Biggs v. Mays

• Decision Date: 16 February 1942
• Docket Number: No. 12050.,12050.
• Citation: 125 F.2d 693
• Parties: BIGGS, Special Deputy Com'r of Finance for State of Missouri, v. MAYS.
• Court: U.S. Court of Appeals — Eighth Circuit

125 F.2d 693 (1942)

BIGGS, Special Deputy Com'r of Finance for State of Missouri, v. MAYS.

No. 12050.

Circuit Court of Appeals, Eighth Circuit.

February 16, 1942.

COPYRIGHT MATERIAL OMITTED

D. D. Panich, of Little Rock, Ark., for appellant.

David R. Hardy, of Kansas City, Mo. (Sebree, Shook & Gisler, of Kansas City, Mo., on the brief), for appellee.

Before THOMAS and JOHNSEN, Circuit Judges and REEVES, District Judge.

THOMAS, Circuit Judge.

This is an appeal from an order in bankruptcy reversing on review an order of the referee which, upon reexamination, re-allowed a claim of the Wellston Trust Company, insolvent and represented in this proceeding by the appellant.

The material evidentiary facts are not in dispute. Edmund M. Mays, the appellee, filed his voluntary petition in bankruptcy April 21, 1939, and was adjudged a bankrupt the following day. On May 8, 1939, the Wellston Trust Company filed its claim in the amount of $70,079, and it was allowed by the referee on the same day. In July, 1940, the bankrupt filed a petition for reexamination of the claim. The claim was based upon a promissory collateral note made by the bankrupt, dated August 25, 1932, and payable six months after date to the Wellston Trust Company. The ground for reexamination of the claim alleged in the petition was that the note was barred by the statute of limitations.

After a hearing at which the parties were represented by counsel the referee entered an order overruling the appellee's contention that the note was barred and reallowing the claim in the amount for which it was filed. A petition for review was filed by the bankrupt, the record was certified by the referee, and the judge on April 7, 1941, announced his findings in open court. Upon motion of appellant the findings were withheld to allow the parties to file briefs. On April 22, 1941, appellant filed a motion to dismiss appellee's petition for review on the ground that the bankrupt was not a person aggrieved or a party in interest within the meaning of section 39, sub. c of the Bankruptcy Act as amended, 11 U.S. C.A. § 67 sub. c, effective September 22, 1938. Appellant requested oral argument upon the motion. On May 3, 1941, the order appealed from was entered. In this order appellant's motion to dismiss the petition for review was denied; it was found that oral argument was not necessary; and the order of the referee reallowing the claim was reversed.

The appeal presents for consideration (1) the power of the judge to review the order of the referee; (2) the alleged abuse of discretion of the judge in refusing to permit oral argument upon the motion to dismiss; and, on the merits, (3) the bar of the statute of limitations.

1. Power of the Judge. — Section 39, sub. c of the Bankruptcy Act, as amended by the Act of June 22, 1938, c. 575, § 1, 52 Stat. 858, 11 U.S.C.A. § 67, sub. c, provides: "A person aggrieved by an order of a referee may * * * file with the referee a petition for review of such order by a judge * * *."

In the present instance the bankrupt filed the petition seeking review by the judge of the order of the referee. The appellant contends that the judge was without power to consider and act upon the petition because the bankrupt is not "a person aggrieved" by the allowance of a claim against the bankrupt estate within the meaning of the statute quoted supra. The judge held that the referee having certified the record to him for review he had power sua sponte to review and revise the order. The judge further found that "The allowance of this claim would, in my opinion, work an injustice to the estate of the bankrupt." In re Mays, D.C., 38 F.Supp. 958, 963.

Under these circumstances we think the court not only had the power to do so but that it properly considered and acted upon the petition for review. Section 39, sub. c, providing that an aggrieved party may petition for a review of the order of a referee, is not a condition upon the jurisdiction of the court. It in no way limits the power of the court, but is merely procedural. It limits only the right of an aggrieved party without impairing the power or discretion of the court. Thummess v. Von Hoffman, 3 Cir., 109 F.2d 291; In re Albert, 2 Cir., 122 F.2d 393, 394. The powers of the judge as a court of bankruptcy are defined in the statutes and in the General Orders, 11 U.S.C.A. following section 53. Section 2, sub. a(10) of the Act, 11 U.S.C.A. § 11, sub. a(10) states that the courts of bankruptcy have jurisdiction to "consider records, findings, and orders certified to the judges by referees, and confirm, modify, or reverse such findings and orders, or return such records with instructions for further proceedings." Section 38 of the Act, 11 U.S.C.A. § 66, provides that "Referees are hereby invested, subject always to a review by the judge, with jurisdiction to * * * (6) perform such of the duties as are by this title conferred on courts of bankruptcy * * *." In Wayne Gas Co. v. Owens-Illinois Co., 300 U.S. 131, 137, 57 S.Ct. 382, 385, 81 L.Ed. 557, the Supreme Court said, "The bankruptcy court has the power, for good reason, to revise its judgments upon seasonable application and before rights have vested on the faith of its action."

