Oriel v. Russell Prela v. Hubshman
| Citation | 73 L.Ed. 419,278 U.S. 358,49 S.Ct. 173 |
| Decision Date | 14 January 1929 |
| Docket Number | Nos. 92 and 91,s. 92 and 91 |
| Parties | ORIEL et al. v. RUSSELL. PRELA v. HUBSHMAN |
| Court | United States Supreme Court |
Messrs. Archibald Palmer, of New York City, and Max Rosenstein, of Newark, N. J., for petitioner Prela.
Mr. Hugo Levy, of New York City, for petitioners Oriel and others.
Messrs. Benjamin Siegel and William E. Russell, both of New York City, for respondent Russell.
[Argument of Counsel from page 359 intentionally omitted] Mr. George Lion Cohen, of New York City, for respondent Hubshman.
These are writs of certiorari to orders of commitment of bankrupts for contempt, one in No. 92 of Harry Oriel and Joseph Confino, and the other in No. 91 of Samuel Prela, made by the United States District Court for the Southern District of New York, and affirmed by the Circuit Court of Appeals for the Second Circuit. They were heard together.
In the Oriel Case, the order, the breach of which led to the commitment, was against Oriel and Confino, directing them to turn over to their trustee in bankruptcy their books for the year 1925. The turnover order was made upon the report of the referee, October 22, 1926. The books directed to be turned over were a ledger, a purchase book and journal, a cash book and a time book. The petition was filed in August, 1926, the order to turn over granted October 22, 1926, and the order of commitment appealed from was entered March 8, 1927. The excuse offered by the bankrupts for noncompliance was that the books were not in their possession and had not been since they moved from one store to another in January, 1926, before the bankruptcy. It appeared that the only books which were missing were the books of 1925. These were necessary to sustain the entries in the books in 1926, showing the basis for the figures for the books of that critical year. The court discredited the excuse of inability to comply. There was conflicting evidence, but, after an extended hearing, the referee found that the books of account were with the bankrupts or under their control. No appeal was taken from the turnover order, and, after a failure to comply therewith, a motion followed for an order of contempt which committed them to jail, thereto be confined and detained until they purged themselves. On the motion to commit, the bankrupts attempted to introduce evidence on the issue whether at the time of the turnover order they had the books in their possession or under their control. The referee and the District Court refused to retry that issue on the ground that the turnover order could not be collaterally attacked. 17 F.(2d) 800. No attempt was made by the bankrupts to show that there was any change in respect to the custody of the books after the turnover order. The Circuit Court of Appeals affirmed the action of the District Court. 23 F.(2d) 409.
In the Prela Case, the bankrupt was directed to turn over to his trustees merchandise and money amounting in all to about $10,000. An appeal from the turnover order was denied by the Circuit Court of Appeals. Failure to comply resulted in a contempt order similar to that in the Oriel Case. 23 F.(2d) 413. It was attempted to introduce in the Prela Case, as it had been in the Oriel Case, evidence to show that the original turnover order was wrong, and witnesses were called who had been available at the original hearing but had not then been subpoenaed.
The cases are brought here on the ground of error in the District Court in holding that the turnover order could not be collaterally attacked, and that the only evidence which was relevant on the motion to commit for contempt was evidence tending to show that, since the turnover order, circumstances had happened disclosing the inability of the bankrupts to comply with the order. It was urged that a finding of contempt required a greater weight of evidence than a turnover order, and hence that the former could not be predicated upon the latter without a re-examination of all the evidence. These rulings present the question before us.
We think a proceeding for a turnover order in bankruptcy is one the right to which should be supported by clear and convincing evidence. The charge upon which the order is asked is that the bankrupt, having possession of property which he knew should have been delivered by him to the trustees, refuses to comply with his obligation in this regard. It is a charge equivalent to one of fraud, and must be established by the same kind of evidence required in a case of fraud in a court of equity. A mere preponderance of evidence in such a case is not enough. The proceeding is one in which coercive methods by imprisonment are probable and are foreshadowed. The referee and the court in passing on the issue under such a turnover motion should therefore require clear evidence of the justice of such an order before it is made. Being made, it should be given weight in the future proceedings as one that may not be collaterally attacked by an effort to try over the issue already heard and decided at the turnover. Thereafter on the motion for commitment the only evidence that can be considered is the evidence of something that has happened since the turnover order was made showing that since that time there has newly arisen an inability on the part of the bankrupt to comply with the turnover order.
The proceedings in these two cases have been so long drawn out by efforts on the part of the bankrupts to retry the issue presented on the motion to turn over as to be, of themselves, convincing argument that, if the bankruptcy statute is not to be frittered away in constant delays and failures of enforcement of lawful orders, the rule we have laid down is the proper one.
The decision of the court in the case of Gompers v. Buck's Stove & Range Co., 221 U. S. 418, 442, 31 S. Ct. 492 (55 L. Ed. 797, 34 L. R. A. (N. S.) 874), and the discussion of Mr. Justice Lamar in that case, leave no doubt that a motion to commit the bankrupt for failure to obey an order of the court to turn over to the receiver in bankruptcy the property of the bankrupt is a civil contempt and is to be treated as a mere step in the proceedings to administer the assets of the bankrupt as provided by law, and in aid of the seizure of those assets and their proper distribution. While in a sense they are punitive, they are not mere punishment-they are administrative but coercive, and intended to compel, against the reluctance of the bankrupt, performance by him of his lawful duty.
With reference to the character or degree of proof in establishing a civil fraud, the authorities are quite clear that it need not be beyond reasonable doubt, because it is a civil proceeding. Lalone v. United States, 164 U. S. 255, 257, 17 S. Ct. 74 (41 L. Ed. 425); United States v. American Bell Telephone Co., 167 U. S. 224, 241, 17 S. Ct. 809 (42 L. Ed. 144); 5 Wigmore, Evidence (2d Ed. 1923) § 2498, 2, 3, and the cases cited. The Court ought not to issue an order lightly or merely on a preponderance of the evidence, but only after full deliberation and satisfactory evidence, with the understanding that it is rendering a judgment which is only to be set aside on appeal or some other form of review, or upon a properly supported petition for rehearing in the same court.
A turnover order must be regarded as a real and serious step in the bankruptcy...
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