In re Stewart

• Decision Date: 03 May 1910
• Docket Number: 2,007.
• Parties: In re STEWART.
• Court: U.S. Court of Appeals — Sixth Circuit

179 F. 222

In re STEWART.

No. 2,007.

United States Court of Appeals, Sixth Circuit.

May 3, 1910

G. H Stewart, for petitioner.

J. N Van Deman, for respondent.

Before SEVERENS, WARRINGTON, and KNAPPEN, Circuit Judges.

KNAPPEN Circuit Judge.

This is a proceeding under section 24b of the bankruptcy act of 1898 (Act July 1, 1898, c. 541, 30 Stat. 553 (U.S. Comp. St. 1901 p. 3432)) to revise an order of the District Court affirming the order of the referee in bankruptcy stating the account of petitioner, as assignee under the Ohio state law of the bankrupt Otho L. Hays, and requiring petitioner to pay over to the trustee in bankruptcy the sum of $4,086.61, found by the referee to be in petitioner's possession and belonging to the estate of the bankrupt. The facts are these The assignment from Hays to petitioner was made April 29, 1904. The assignee entered at once upon the performance of his duties under the assignment. Petition in bankruptcy was filed July 16, 1904, and thus less than three months after the assignment, the act of bankruptcy alleged being the assignment in question. The assignee resisted the petition for the adjudication in bankruptcy, carrying the contest through the District Court and into this court, where the decision of the District Court adjudicating Hays a bankrupt was affirmed. Hays v. Wagner, 150 F. 533, 80 C.C.A. 275. The adjudication in bankruptcy was first entered as of July 14, 1905. It was later entered as of December 26, 1905. Final adjudication was made March 15, 1907, under order of affirmance made by this court. A trustee was thereupon appointed. Meanwhile, there had been no receivership in the bankruptcy proceedings, the assignee being allowed to remain in possession of the assets. The assignee not having filed in the state court any account or report of his doings as assignee, that court, upon application of the trustee, ordered the petitioner to file his account in the District Court. The latter court, upon the application of the assignee, made an order to the same effect. Petitioner then filed his account in the District Court, showing receipts amounting to $18,131.17 (about two-thirds of which was for rentals collected through an agent), and claiming credits amounting to $12,409.72. The surplus of receipts over claimed credits, viz., $5,721.45, was, in connection with the filing of the account, turned over to the trustee. The items of the claimed credits were these: (1) Disbursements from April 30, 1904, to June 8, 1907, consisting largely of repairs, insurance, taxes, and commissions paid for collecting rents on real estate, together with $737.40 on account of the dower interest of the bankrupt's wife, all amounting to $6,657.03. This item was allowed by the referee in full. (2) Disbursements consisting largely of expenses directly connected with the administration of the trust, amounting to $618.24. This item was allowed in full by the referee. (3) A claim for commissions of the assignee upon moneys received and disbursed by him, computed according to the Ohio assignment statute, amounting to $483.25. This item was allowed by the referee at $321.64 (the amount provided by the bankrupt act), being a reduction of $161.61. (4) The bill of the law firm of Stewart & Stewart, of which firm petitioner was the senior member, for attorney's fees connected with the administration under the assignment, amounting to $370. This item was allowed in full. (5) The bill of said law firm of Stewart & Stewart for further legal services in proceedings under the assignment, the largest item being in connection with the sale of real estate and the report and confirmation of the same. This bill amounted to $360. This item was allowed at $185, being a reduction of $175. (6) The bill of Stewart & Stewart for professional services and advice in resisting the proceedings for adjudication in bankruptcy, $250. This item was entirely disallowed as a lien or preferred claim. (7) Expenses and disbursements of Stewart & Stewart in defending against said adjudication in bankruptcy, $270.92. This item was disallowed in toto. (8) The claim of the assignee for extra compensation for extraordinary services in administering the assignment, $3,500. This claim was disallowed in toto. The disallowed items of claimed credits amounted to $4,086.61, exclusive of the $270.92 actually disbursed by the assignee in connection with the resistance to the bankruptcy proceedings. The referee found that the assignee had in his hands this amount of $4,086.61 belonging to the estate of the bankrupt, and ordered its payment to the trustee in bankruptcy, directing the trustee to institute plenary suit for the $270.92, as not in the hands of the assignee. It is the affirmance of this order which the assignee seeks to have reviewed. The trustee also asks a review of certain items in the assignee's account, which were allowed by the referee against the trustee's objection.

