Stuart v. Reynolds

• Decision Date: 04 March 1913
• Docket Number: 2,310.
• Citation: 204 F. 709
• Parties: STUART v. REYNOLDS.
• Court: U.S. Court of Appeals — Fifth Circuit

204 F. 709

STUART v. REYNOLDS.

No. 2,310.

United States Court of Appeals, Fifth Circuit.

March 4, 1913

[Copyrighted Material Omitted]

This petition for review results from the following proceedings:

C. W Reynolds, engaged in the general merchandise business at Clanton, Ala., was adjudged a voluntary bankrupt. After the appointment of a trustee for his estate he submitted to an examination by his creditors before the referee. After this examination, and an audit of his books kept in connection with his mercantile business, George Stuart, trustee petitioned the referee for a rule against the bankrupt, Reynolds, requiring him to appear before the referee at a time fixed to show cause why he should not be forthwith required to turn over to his trustee goods, wares, and merchandise, or other equivalent in money, to the amount of $19,249.35, which it was charged belonged to his estate, and were then in his possession or under his control.

This rule against the bankrupt, after hearings, resulted in orders being passed by the referee directing the bankrupt to turn over to the trustee 'goods, wares, and merchandise, money, and other property, of the value of $20,969.60." The bankrupt failed to comply with these orders, and the proceedings at last eventuated in a finding by the referee 'that the said bankrupt, C. W. Reynolds, has now in his possession or under his control certain goods, wares, merchandise, or money, the proceeds thereof amounting to the sum of $19,722.96, or that he has in his possession or under his control goods, wares, and merchandise in part, and money in part, to the aggregate value of $19,722.96. ' On this finding the referee passed an order that the bankrupt, on or before the 7th day of February, 1911, should turn over and deliver to the trustee in bankruptcy 'the sum of $19,722.96 in goods, wares, and merchandise, or in money. ' The bankrupt, feeling aggrieved at this order, in due course and on the 4th day of February, 1911, petitioned for a review thereof by the judge. Thereupon there was certified to the judge the order passed against the bankrupt by the referee and the fact of the bankrupt's failure to comply therewith; also a summary of the evidence upon which the action of the referee was based.

The judge, after hearing and consideration, found as follows:

'I cannot find, after careful examination of the evidence, that it sustains the findings of the referee that the bankrupt has now in his possession, or at the time the order was made, either the goods or the money proceeds amounting to $19,722.96, or any other sum. While the evidence leaves no shadow of a doubt in the mind of the court that the bankrupt had goods of that value, for which he has not accounted, or has converted into money, which at one time he had under his control, I do not think the proof justifies the referee in finding that at the time of the order, or at the time of his examination, the bankrupt still had in his possession or under his control either the goods or the money. After a somewhat exhaustive investigation of his affairs, no evidence develops showing the disposition of any specific goods, or tracing to him the possession of any considerable sum of money, or other evidence of such conduct as indicates that he now has any of the goods, or money derived from their conversion, in his possession or under his control.'

With this finding as a basis, the court, on October 18, 1911, passed an order reversing and holding for naught the order theretofore entered by the referee, requiring the bankrupt to pay over to his trustee in bankruptcy the sum of $19,772.96 in goods, wares, and merchandise, or in money, and discharging the rule upon the bankrupt to show cause why he should not be punished for failure to comply with the referee's order.

John London and Henry Fitts, both of Birmingham, Ala., for petitioner.

Jones, Foster & Field, of Montgomery, Ala., and Tipton Mullins and J. Osmond Middleton, both of Clanton, Ala., for respondent.

Before PARDEE and SHELBY, Circuit Judges, and MEEK, District Judge.

MEEK, District Judge (after stating the facts as above).

This proceeding is brought here under the provisions of section 24b of the Bankruptcy Act (Act July 1, 1898, c. 541, 30 Stat. 553 (U.S. Comp. St. 1901, p. 3432)). Therefore we are not authorized to determine questions of fact upon which the order of the lower court is based, but may only superintend, and, if need be, revise, its action in the matter of law. This is now the settled interpretation given section 24b. Matter of Loving, 224 U.S. 183, 32 Sup.Ct. 446, 56 L.Ed. 725; Coder v. Arts, 213 U.S. 223, 29 Sup.Ct. 436, 53 L.Ed. 772, 16 Ann.Cas. 1008; First National Bank v. Title & Trust Company, 198 U.S. 280, 25 Sup.Ct. 693, 49 L.Ed. 1051; Mueller v. Nugent, 184 U.S. 1, 22 Sup.Ct. 269, 46 L.Ed. 405; Samel v. Dodd (Fifth Cir.) 142 F. 68, 73 C.C.A. 254; In re Purvine (Fifth Cir.) 96 F. 192, 37 C.C.A. 446. The matter of law to be passed on is the validity of the order of the lower court of October 18, 1911, and this is to be determined on the record of the District Court. Mueller v. Nugent, cited supra.

