Chandler v. Perry

• Decision Date: 18 December 1934
• Docket Number: No. 7533.,7533.
• Citation: 74 F.2d 371
• Parties: CHANDLER et al. v. PERRY.
• Court: U.S. Court of Appeals — Fifth Circuit

74 F.2d 371 (1934)

CHANDLER et al. v. PERRY.

No. 7533.

Circuit Court of Appeals, Fifth Circuit.

December 18, 1934.

John Sayles and J. M. Chandler, both of Dallas, Tex., for appellants.

Gordon Simpson, of Tyler, Tex., for appellee.

Before FOSTER, SIBLEY, and HUTCHESON, Circuit Judges.

SIBLEY, Circuit Judge.

Perry, as trustee in bankruptcy of Martin, petitioned the referee to cite the appellants to set up their several claims to a gas and oil leasehold which he alleged was in his custody and control and actual possession, and prayed that the claims be disallowed and canceled, except Copeland's, and that it be declared a mortgage only. The referee granted the citation, but, instead of responding to it, the appellants each moved the judge to suppress the proceeding as being beyond the summary jurisdiction of the referee because they were entitled to a plenary suit and the attempted proceeding was really such, being either a suit at law to recover an interest in the lease in which a jury trial was due, or else a bill in equity to quiet title in which a trial before the chancellor should be had. The trustee answered the motions under oath, reasserting his exclusive possession of the property as that of the bankrupt, and the referee's duty and power to deal with it. The judge overruled the motions and directed the referee to take further steps conformably to law. Appeal was taken as from a proceeding in bankruptcy to review this ruling in matter of law. The questions raised are: May a court of bankruptcy by summary proceeding do what the trustee has asked? If so, may the referee exercise the jurisdiction?

A distinction must be observed between proceedings to obtain possession of property belonging to the estate and those whose object is to deal with property of the estate already in the possession of the court through its officers. As to the former, it is well settled that summary process may be used to obtain possession of all property of the bankrupt which was in the bankrupt's possession at the time the petition was filed or which was then held by others for him or by others under a merely pretended or colorable claim, or to recover possession of property which has been in the court's possession and has been wrongfully taken away. On the other hand, to recover property adversely held by a third person at the time the petition was filed, though under a title which is asserted to be fraudulent or otherwise void, or to recover a debt or other chose in action of which the court could not have actual possession, a plenary suit with the formality and delay incident to such whether at law or in equity must be resorted to. In all proceedings to recover the possession of property summarily there is preliminary jurisdiction to inquire into the nature of the defendant's possession and into any adverse claim so far as to see whether it is more than colorable. Mueller v. Nugent, 184 U. S. 1, 22 S. Ct. 269, 46 L. Ed. 405; Louisville Trust Co. v. Comingor, 184 U. S. 18, 22 S. Ct. 293, 46 L. Ed. 413; Weidhorn v. Levy, 253 U. S. 268, 40 S. Ct. 534, 64 L. Ed. 898; Taubel-Scott-Kitzmiller Co. v. Fox, 264 U. S. 426, 44 S. Ct. 396, 68 L. Ed. 770; Harrison, Trustee v. Chamberlin, 271 U. S. 191, 46 S. Ct. 467, 70 L. Ed. 897; MacDonald v. Plymouth County Trust Co., 286 U. S. 263, 52 S. Ct. 505, 76 L. Ed. 1093; Shea v. Lewis (C. C. A.) 206 F. 877; Autin v. Piske (C. C. A.) 24 F.(2d) 626.

The jurisdiction to dispose of property rightly in the court's actual or constructive possession, and as ancillary thereto to deal with all claims of title to or interest in or liens upon it, is much broader. It is not peculiar to courts of bankruptcy, but appertains to all courts having possession of property for disposition, and rests largely upon necessity, inasmuch as by a settled principle no other court is allowed to interfere with property thus in custodia legis. Murphy v. John Hofman Co., 211 U. S. 562, 29 S. Ct. 154, 53 L. Ed. 327; Taubel-Scott-Kitzmiller Co. v. Fox, 264 U. S. 426, 44 S. Ct. 396, 68 L. Ed. 770; Isaacs v. Hobbs Tie & T. Co., 282 U. S. 734, 51 S. Ct. 270, 75 L. Ed. 645; Whitney v. Wenman, 198 U. S. 539, 25 S. Ct. 778, 49 L. Ed. 1157. This ancillary jurisdiction in courts of bankruptcy is ordinarily exercised by summary process either on intervention by claimants asserting an interest, or as here by petition on the part of the trustee for a rule against such claimants. The fact that they assert an interest or title adverse to the bankrupt does not require a plenary proceeding, although of course the court in its discretion might direct the trustee to resort to such. The necessity for prompt disposition of the bankrupt's property in possession of the court usually justifies summary proceedings. Autin v. Piske (C. C. A.) 24 F.(2d) 626. Since, however, this jurisdiction rests upon the court's possession of the res, the fact of its possession and sometimes the rightfulness of it may be questioned by the claimant who is impleaded without his consent. For example, a trustee or receiver in bankruptcy who ought to have brought a plenary suit to recover possession of property adversely held...