Taylor v. Voss, 199

• Citation: 70 L.Ed. 889,271 U.S. 176,46 S.Ct. 461
• Decision Date: 03 May 1926
• Docket Number: No. 199,199
• Parties: TAYLOR et al. v. VOSS
• Court: United States Supreme Court

271 U.S. 176

46 S.Ct. 461

70 L.Ed. 889

TAYLOR et al.

v VOSS.

No. 199.

Argued March 8, 9, 1926.

Decided May 3, 1926.

[Syllabus from pages 176-178 intentionally omitted] Messrs. D. H. Ortmeyer, of Evansville, Ind., and Harold Taylor, of Indianapolis, Ind., for petitioners.

Mr. Henry B. Walker, of Evansville, Ind., for respondent.

Mr. Justice SANFORD delivered the opinion of the Court.

In December, 1921, Wilbur Erskine, a married man, residing and owning real estate in Indiana, was adjudged a bankrupt on his voluntary petition in the federal District Court for the State. In February, 1922, the respondent Voss was appointed the trustee in bankruptcy. In March, before any sale of the real estate, the bankrupt's wife, Mary E. Erskine, died testate, leaving by her will her entire property to the petitioner Taylor, as testamentary trustee. In May, the trustee in bankruptcy, filed a petition in the bankruptcy proceeding, alleging that the testamentary trustee claimed an interest in the real estate of the bankrupt, and praying that he be required to set up this claim, and that such interest be fixed by the court and the right to sell the real estate free from such claim be declared. The testamentary trustee answered, alleging that upon the adjudication in bankruptcy Mrs. Erskine had become absolutely vested under the State laws and the Bankruptcy Act, with a wife's interest in the real estate of her husband, to which she was entitled at the time of her death; and also praying that the court fix this interest. Pending a hearing as to this claim, the real estate was sold by the trustee in bankruptcy, by consent, for $36,870; under an agreement that not less than one-fifth of the proceeds should be held by him to protect whatever rights the testamentary trustee might have in the real estate, and that if the final decision should be in favor of the latter, the trustee in bankruptcy should pay over to him the amount found to be due on account of his interest in the real estate. Thereafter, the question as to the disposition of the proceeds of sale was submitted to the referee under the foregoing agreement and a stipulation as to the facts, as they have been set out. Upon this hearing the referee held that the testamentary trustee was entitled to receive one-fifth of the proceeds of sale, amounting to $7,374, and directed that this sum be paid to him by the trustee in bankruptcy. This order was confirmed by the District Judge. Within two months thereafter the trustee in bankruptcy filed a petition in the Circuit Court of Appeals for a revision of this order in matter of law, under section 24b of the Bankruptcy Act (Comp. St. § 9608).¹ The testamentary trustee moved to dismiss this petition on the ground that it presented a controversy arising in the bankruptcy proceeding which could be reviewed only by an appeal under section 24a of the Act. The Court of Appeals denied this motion, on the ground that while the petition presented such a controversy, the matter might nevertheless be considered as though it had been brought up by appeal, in accordance with the provisions of section 4 of the Jurisdictional Act of 1916 (Comp. St. § 1649a).² And, thus considering the matter, the court held, that upon the death of Mrs. Erskine before the real estate had been sold, all her right therein had been extinguished, and no interest had passed to the testamentary trustee; and accordingly reversed the order of the District Court. Voss v. Taylor, 1 F.(2d) 149. This writ of certiorari was then granted. 267 U. S. 588, 45 S. Ct. 352, 69 L. Ed. 801.

The contentions of the testamentary trustee are: (1) That the Circuit Court of Appeals had no jurisdiction to review the order of the District Court under the petition for revision; and (2) that, even if such jurisdiction existed, the decree reversing that order was erroneous as a matter of law.

1. The first of these contentions requires a consideration of the provisions of the Bankruptcy Act dealing with the review of proceedings in courts of bankruptcy in the exercise of the appellate and supervisory jurisdiction of the Circuit Courts of Appeals.

By section 24a of the Act the Circuit Courts of Appeals are 'invested with appellate jurisdiction of controversies arising in bankruptcy proceedings from the courts of bankruptcy.' By section 24b they are given jurisdiction 'to superintend and revise in matter of law the proceedings of the several inferior courts of bankruptcy * * * on due notice and petition by any party aggrieved.' And by section 25a (Comp. St. § 9609) it is provided that appeals 'in bankruptcy proceedings' may be taken to them, within ten days, from judgments as to adjudications of bankruptcy, discharges, and claims of five hundred dollars or over.

These provisions-which are to be read in the light of the provision in section 23a (Comp. St. § 9607) giving the District Courts, as the successors of the Circuit Courts, general jurisdiction in plenary actions of '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'-have given rise to much conflict of opinion in the various Circuit Courts of Appeals in respect to the distinction between 'controversies arising in bankruptcy proceedings' and mere 'proceedings' in bankruptcy, and the procedure by which they may be brought up for review.

