In re Ahmann, 33785.

• Decision Date: 03 September 1971
• Docket Number: No. 33785.,33785.
• Citation: 331 F. Supp. 384
• Parties: In the Matter of Elmer W. AHMANN, Jr., Bankrupt. Petition of I. I. OZAR, Trustee, Petitioner.
• Court: U.S. District Court — Western District of Missouri

331 F. Supp. 384

In the Matter of Elmer W. AHMANN, Jr., Bankrupt Petition of I. I. OZAR, Trustee, Petitioner.

No. 33785.

United States District Court, W. D. Missouri, W. D.

September 3, 1971.

Henry G. Eager and Charles L. House, Kansas City, Mo., for Trustee I. I. Ozar.

Stephen B. Millin, Kansas City, Mo., for L. R. McLaighlin.

George M. Hare, Independence, Mo., for bankrupt.

MEMORANDUM AND ORDER SUSTAINING TRUSTEE'S PETITION FOR REVIEW

JOHN W. OLIVER, District Judge.

The parties, pursuant to Local Rule 29, have stipulated that the Trustee's pending petition for review shall be considered upon the evidence and record adduced before the Referee and that no party wished to adduce any further evidence in this Court. We have considered the briefs of the parties submitted pursuant to the schedule agreed upon in their Local Rule 29 stipulation. We conclude that the Trustee's petition for review should be sustained.

I

Consistent with the principles stated in In re Cox (W.D.Mo., 1965), 244 F. Supp. 430, 433, we accept the Referee's finding as made in paragraphs 1 through 7, inclusive, 11 and 12 of his Findings of Fact. Findings 8 through 10 are not accepted because they are not relevant to any question presented in the case. It is necessary that this Court make additional findings, 5a, 5b, 5c and 7a which are relevant.

The Referee's first seven findings may be summarized as follows:

1. On March 11, 1968 the Trustee filed a Petition To Tak Possession and Control of certain real property then in the actual physical possession of respondent L. R. McLaughlin. It is undisputed that such property was in Mr. McLaughlin's possession before the bankruptcy petition was filed.

2. L. R. McLaughlin was not named as a respondent in the Trustee's original petition filed March 11, 1968. However, in recognition of his claimed interest, Mr. McLaughlin promptly employed an attorney to represent the respondents who were named.

3. On April 18, 1968, Mr. McLaughlin's employed attorney filed a motion to dismiss the Trustee's petition on behalf of the respondents who were named. On that same day, Mr. McLaughlin joined the named respondents in the filing of a formal motion for a continuance.

4. On April 19, 1968 Mr. McLaughlin personally appeared together with his employed counsel in support of respondents' motion for a continuance. That motion was granted.

5. On May 3, 1968 Mr. McLaughlin again personally appeared with counsel and participated in an evidentially hearing on the motion to dismiss.

5a. Additional finding of this Court. The transcript of the May 3, 1968 proceeding shows that the Referee was advised by the Trustee's counsel that "Mr. L. R. McLaughlin was apparently inadvertently not included as a respondent in the proceeding." (p. 4 May 3, 1968 transship). Leave was therefore requested "to add Mr. L. R. McLaughlin as an individual respondent to out partition * * * without the formality of a show cause order, * * to endorse him and add him as respondent." (Ibid, p. 4-5). Mr. McLaughlin's counsel stated to the Referee: "I would make no objection to that." (Ibid, p. 5). L. R. McLaughlin on May 3, 1968 was thus made a party respondent in the proceeding to take possession and control of the property which he claimed adversely to the Trustee.

5b. Additioal finding of this Court. Any possible misunderstanding concerning the status of L. R. McLaughlin as a named respondent was removed by the Trustee's counsel's statement at the May 3, 1968 proceeding that "Mr. McLaughlin is formally added" and by the agreement of Mr. McLaughlin's counsel that the Referee should proceed first with the Trustee's Motion to Dismiss Petitioner's Petitioner (Ibid, p. 6.) Indeed, the Referee confirmed with Mr. McLaughlin's counsel that Mr. McLaughlin was the new respondent who had been added and thereafter directed the parties to proceed with the hearing on the Trustee's petition (Ibid, p. 7).

5c. Additional findings of this Court. After the direction by the Referee, Mr. McLaughlin's counsel, "on behalf of Samuel Edmonds, Mid-West Apartment Constrictors, Inc., Kathryn McLaughlin and L. R. McLaughlin," made an oral motion to dismiss based substantially on the same grounds as those stated in the formal motion filed April 18, 1968 (Ibid, p. 7). Mr. McLaughlin counsel then proceeded to officer three exhibits in evidence and to make argument on the merits of his legal position (Ibid, p. 7).