General Order 4 provides that "Proceedings may be conducted by the bankrupt or debtor in person in his own behalf, or by a creditor." General Order 21(6) provides that "When the trustee or any creditor or the bankrupt or debtor shall desire the reconsideration of any claim allowed against the estate, he may apply by petition to the referee", etc.

In this instance the Wellston Trust Company was a party to the bankruptcy proceeding. It became such by filing and securing an adjudication of its claim before the referee. That adjudication was subject to be reviewed and revised by the court at the instance of any aggrieved party, or any party in interest, to that proceeding, or by the court sua sponte, upon certification of the record by the referee. The bankrupt petitioned for review. The appellant appeared and contested the review without objecting to it on the ground that the petition was filed by the bankrupt. An analogous situation was presented to the court in the case of Jones v. Clower, 5 Cir., 22 F.2d 104, 106, and in determining the issue in that case the Court of Appeals said:

"It seems that appellants, by contesting appellee's petition without objecting to it on the ground that it was filed by a creditor, and not by the trustee in bankruptcy of the estate of the maker of the note referred to, waived the objection to that petition on that ground. But, without regard to that consideration, the court, in the absence of any petition by either the trustee in bankruptcy or a creditor, could of its own motion take action to correct what it has cause to believe was erroneous action, taken by it upon insufficient knowledge."

To the same effect, see In re Flanders Co., 6 Cir., 32 F.2d 654; International Agr. Corp. v. Cary, 6 Cir., 240 F. 101, 105; In re De Ran, 6 Cir., 260 F. 732; Lesser v. Gray, 236 U.S. 70, 74, 35 S.Ct. 227, 59 L. Ed. 471.

The court did not err in the exercise of its power to review the order of the referee.

2. Discretion of the Court. — It is urged that the court abused its discretion in refusing to hear oral argument on the motion to dismiss. The contention is without merit. A court in the exercise of a sound discretion may always limit argument to itself. There was no abuse of such discretion in this instance. The matter before the court had been pending for several months. A conclusion upon the merits had been announced by the judge when the motion to dismiss was filed, and written briefs were thereafter filed by counsel for the parties. The able opinion of the judge shows that he gave full consideration to the belated motion. There was no abuse of discretion.

3. The Statute of Limitations. — The note upon which appellant's claim was based was dated August 25, 1932, and was due six months later on February 25, 1933. Section 8933 of Pope's Digest of the Statutes of Arkansas provides that "Actions on promissory notes * * * shall be commenced within five years after the cause of action shall accrue, and not afterward." The cause of action on appellant's note was barred, therefore, on February 25, 1938, unless the bar of the statute was tolled by some act of the bankrupt prior to the filing of his voluntary petition on April 21, 1939. The appellant argues that the statute was tolled (1) by a credit endorsed upon the note on October 25, 1937; (2) by the pendency of an involuntary petition in bankruptcy against the bankrupt in St. Louis, Missouri; (3) by the listing of the note by the bankrupt in his schedule of liabilities; (4) by the pendency of a plenary suit on the note instituted December 19, 1938; and (5) by an acknowledgment of the debt in writing in 1938.

Appellant waives argument on the first point, that the statute was tolled by the endorsement of a credit on the note on October 25, 1937. The holder at that time endorsed a credit derived from the proceeds of the sale of collateral. The record shows that no notice of the sale was given the maker of the note. Under the law of Arkansas, such a credit does not toll the running of the statute. Taylor v. White, 182 Ark. 433, 31 S.W.2d 745; Bank of Searcy v. Kroh, 195 Ark. 785, 114 S.W.2d 26, 28. See, also, Storrie Coal Co. v. McAlester Fuel Co., 10 Cir., 109 F.2d 90, 92.

Appellant and two other creditors filed an involuntary proceeding in bankruptcy against the bankrupt on July 10, 1934, in the district court for the eastern district of Missouri. The bankrupt asked for a jury trial. No further action having been taken, the proceedings were dismissed by the court on May 27, 1937. The second contention of appellant is that the statute was tolled during the period between these two dates. The amendment to the Bankruptcy Act of 1898 known as the Chandler Act did not become effective until...