Galbraith v. Vallely

• Decision Date: 11 April 1921
• Docket Number: No. 234,234
• Citation: 65 L.Ed. 823,41 S.Ct. 415,256 U.S. 46
• Parties: GALBRAITH v. VALLELY
• Court: U.S. Supreme Court

256 U.S. 46

41 S.Ct. 415

65 L.Ed. 823

GALBRAITH

v VALLELY.

No. 234.

Argued March 18, 1921.

Decided April 11, 1921.

Mr. Fred B. Dodge, of Minneapolis, Minn., for petitioner.

Francis J. Murphy, of Minot, N. D., for respondent.

Mr. Justice DAY delivered the opinion of the Court.

This is a writ of certiorari to review a decision of the Circuit Court of Appeals for the Eighth Circuit affirming an order of the District Judge for the District of North Dakota in a bankruptcy proceeding. The pertinent facts are: On August 15, 1917, one Conrad C. Reiswing executed a trust deed for the benefit of his creditors to John P. Galbraith, assignee and the petitioner herein. The assigned stock of merchandise was sold. Various proceedings and meetings of creditors were had, not necessary to recite. On December 22, 1917, upon the petition of creditors Reiswig was duly adjudged a bankrupt, and Valley, respondent herein, is his trustee in bankruptcy. Galbraith appeared in the bankruptcy proceedings and filed an account, claiming therein the right to retain a certain sum for fees and disbursements under the assignment, and piad over to the trustee in bankruptcy the other moneys which he had acquired. Thereupon the trustee in bankruptcy filed a petition with the referee in bankruptcy asking, in a summary proceeding. for an order upon Galbraith to show cause why he should not pay over the sum of $1,474.10, retained as fees and expenses as trustee under the assignment. The referee in bankruptcy made an order that Galbraith forthwith pay over that sum to the trustee in bankruptcy or show cause why he should not do so. Galbraith appeared and set up that the order of the referee in the summary proceeding was without authority as he was an adverse claimant to the moneys referred to in the order, and that the court had no jurisdiction in a summary proceeding to hear and determine the questions involved. Without waiving objection, and subject to the right of Galbraith to assert his objection to the proceedings, testimony was taken concerning the money expended and retained by the assignee prior to the bankruptcy proceedings, for administering the estate. Among other things it was stipulated that as to the particular money expended by the assignee, he was an adverse claimant. The referee delivered an opinion passing upon the amount of expenditures and compensation, but held that Galbraith was an adverse claimant within the rule declared by this court in Louisville Trust Co. v. Comingor, 184 U. S. 18, 22 Sup. Ct. 293, 46 L. Ed. 413, and that, therefore, the bankruptcy court was without jurisdiction to proceed in a summary manner, and discharged the order. The decision of the referee was reversed by the District Judge. 253 Fed. 390. The Circuit Court of Appeals affirmed the order of the District Court, 261 Fed. 670, and the case is here upon writ of certiorari.

We think the referee was right in holding that the case was governed by Louisville Trust Co. v. Comingor, supra. In that case a general assignment for the benefit of creditors was made within four months of the bankruptcy proceeding, the assignment was therefore an act of bankruptcy. A receiver was appointed in the bankruptcy court. The assignee turned over the proceeds of sale of the property, retaining his fees as assignee and his disbursements to counsel. A summary proceeding was begun in the District Court ordering the assignee to show cause why he should not pay to the receiver the amounts retained. This order was made against the objection of the assignee that the court had no authority to proceed in that manner. This court held that the assignee was an adverse claimant as to these amounts, and that the District Court was without jurisdiction to determine the controversy in a summary proceeding. This case has been repeatedly cited as determinative of the law and practice...