6. On May 20, 1968, a memorandum brief was filed on behalf of respondents Sarah N. Ahmann, Samuel Edmonds, Mid-West Apartment Contractors, Inc., Kathryn M. McLaughlin and Robert McLaughlin. The Referee properly quoted language from that belief which shows that rather than objecting to the exercise of summary jurisdiction, the respondents sought an adjudication on the merits of their claim that the "Trustee in bankruptcy has no right to title or possession of land which was held by the entirety where only one of the spouses is in bankruptcy."

7. The Referee denied the respondents' motion to dismiss on June 25, 1968.

7a. Additional finding of this Court. Neither the written or oral motions filed on behalf of L. R. McLaughlin prior to the Referee's denial of those motions on June 25, 1968 had in fact interposed any objection to the exercise of summary jurisdiction by the Bankruptcy Court. Nor was any objection otherwise interposed to the exercise of summary jurisdiction by the Bankruptcy Court. Both motions were predicated on the legal theory that the property had been held by the bankrupt and his wife as an estate in the bankrupt and that, because only he and not his wife and filed for bankruptcy, the Trustee could have no right to the property.¹

The Referee's findings 11 and 12 reflect that almost a year later on June 16, 1969, for reasons not stated, the Referee granted L. R. McLaughlin and Kathryn M. McLaughlin leave to file a second motion to dismiss in which, for the first time, it was alleged (a) that the Court had no jurisdiction to grant relief in a summary proceeding; and (b) that the Trustee's petition failed to state a claim. That motion was heard and submitted on July 29, 1969, and thereafter granted on April 12, 1971.

II

Paragraph 7 of the Referee's conclusions of law stated:

The adverse claimant's participation in determining the facts and whether or not their claim was adverse and the property in their possession was proper and timely did not give this court summary jurisdiction by (1) express consent, or (2) by waiver through failure to raise a proper objection, or (3) by any act indicating a willingness on the part of the adverse claimant that their claim or interest could be determined by the bankruptcy court.

We conclude that the conclusion of law stated in paragraph 7 is not tenable under the undisputed factual circumstances of this case. Under § 2(a) (7) all courts of bankruptcy are vested with summary jurisdiction are vested with troversies "arising in a proceeding under this title where an adverse party does not interpose objection to the summary jurisdiction of the court of bankruptcy." That section further provides that where there is a failure to interpose a timely objection, the adverse claimant "shall be deemed to have consented to such jurisdiction."

It is clear under the facts as we find them that none of the respondents, including but not limited to Mr. McLaughlin, in fact interposed any objection to the summary jurisdiction of the Bankruptcy Court until after the Referee granted respondents leave to file a second motion to dismiss on June 16, 1969. The legal question presented by the Trustee's petition for review is whether, under all the facts and circumstances, the respondent must be "deemed to have consented" to the exercise of summary jurisdiction by the Bankruptcy Court within the meaning of § 2(a) (7), as amended in 1952, and § 23(b) of the Bankruptcy Act. That question must be answered in the affirmative.

Katchen v. Landy, 382 U.S. 323, 86 S.Ct. 467, 15 L.Ed.2d 391 (1966), determined that the Bankruptcy Act confers summary jurisdiction to compel a claimant to surrender preferences that under § 57(g) would require disallowance of the claim. Footnote 9 on pages 332-333 of 382 U.S., on page 474 of 86 S.Ct. makes clear that Katchen v. Landy did not reach the question of "whether a referee has summary jurisdiction to adjudicate a demand by the trsutee for affirmative relief which would involve factual and legal bases not disposed of in passing on an objection to a claim." That footnote also makes clear that the Court did not reach the factual question of whether the creditor in that case had "consented" within the meaning of § 23(b).

Katchen v. Landy, however, teaches that determination of statutory questions which arise under the Bankruptcy Act and questions concerning the scope and jurisdiction of summary proceedings in bankruptcy must be determined "after due consideration of the structure and purpose of the Bankruptcy Act as a whole, as well as the particular provisions of the Act brought in question" (Ibid. 328, 86 S.Ct. 472). The Court added that:

When Congress enacted general revisions of the bankruptcy laws in 1989 and 1938, it gave "special attention to the subject of making the bankruptcy laws inexpensive in their administration." H.R.Rep. No. 1228, 54th Cong., 1st Sess., p. 2; H.R.Rep. No. 1409, 75th Cong., 1st Sess., p. 2; S.Rep. No. 1916, 75th Cong., 3rd Sess., p. 2. Moreover, this Court has long recognized that a chief purpose of the bankruptcy laws is "to secure a prompt and effectual administration and settlement of the estate of all bankrupts within a limited period." Ex parte Christy, 3 How. 292, 312, 11 L.Ed. 603, and that provision for summary disposition, "without regard to usual modes of trial attended by some necessary delay," is one of the means chosen by Congress to effectuate that purpose, Bailey v. Glover, 21 Wall. 342, 346, 22 L.Ed. 636. Ibid, 328, 86 S.Ct.472.

The 1952 amendment to §...