From the evidence before him, which was of a conflicting nature, the judge was unable affirmatively to find as a fact that the bankrupt, at the time of the making of the order against him by the referee, then had in his possession or under his control either the goods or the money he was directed to turn over to the trustee of his estate. Failing to find this, it was incumbent on the judge to reverse the action of the referee and discharge the rule against the bankrupt. No other order than the one passed by him was compatible with or justified by the judge's view of the evidence and the conclusions entertained by him.

In view of the brief and argument submitted in behalf of the petitioner, we deem it appropriate to say the doctrine announced by this court in Re Purvine, cited supra, has neither been modified nor changed. The same doctrine was subsequently announced and sanctioned by the Supreme Court of the United States in Mueller v. Nugent, 184 U.S. 1, 22 Sup.Ct. 269, 46 L.Ed. 405. There is no departure from this doctrine in Samel v. Dodd, cited supra. In the latter case it was held the court, finding in a summary proceeding that bankrupts had in their possession or under their control goods and merchandise, the property of their estate in bankruptcy, had not the power lawfully to order them to pay over the value of such goods and merchandise in money under penalty of commitment for contempt; that in such a proceeding the court was restricted to ordering a return of the goods and merchandise in specie or kind, and this only when it was made clear by proof that the bankrupts were in possession or control of them.

The petition for a revision of the action of the judge will be denied.

PARDEE, Circuit Judge, concurs in the foregoing opinion and decision.

SHELBY Circuit Judge (concurring).

Stuart, the petitioner, was appointed trustee of the estate of the bankrupt, C. W. Reynolds, and from an examination of the bankrupt and of his books was speedily convinced that the bankrupt ought to turn over to him as trustee $19,249.35 in goods or money. The trustee presented his petition to the referee in bankruptcy, praying for an order that the bankrupt be required forthwith to show cause why he should not turn over to his trustee 'goods, wares, and merchandise, or other equivalent in money, to the amount of $19,249.35," or such portion as the court might find the bankrupt had in his possession. The bankrupt answered under oath, denying that he had in his possession or under his control any goods, or money for which the same had been sold, and denying the averment that he did not deliver to his trustee all the goods, wares, merchandise, and money belonging to his bankrupt estate. These pleadings, briefly stated, made the issue. The trustee admitted receiving 'stock inventoried at $8,372.66' and book accounts for $845.26. C. W. Harden, a clerk of the United States marshal, qualified as an 'expert' accountant, and presented statements which he testified gave the status of the bankrupt's business as shown by his books, which statement closes with the ominous and convincing lines:

'Amount of goods or money now wrongfully withheld from his trustee, $19,249.35."

Notwithstanding the failure of the evidence to show whether it was goods or money that was 'now wrongfully withheld,' and the failure to show what kind of goods, and where they were, or where the alleged money was held or deposited, if it was money that was withheld, or that the bankrupt had actual possession, and notwithstanding the bankrupt's sworn denial, the referee found the evidence so convincing that he made an order that the bankrupt 'was short in the further sum of $20,969.60,' and that he turn over and deliver to the trustee 'the goods, wares, and merchandise, money, and other property, of the said value of $20,969.60, or show cause why he should not do so. ' The bankrupt objected to the order as illegal, not based on sufficient evidence or sufficient finding of fact, and as not describing or designating the property he was alleged to withhold. The referee adhered to his order, alleging that the bankrupt had failed to pay over the money or deliver the goods, and had failed to 'purge himself of the said contempt,' and certified the case to the District Court 'for such punishment or disposition as to said court may seem meet and proper. ' The District Court made no formal finding of facts, but, having briefly stated the case, disposed of it decisively as follows:

'Under the decision in the case of Samel v. Dodd, 142 F. 71 (73 C.C.A. 254), rendered by our Circuit Court of Appeals, it is not

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