Clay v. Waters

• Decision Date: 18 April 1910
• Docket Number: 3,131,3,132.
• Parties: CLAY v. WATERS (two cases).
• Court: U.S. Court of Appeals — Eighth Circuit

178 F. 385

CLAY v. WATERS (two cases).

Nos. 3,131, 3,132.

United States Court of Appeals, Eighth Circuit.

April 18, 1910

Syllabus by the Court.

A judgment for a criminal contempt committed in the progress of a suit in equity is reviewable by writ of error only.

A judgment against a party to a suit in equity for a civil contempt committed therein before final decree is reviewable by appeal from the final decree only.

A judgment against a party for a civil contempt committed after the decree is reviewable by appeal.

Contempts are of two classes: 'Criminal contempts,' which are prosecuted to preserve the power and vindicate the dignity of the courts and to punish the offender; and 'civil contempts,' which are prosecuted to preserve and enforce the rights of private parties and to compel obedience to orders and decrees to enforce the rights and administer the remedies to which the court has found them to be entitled.

At the time of his adjudication in bankruptcy, a bankrupt had $40,000. After the adjudication the defendant knowingly took a part of this money, loaned some of it on notes and mortgages in his name, and with some of it bought real estate in his name for the purpose of concealing it from the trustee in bankruptcy and appropriating it to himself. The trustee brought a suit for these notes and this real estate, and after the suit was commenced, and before the decree, the defendant disposed of the notes and the real estate to innocent parties for the purpose of withdrawing the property from the jurisdiction of the court and defeating its coming decree.

Held these acts constituted a criminal contempt. The judgment on a petition which set forth these facts that the defendant be imprisoned for contempt of court for 10 months unless within that time he accounted for and paid over the proceeds of the property he had converted to his use in this way was a judgment for a criminal contempt with leave to purge the contempt and be released by payment of the proceeds.

The District Court sitting in bankruptcy has jurisdiction to draw to itself and to determine by summary proceedings after reasonable notice to the claimants all controversies between the trustee and adverse claimants over liens upon and the title and possession of (1) property in the possession of the bankrupt when the petition in bankruptcy is filed, (2) property held by third parties for him, (3) property lawfully seized by the marshal as the bankrupt's under clause 3 of section 2 of the bankruptcy law, and (4) property claimed by the trustee which has been lawfully reduced to actual possession by the officers of the court.

These controversies relative to the property of the bankrupt are within the jurisdiction of the District Court in proceedings in bankruptcy under section 2 of the bankruptcy law (Act July 1, 1898, c. 541, 30 Stat. 545 (U.S. Comp. St. 1901, p 3420)), and they are not controversies at law or in equity as distinguished from proceedings in bankruptcy within the meaning of section 23 of that act.

A plenary suit may be maintained in the District Court to determine the controversies above specified which it has jurisdiction to determine by summary proceedings in bankruptcy.

The subsequent intentional taking and concealment of property of a bankrupt in his possession at the time of his adjudication by one who then had no lien upon or title or debatable claim to it is a violation of the injunction against the interference with the bankrupt's property embodied by the settled law of the land in the adjudication and in the legal custody secured by the court and is punishable as a 'contempt of court' under section 725, Rev. St. (U.S Comp. St. 1901, p. 583).

The filing of the petition in bankruptcy and the adjudication themselves constitute a caveat and an injunction by the court against any interference with the property of the bankrupt by all persons who have no liens upon, titles, or debatable claims to it at the time the petition is filed, and the taking and disposition of it by any of them violates that injunction.

It is not indispensable to the validity of a judgment for contempt of court that it should recite the acts constituting the contempt, where they are alleged in the petition for the judgment and are admitted by the answer, and the judgment is that the defendant is 'adjudged to stand in contempt of this court as alleged in the petition.' Shepard Barclay (Hugh Dabbs, R. H. Davis, P. H. Cullen, and Thomas T. Fauntleroy, on the brief), for plaintiff in error and appellant.

