equity side of the bankruptcy court. Section 24b, on its face, applies, and, if it were not for section 25a, would in fact undoubtedly apply, to all 'proceedings in bankruptcy' on the equity side. The intention is expressed that the review of these summary orders and judgments shall not extend to an examination of the correctness of the facts, but only to the law applied to the facts on which the court admittedly acted. Then section 25a excepts three specific 'proceedings in bankruptcy' from the general rule, one of them being the proceedings set forth in these petitions. These three matters were deemed of such importance in the settlement of the estate that a special review was provided for by appeal, in which law and fact-- either of both-- could be determined. The petitioners admit that, if their desire had been to have a review of the facts, they would have been compelled to perfect their appeal under section 25a. But an appeal, the facts on which the court acted being unchallenged, presents only matter of law. That these petitioners felt themselves aggrieved only in matters of law is therefore not influential in determining whether they should proceed under 24b or 25a. What is determinative, in our judgment, is that their grievance arose from a matter that was excepted from the operation of section 24b by reason of being selected from the general class of 'proceedings in bankruptcy' for special treatment in section 25a.

The result in re-enforced, we think, by the consideration that,...