American Trust Co. v. Wallis

• Decision Date: 18 December 1903
• Docket Number: 24.
• Citation: 126 F. 464
• Parties: AMERICAN TRUST CO. OF PITTSBURGH v. WALLIS.
• Court: U.S. Court of Appeals — Third Circuit

126 F. 464

AMERICAN TRUST CO. OF PITTSBURGH v. WALLIS.

No. 24.

United States Court of Appeals, Third Circuit.

December 18, 1903

Charles A. Woods, for appellant.

H. W McIntosh, for appellee.

Before ACHESON, DALLAS, and GRAY, Circuit Judges.

GRAY Circuit Judge.

This is an appeal from the District Court of the United States for the Western District of Pennsylvania, in Bankruptcy, in the matter of William B. Wallis, bankrupt. On May 6, 1902, a creditors' petition in bankruptcy was filed against William B. Wallis, a dealer in machinery and supplies in Pittsburgh, Pennsylvania; and thereafter, no one objecting on May 31, 1902, said Wallis was adjudged a bankrupt, and on August 9, 1902, the American Trust Company of Pittsburgh, the appellant, was duly elected and qualified as trustee in bankruptcy of the bankrupt's estate; the same trust company having prior thereto, on May 8, 1902, been appointed by the court temporary receiver in bankruptcy of said estate. On October 9, 1902, a petition was filed by the trustee before the referee to whom the case had been referred, setting forth that William B. Wallis, the bankrupt, on May 6, 1902, and during several days subsequent thereto, with notice or knowledge of the filing of the involuntary petition in bankruptcy against him, had collected sums of money from various debtors, amounting in the aggregate to $1,071.40; that the petitioner, both as receiver and trustee, had made demands on him to turn over the said sum, but that he refused and neglected so to do, and praying for an order on the bankrupt to turn over said sum to the trustee. A rule to show cause was granted on this petition, and the bankrupt filed an answer, admitting that he had collected certain sums from his debtors, to the aggregate amount stated, with notice or knowledge of the filing of the petition in bankruptcy, but that he had disbursed said money to various creditors, and that no portion of it remained in his possession. He also states, and it is not denied, that upon the appointment of the trust company, as receiver, and upon requests made, he prepared and filed with said trust company a list of said collections, from which the list filed with said petition was made; that at the time said list of collections was filed with said trust company, there was also filed by him a list of disbursements of said money, showing that the whole amount thereof, and more, was, about the same time that it was collected, actually distributed and disbursed, and that no portion thereof remained or remains in the hands of the respondent, or within his control. The respondent avers himself 'ready and willing to abide and comply with the decrees of this court, so far as in his power lies; to give such other and further information, if any there be not already given, as may be in his possession, to the end that right and justice may be done; give testimony at any legal inquiry or cause of action looking to the recovery of said moneys disbursed as aforesaid, or any of them; but he respectfully submits that said disbursements having been made by him in good faith and before he was adjudged a bankrupt, under the facts and under the law as he is advised of the same, he is justly entitled to his discharge, for which he respectfully prays. ' It is not denied that the collections and disbursements referred to were made with notice or knowledge of the filing of the petition in involuntary bankruptcy. There was no concealment or fraud of any kind alleged to have been committed by the bankrupt, and he has not failed to turn over to the receiver everything which he possesses, not claiming the $300-- exemption allowed him by law. After argument, on October 31, 1902, the said referee filed an opinion and an order, dismissing the trustee's petition and refusing to grant an order requiring the bankrupt to turn over to the trustee the said sum of money, to which opinion and order the trustee filed objections and a petition for a certification to the district judge for a review thereon. Thereupon, after argument, the District Court in Bankruptcy, on June 27, 1903, made an order and decree, affirming the opinion and order of the referee, and it is this order and decree that is now before us for review.

The single question arising on the case thus presented is: -- Has the referee, or the court in bankruptcy, power to order the bankrupt to deliver and turn over to the trustee in bankruptcy, money collected from his debtors after he had received notice or knowledge of the filing of the petition by creditors to have him adjudged a bankrupt, which money has since passed into the possession of others and is not under the control of the bankrupt? The question is unembarrassed by any allegation of fraud or concealment on the part of the bankrupt, or of those whom he preferred by payments of his debts to them out of the moneys collected.

The referee and the District Court were successively asked for a peremptory order upon the bankrupt to turn over to the trustee the money which he admits to have collected under the circumstances stated in the petition, but which, it is not denied by the trustee, is not now in the possession or control of the said bankrupt. The powers vested in courts of bankruptcy, to accomplish the general purpose of the bankrupt law, to wit, to segregate the estate of the bankrupt and provide for its equitable distribution amongst the creditors are plenary and far-reaching. The court may, by summary order, direct the delivery and turning over to the trustee by the bankrupt, or by any third person holding the same under his order and control, any property which, prior to the filing of the petition, the bankrupt could by any means have transferred or which might have been levied upon and sold under judicial process against him. For disobedience of such order, the court in bankruptcy undoubtedly has the power, by attachment for contempt, to enforce compliance with such order, and punish refusal to comply. This power, however, is farreaching and drastic, and must be exercised with cautious discretion. If the bankrupt denies that he has possession or control of the property, or, if a third person in possession thereof claims to hold it, not as the agent or representative of the bankrupt, but by title...