John W. Halliburton (Hiram W. Currey and Samuel McReynolds, on the brief), for defendant in error and appellee.

Before SANBORN, Circuit Judge, and RINER and WILLIAM H. MUNGER, District Judges.

SANBORN Circuit Judge.

George R. Clay, who will be called the 'defendant,' assails by writ of error and by appeal the judgment of the District Court that he is guilty of contempt of that court and that he be imprisoned for a period of 10 months unless before the expiration of that time he accounts for and pays over to W. H. Waters, trustee of the estate of Robert Boatright, a bankrupt, the proceeds of certain property converted by the defendant to his use after the institution of a suit against him for that property in the court below. At the threshold of this case there is a motion by the trustee to dismiss both the writ and the appeal on the ground that the judgment was for a civil and not for a criminal contempt, and that this court has no jurisdiction to review it. The defendant, on the other hand, contends, among other things, that the judgment should be reversed because the court below never had any jurisdiction of the subject-matter of the suit out of which it arose. A brief review of the proceedings anterior to the judgment is, therefore, indispensable to a discussion or a determination of the questions here presented.

On December 22, 1902, Robert Boatright was adjudged a bankrupt by the court below. On April 15, 1905, the trustee in bankruptcy of his estate exhibited a bill in equity in that court against the defendant and others wherein he averred that Boatright had $40,000 at the time of the filing of the petition in bankruptcy which in August, 1903, he carried away and deposited in the Canadian Bank of Commerce at Windsor, Ontario, and concealed from the trustee, that the defendant and others in August 1904, took this money, and, with knowledge that it was the property of the estate of Boatright in bankruptcy, with intent to continue its concealment from the trustee, invested a part of it in the defendant's name in promissory notes and mortgages on specified real estate which secured them and in real estate which is described in the bill, and the trustee prayed that the court would adjudge that this real estate and these notes and mortgages were the property of the estate, and that the defendant should assign and convey them to the trustee. Clay denied the material averments of the bill; but after a final hearing the court below found them to be true and rendered a decree to the effect that certain real estate and certain notes and mortgages described in the bill, which the defendant held in his name and control when the suit was commenced, and when the subpoena was served upon him, were the property of the estate, and that he should convey them and their proceeds to the trustee. An appeal was taken from this decree, and the portion of it which has been recited was affirmed by this court. Clay v. Waters, 161 F. 815, 88 C.C.A. 633. Thereafter and on January 25, 1909, the trustee filed a petition in the District Court, in which he set forth the facts which have been stated in detail and alleged, among other things, that the defendant for the purpose of hindering and defrauding him and the creditors of the estate of Boatright and for the purpose of defeating the jurisdiction and the decree of the court below, during the pendency of the cause and after the subpoena was served upon him, conveyed to strangers to the proceedings all the real estate described in the bill and decree as held and controlled by him except one lot which he had conveyed before the suit was commenced, and that for the same purpose and with like intent he had during the same time transferred or otherwise disposed of all the notes and mortgages described in the decree, and the trustee asked that a citation might be issued to the defendant which should require him to comply with the decree and to show cause why he should not be committed for contempt of the court.

A citation was issued upon this petition on January 25, 1909, returnable on January 27, 1909, which the court held insufficient. Thereafter and on February 20, 1909, the court made an order which recited the substance of the petition and particularly the fact that it was made to appear to the court by the petition that the defendant had wholly failed to comply with the decree, that for the purpose and with the intent of defeating the jurisdiction and decree of the court he had conveyed to third persons during the pendency of the suit, and, after his answer was filed therein, all the real estate described in the bill and decree as held and controlled by him except the lot which he had conveyed before the commencement of the suit, and that for the same purpose and with like intent he had conveyed away or disposed of to third persons during the same time all the notes and mortgages described in the bill and decree. And in view of these premises the court ordered that he be required to appear before it and show cause, if any he had, why he should not be punished for contempt, and that he should make return to the order on or before March 15, 1909.

The defendant answered the order and the petition. In his answer he...