323 U.S. 97 (1944), 307, Cline v. Kaplan

Docket Nº:No. 307
Citation:323 U.S. 97, 65 S.Ct. 155, 89 L.Ed. 97
Party Name:Cline v. Kaplan
Case Date:December 04, 1944
Court:United States Supreme Court
 
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Page 97

323 U.S. 97 (1944)

65 S.Ct. 155, 89 L.Ed. 97

Cline

v.

Kaplan

No. 307

United States Supreme Court

Dec. 4, 1944

Submitted November 13, 1944

CERTIORARI TO THE CIRCUIT COURT OF APPEALS

FOR THE SEVENTH CIRCUIT

Syllabus

1. Where a bona fide claim adverse to that of the bankrupt estate is asserted as to property which is not in the actual or constructive possession of the bankruptcy court, the claimant has the right to have the merits of his claim adjudicated in a plenary suit. P. 98.

2. The bankruptcy court has the power and the duty to examine the adverse claim to ascertain whether it is ingenuous and substantial. P. 99.

3. When it is established that the adverse claim is substantial, the bankruptcy court cannot retain jurisdiction unless the claimant consents to its adjudication by that court. P. 99.

4. Consent to adjudication by the bankruptcy court of an adverse claim is lacking where the claimant has throughout resisted a petition for a turnover order and has made formal objection to the exercise of summary jurisdiction before the entry of a final order. Louisville Trust Co. v. Comingor, 184 U.S. 18. P. 99.

5. Upon the facts of this case, held that a claimant adverse to the bankrupt estate, as to property which was not in the actual or constructive possession of the bankruptcy court, did not consent to adjudication of the claim by the bankruptcy court. P. 100.

142 F.2d 301 affirmed.

Certiorari, post, p. 691, to review a judgment which, reversing orders of the bankruptcy court, sustained the referee's dismissal, for lack of jurisdiction, of a petition for a turnover order.

FRANKFURTER, J., lead opinion

MR. JUSTICE FRANKFURTER delivered the opinion of the Court.

This case concerns the powers of a bankruptcy court when a claim adverse to the bankrupt estate is asserted.

Page 98

An involuntary petition for adjudication in bankruptcy was filed against Gold Medal Laundries on September 22, 1941. A month later, the adjudication was made. On December 22, petitioner, the trustee in bankruptcy, filed with the referee a petition for an order directing the respondents to turn over certain assets, allegedly belonging to the bankrupt, which had come into possession of the respondents some fifteen months prior to the institution of the bankruptcy proceedings. Respondents' answer claimed ownership in themselves and prayed dismissal of the petition. Extensive hearings were held to determine whether the property was in the constructive possession of the bankrupt. Prior to the close of the hearings, respondents orally moved that the petition be dismissed for want of summary jurisdiction, and a formal motion to this effect was filed on May 19, 1942. On June 24, 1942, the referee granted this motion. The District Court reversed, whereupon the referee denied a turnover order on the merits, and the District Court again reversed. Appeals from both decisions of the District Court were taken to the Circuit Court of Appeals for the Seventh Circuit. Having found that the objection to the summary jurisdiction had been timely and had not been waived, that court sustained the referee's dismissal for lack of jurisdiction. 142 F.2d 301. Conflicting views having been expressed in different circuits on matters affecting bankruptcy...

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