Hoehn v. McIntosh

• Decision Date: 15 March 1940
• Docket Number: No. 8146.,8146.
• Citation: 110 F.2d 199
• Parties: HOEHN et al. v. McINTOSH.
• Court: U.S. Court of Appeals — Sixth Circuit

110 F.2d 199 (1940)

HOEHN et al. v. McINTOSH.

No. 8146.

Circuit Court of Appeals, Sixth Circuit.

March 15, 1940.

Henry B. Graves and Frank C. Sibley, both of Detroit, Mich. (Miller, Bevan, Horwitz & DesRoches, of Detroit, Mich., on the brief), for appellants.

R. S. Wisok, of Detroit, Mich. (Beckenstein, Wisok & Maguire, of Detroit, Mich., on the brief), for appellees.

Before ALLEN, HAMILTON, and ARANT, Circuit Judges.

HAMILTON, Circuit Judge.

This is an appeal from an order authorizing the sale either privately or publicly of certain real property alleged to belong to the bankrupt.

On March 12, 1937, an involuntary petition was filed against the Plymouth Cooperage Corporation, debtor, pursuant to Section 77B of the National Bankruptcy Act, 11 U.S.C.A. § 207. It had theretofore been engaged in the business of manufacturing beer barrels at Plymouth, Michigan. In 1936, it expanded its business by attempting to acquire a plant at Cleveland, Ohio, negotiations for which were conducted by appellant Rowland W. Fixel, its attorney, and two of its directors in the following manner: On March 30, 1936, at a meeting of its Board of Directors, attended by its attorney, an offer was made to sell to the debtor the Cleveland property, including land and machinery at $35,000; $10,000 to be paid within six months with the assumption of an existing mortgage for $10,000, the remaining $15,000 to be paid with six per cent interest thereon, with an option to the seller to take, in lieu thereof, $15,000 par value of the debtor's common stock. The directors passed a resolution accepting this offer.

On April 2, 1936, appellant Rowland W. Fixel purchased the property for $18,000, paying $8,000 cash and executing a mortgage back for the balance; took title to himself as trustee without disclosing in the instrument the names of his cestui que trustents. He afterwards disclosed them to be appellants William H. Hoehn, and the testamentary trustees of the estate of Bertha Fixel, deceased. On the same date, Fixel, trustee, entered into a land contract with the debtor, agreeing to convey to it the property thus acquired on the same terms as offered and accepted at the meeting of the Board of Directors March 30, 1936. Thereafter the debtor took possession of the property and paid to Fixel $2,000 in cash on the purchase price and he elected to and did receive at par $15,000 par value of its common stock.

In April, 1938, upon leave granted by the Bankruptcy Court, appellee instituted a plenary action in the Wayne Circuit Court of Michigan against appellant Fixel, individually and the appellants, testamentary trustees of Bertha Fixel and appellant William H. Hoehn, seeking to acquire the legal title to the Cleveland property on the ground that Fixel was a trustee ex maleficio for the debtor when he acquired the property for himself.

On December 15, 1939, the state action was terminated by a decree that Fixel acquired the property for the debtor, that it was indebted to him in the sum of $8,000, which he had paid on the purchase price, plus six per cent interest, and for which he was entitled to a lien. It was also decreed that the estate of Bertha Fixel be charged with $1,457.72, the proceeds of shares sold out of the stock Fixel received from the debtor as part of the purchase price. The shares unsold were adjudged to be cancelled. Other matters not material here were also adjudicated.

On June 28, 1937, the Bankruptcy Court entered an order pursuant to sub. k of Section 77B, 11 U.S.C.A. § 207, sub. k, of the Bankruptcy Act, directing that the debtor be liquidated because of the impossibility of reorganization.

On March 7, 1937, appellants instituted an action against the debtor in Cuyahoga County, Ohio, for foreclosure under the land contract. Process was issued, but no service had on the debtor and the court entered no order after the filing of the petition.

On April 8, 1938, the trustee filed a petition for leave to sell the personal property conveyed under the land contract. Appellants appeared, specially denying the jurisdiction of the court to order the sale and claiming an interest adverse to the trustee, and insisting that the Common Pleas Court of Cuyahoga County had exclusive jurisdiction of the disposition of the property. Upon hearing the court denied their contentions and ordered the sale. Pursuant to this order, the property was sold for $450, the sale confirmed and no appeal taken therefrom. Incidentally, the Wayne Circuit Court in its decree in the plenary action adjudged that appellants were entitled to this $450.

Prior to June 28, 1938, the mortgagee of the Ohio property was threatening to foreclose his lien and delinquent taxes of approximately $2,000 had accumulated against the property and it was rapidly deteriorating and in need of repairs. On this date appellee filed a petition stating the foregoing facts and prayed the court for an order of sale. It issued a show cause order directed to appellants to which they responded, questioning the jurisdiction of the court and objecting to the sale. Upon hearing July 25, 1938, the court ordered the sale of the property and gave as reasons therefor the facts appearing in appellee's petition. In the order of the court the trustee was directed to make the sale publicly or privately, subject to the approval of the court and for an upset price sufficient to discharge the mortgage lien and delinquent taxes on the property. Appellants are seeking to reverse this order which has not been executed.

Appellee urges that this appeal is premature because the order complained of is not subject to a petition to revise or reverse and that the court is without jurisdiction. The question is whether Section 24, sub. a, of the Bankruptcy Act, 11 U.S.C.A. § 47, sub. a, 52 Stat. 854, confers jurisdiction on the court to review, revise or reverse interlocutory administrative and discretionary orders, arising in proceedings in bankruptcy. The present order authorized the sale free of all liens, but subject to the approval of the court, with provision for due notice to all interested parties of any application for approval. Appellee insists that until the trustee reports an offer for the property at the upset price fixed in the order of sale, appellants can suffer no injury and have no right to complain.

The Act in question confers appellate jurisdiction on appeals from the district court "* * * in proceedings in bankruptcy, either interlocutory or final, and in controversies arising in proceedings in bankruptcy, to review, affirm, revise, or reverse, both in matters of law and in matters of fact * * *." Bankruptcy Act 24, sub. a, 11 U.S.C.A. § 47, sub. a.

The Statute, as it existed prior to the amendment, has been considered in numerous decisions, the rationale of which is that appeals from purely intermediate and preliminary orders should be allowed only in exceptional cases. So far as is material to the question under consideration, the amendment made no change in the law. Before reviewable, administrative orders must have a certain degree of finality. The salutary purpose of the legislation would be destroyed if every order, no matter how trivial, were subject to review. The Act does not contemplate tying up the estate and prolonging administration by appeals, unless the subject has been finally disposed of in the lower court and practically nothing remains to be done in that respect, so that rights...