The assignee contends in this court that the referee in bankruptcy had no jurisdiction by summary proceeding to direct an assignee appointed under the state law to turn over to the trustee in bankruptcy the funds to which he claims the right to credit, on account of commissions, compensation for extra services, and bills for legal services and expenses. This contention rests upon the proposition that the claim of the assignee is adverse to the estate of the bankrupt. There is no doubt that if the claim presented by the assignee is an adverse claim within the meaning of the decisions, the District Court had no jurisdiction by summary proceeding to require the turning over of the moneys to the estate of the bankrupt as against the assignee's objection to the jurisdiction of the bankruptcy court. Louisville Trust Co. v. Comingor, 184 U.S. 18, 22 Sup.Ct. 293, 46 L.Ed. 413; First Nat. Bank v. Title & Trust Co., 198 U.S. 280, 25 Sup.Ct. 693, 49 L.Ed. 1051. But in our opinion, upon the case presented on this review, the District Court had jurisdiction to make the order complained of. The assignment by Hays to Stewart did not constitute the latter an assignee for value, but simply made him the agent of Hays for the distribution of the proceeds of the property among the latter's creditors. Being such agent his possession was that of the principal, and he therefore did not hold adversely to the bankrupt or to the latter's trustee by the mere fact that he held in his hands funds received by him under the assignment. Bryan v. Bernheimer, 181 U.S. 188, 192, 193, 21 Sup.Ct. 557, 45 L.Ed. 814; Mueller v. Nugent, 184 U.S. 1, 17, 22 Sup.Ct. 269, 46 L.Ed. 406. The assignee contends that this case is ruled by Louisville Trust Co. v. Comingor, supra, in which, under the facts there presented, the bankruptcy court was held to have no jurisdiction to make an order for the surrender by an assignee of moneys which had been received by him under the assignment. The Comingor Case differs from the case before us in these respects: In that case the assignee denied the jurisdiction of the bankruptcy court, and showed in defense to the proceeding to require him to pay over the moneys in question that previous to the commencement of the bankruptcy proceedings he had actually disbursed the entire amount by way of commissions retained by him as compensation and through payments to his attorneys, and that he was utterly unable to recover or repay any part of such moneys. He therefore could not comply with an order for surrender, and as pointed out by this court in the opinion of Judge Severens, imprisonment must inevitably follow the order for surrender. Ex parte Comingor, 107 F. 898, 907, 47 C.C.A. 51. As stated by Mr. Chief Justice Fuller:

'He (Comingor) was ruled to show cause, and the cause he showed defeated jurisdiction over the subject-matter, that is, jurisdiction to proceed summarily. He did not come in voluntarily, but in obedience to peremptory orders, and although he participated in the proceedings before the referee, he had pleaded his claims in the outset, and he made his formal protest to the exercise of jurisdiction before the final order was entered.'

In the case we are considering, of the $18,000 and upwards received by the assignee there came into his hands previous to the proceedings in bankruptcy but $808.12.

The accounts presented by him show that he had disbursed previous to the bankruptcy proceedings but $166. We find no assertion in the record that he has ever paid the claims of Stewart &amp Stewart for legal services (except the sum of $99.72, not in controversy) or any of the claims in controversy here except the expenses (as distinguished from legal services) connected with the resistance to the bankruptcy proceedings. The record is express that upon the proceedings for the settlement of his accounts before the referee, the assignee stated in open court, that the entire receipts, less certain disbursements which were allowed by...