Courtney v. Shea

• Decision Date: 30 June 1915
• Docket Number: 2665.,2630
• Parties: COURTNEY v. SHEA et al. SAME v. WHALLEN.
• Court: U.S. Court of Appeals — Sixth Circuit

225 F. 358

COURTNEY v. SHEA et al.

SAME v. WHALLEN.

Nos. 2630, 2665.

United States Court of Appeals, Sixth Circuit.

June 30, 1915

[Copyrighted Material Omitted]

On November 11, 1913, John H. Shea was adjudicated a bankrupt on his petition of that date, and later R. H. Courtney was appointed trustee of the bankrupt's estate. Upon examination into the condition of the estate, it appeared that certain moneys had been deposited in bank, and certain other moneys invested in shares of stock in two building associations, the Avery Building Association and the Portland Building & Loan Association, in the name of the bankrupt's wife, Irene Shea. On January 2, 1914, the trustee filed a petition in the court below, alleging that these moneys and stocks belonged to the bankrupt, and that Irene Shea claimed to be the owner of the moneys and securities. The prayer was for a rule against the bankrupt and Irene Shea, requiring them to pay to the petitioner the money and to turn over to him the shares of stock. On the same date a rule was issued against the bankrupt and his wife to show cause why the prayer of the petition should not be allowed. Response was filed by Shea and his wife, setting out many details which need not be repeated. Upon the hearing the referee adjudged the response to be insufficient and made the rule absolute.

On January 16, 1914, the trustee also filed a petition in the court below against James P. Whallen, individually and as executor of John H. Whallen, claiming that the bankrupt had placed in the possession of the Whallens certificate 484 for 50 shares of stock in the Avery Building Association; that Shea had paid $1,470 to the building association on account of such shares of stock; and that Shea, without receiving any consideration therefor, had, on August 31, 1912, transferred the certificate to James P. and John H. Whallen for the purpose of defrauding the creditors of the bankrupt; that John H. Whallen had since died testate, and James P. had qualified as his executor. The petition contained a prayer for a rule against James P. Whallen, individually and as such executor, requiring him to show cause why he should not pay to the trustee the sum of $1,470, and to turn over to him the certificate representing the stock. Response was filed by James P. Whallen, individually and as such executor, stating that on August 31, 1912, he with John H. Whallen purchased from Shea this certificate of stock and paid therefor the sum of $1,125, part in cash and part through discharge of Shea's obligations to them for loans of money theretofore made to him; that after the date of such purchase the Whallens paid to the building association on account of the shares $370, making the total value of the certificate $1,494; and that the Whallens were the absolute owners of the stock. The referee, adjudging the response to be sufficient discharged the rule, without costs.

In the first proceeding Shea and his wife filed a petition for review, and in the second the trustee filed a like petition in the District Court. In that court the order in the first proceeding was affirmed only to the extent of requiring respondents to pay to the trustee $234.54 out of the moneys then on deposit to the credit of Irene Shea, or under her control, in the First National Bank of Louisville, but in all other respects the order was reversed and set aside; and the order in the second proceeding was affirmed. So far as the order in the first proceeding was affirmed, it seems to have been acquiesced in by the respondents; at least they have taken no steps to have it reviewed. The trustee adopted two remedies for bringing the modified order in the first proceeding and the entire order in the second under review in this court; one was by appeal, and the other by petition to revise in matter of law. Each proceeding was docketed here as a separate case, though both cases are included in one record and were argued and submitted as one cause.

B. K. Marshall, of Louisville, Ky., for appellant and petitioner.

J. B. Baskin, of Louisville, Ky., for appellees and respondents.

Before WARRINGTON and DENISON, Circuit Judges, and SESSIONS, District judge.

WARRINGTON Circuit Judge (after stating the facts as above).

Counsel do not concern themselves about the remedies adopted by the trustee to bring these cases into this court. Since each proceeding is summary in character and object, we think each is a proceeding in bankruptcy, reviewable under section 24b, and not appealable as a controversy arising in bankruptcy proceedings under section 24a. First Nat. Bank v. Title & Trust Co., 198 U.S. 280, 288, 291, 25 Sup.Ct. 693, 49 L.Ed. 1051; In re Goldstein, 216 F. 887, 888, 133 C.C.A. 91 (C.C.A. 7th Cir.); In re Farrell, 176 F. 505, 507-509, 100 C.C.A. 63 and citations (C.C.A. 6th Cir.); In re Rose Shoe Mfg. Co., 168 F. 39, 40, 93 C.C.A. 461 (C.C.A. 2d Cir.); In re Rathman, 183 F. 913, 929, 106 C.C.A. 253 (C.C.A. 8th Cir.). The two remedies adopted, the one to revise in matter of law and the other to appeal, are mutually exclusive (Barnes v. Pampel, 192 F. 525, 527, 113 C.C.A. 81 (C.C.A. 6th Cir); In re Martin, 201 F. 31, 37, 119 C.C.A. 363 (C.C.A. 6th Cir.)); and the appeals will be dismissed.

The controlling question in each case is whether the trustee was entitled to summary processes, or, stated in another way whether he was required to proceed by plenary suits to recover the moneys and stocks in dispute. Every legitimate object of summary proceedings such as these is accomplished, and they should be dismissed, when it appears that the property sought to be recovered is in possession of a third person and held under an adverse claim, which existed at the time the petition in bankruptcy was filed, and which, if supported by uncontradicted testimony, would sustain a judgment in favor of the claimant, even though the claim might in the end prove to be fraudulent and voidable; but of course a merely frivolous claim, such as that of an agent or bailee holding in the interest of the bankrupt, should not be allowed to defeat summary process. In re Yorkville Coal Co., 211 F. 619, 621, 128 C.C.A. 570 (C.C.A. 2d Cir.); In re Bacon, 210 F. 129, 134, 126 C.C.A. 643 (C.C.A. 2d Cir.); In re Goldstein, supra, at page 888 of 216 Fed., 133 C.C.A. 91; In re Blum, 202 F. 883,...