It is now settled by the decisions of this Court, that the 'controversies arising in bankruptcy proceedings' referred to in section 24a, include those matters arising in the course of a bankruptcy proceeding, which are not mere steps in the ordinary administration of the bankrupt estate, but present, by intervention or otherwise, distinct and separable issues between the trustee and adverse claimants concerning the right and title to the bankrupt's estate. Hewit v. Berlin Machine Works, 194 U. S. 296, 300, 24 S. Ct. 690, 48 L. Ed. 986; Coder v. Arts, 213 U. S. 223, 234, 29 S. Ct. 436, 53 L. Ed. 772, 16 Ann. Cas. 1008; Tefft & Co. v. Munsuri, 222 U. S. 114, 118, 32 S. Ct. 67, 56 L. Ed. 118; Swift & Co. v. Hoover, 242 U. S. 107, 109, 37 S. Ct. 56, 61 L. Ed. 175. In such 'controversies' the decrees of the court of bankruptcy may be reviewed by appeals which bring up the whole matter and open both the facts and the law for consideration. Duryea Power Co. v. Sternbergh, 218 U. S. 299, 302, 31 S. Ct. 25, 54 L. Ed. 1047; Houghton v. Burden, 228 U. S. 161, 165, 33 S. Ct. 491, 57 L. Ed. 780.

On the other hand, the 'proceedings' in bankruptcy referred to in section 24b are those matters of an administrative character, including questions between the bankrupt and his creditors, which are presented in the ordinary course of the administration of the bankrupt's estate. Matter of Loving, 224 U. S. 183, 188, 32 S. Ct. 446, 56 L. Ed. 725. In such administrative matters-as to which the courts of bankruptcy proceed in a summary way in the final settlement and distribution of the estate, U. S. Fidelity Co. v. Bray, 32 S. Ct. 620, 225 U. S. 205, 218, 56 L. Ed. 1055³-their orders and decrees may be reviewed by petitions for revision which bring up questions of law only. Duryea Power Co. v. Sternbergh, supra, 302 (31 S. Ct. 25).

It thus appears that the essential distinction between the different methods provided for reviewing the orders and decrees of the courts of bankruptcy is, that 'controversies' in bankruptcy proceedings, arising between the trustee representing the bankrupt and his creditors, on the one side, and adverse claimants on the other, affecting the extent of the estate to be distributed, may be reviewed both as to fact and law; while 'proceedings' in bankruptcy affecting merely the administration and distribution of the estate, may be reviewed in matter of law only except as to the three classes of such 'proceedings' enumerated in section 25a, as to which a short right of appeal is given, both as to fact and law. Furthermore, apart from the scope of the review permitted by the act, the distinction between an appeal and a petition for revision in the mere matter of form, is immaterial. Thus, although a petition for revision cannot be treated as an appeal for the purpose of enlarging the scope of the review so as to extend to questions of fact, Duryea Power Co. v. Sternbergh, supra, 302 (31 S. Ct. 25) where a matter which is only reviewable in law is taken up by an appeal, the Circuit Court of Appeals, if the question of law is sufficiently presented on the record, may treat the appeal as a petition for revision and dispose of it accordingly. Bryan v. Bernheimer, 181 U. S. 188, 193, 21 S. Ct. 557, 45 L. Ed. 814; Holden v. Stratton, 191 U. S. 115, 118, 119, 24 S. Ct. 45, 48 L. Ed. 116; Duryea Power Co. v. Sternbergh, supra, 301 (31 S. Ct. 25).

Coming then to the procedural question involved in the present case it is clear, in the first place, that, as was held by the Circuit Court of Appeals, the matter presented is a 'controversy' between the trustee in bankruptcy and the testamentary trustee, as an adverse claimant, in respect to the title to the bankrupt's estate, which might have been reviewed by an appeal under section 24a of the Bankruptcy Act. Hewit v. Berlin Machine Works, supra, 300 (24 S. Ct. 690); Knapp v. Milwaukee Trust Co., 216 U. S. 545, 553, 30 S. Ct. 412, 54 L. Ed. 610; Houghton v. Burden, supra, 165 (33 S. Ct. 491); Greey v. Dockendorff, 34 S. Ct. 166, 58 L. Ed. 339, 231 U. S. 513, 514; Globe Bank v. Martin, 236 U. S. 289, 296, 35 S. Ct. 377, 59 L. Ed. 583; Bailey v. Baker Machinery Co., 239 U. S. 268, 270, 36 S. Ct. 50, 60 L. Ed. 275; Moody v. Century Bank, 239 U. S. 374, 377, 36 S. Ct. 111, 60 L. Ed. 336; Benedict v. Ratner, 268 U. S. 353, 358, 45 S. Ct. 566, 69 L. Ed. 991. And if, under the provisions of the Bankruptcy Act, an appeal was the only method by which this 'controversy' could be reviewed, we think it is clear that there was no...