In re Antigo Screen Door Co.

• Citation: 123 F. 249
• Decision Date: 14 April 1903
• Docket Number: 779.
• Parties: In re ANTIGO SCREEN DOOR CO.
• Court: United States Courts of Appeals. United States Court of Appeals (7th Circuit)

123 F. 249

In re ANTIGO SCREEN DOOR CO.

No. 779.

United States Court of Appeals, Seventh Circuit.

April 14, 1903

F. C Winkler, for petitioner.

A. C Conway, for respondent.

The Antigo Screen Door Company, a corporation of the state of Wisconsin, had its principal office and place of business in the city of Antigo, Wis., and its sawmill in the town of Ackley, in Langlade county. It was adjudged bankrupt upon petition of its creditors, filed September 11, 1899, and a trustee thereafter appointed. On November 25, 1898, the bankrupt executed to the Langlade County Bank its chattel mortgage upon 'all furniture manufactured or in process of manufacture, all glass used in or about furniture, all furniture hardware, all wire cloth, all screen doors, and all snow shovels' contained in its warehouse in the city of Antigo. The mortgage was to secure its note of $3,000 of that date, payable in 90 days, with interest, given for that much money then loaned to the company and used in payment of labor claims owing by it, and not in payment of any obligation then owing to the bank. The mortgage was filed in the office of the city clerk of the city of Antigo on November 30, 1898. On February 7, 1899, on March 27, 1899, on May 26, 1899, and on September 7, 1899, certain affidavits made on behalf of the bankrupt were filed and attached to the mortgage on file showing the amount of stock sold, the amount of additions to the stock, and that no payment had been made on account of the mortgage, with other averments required by law. These show sales aggregating $21,368, and additions to the stock aggregating $23,805. The mortgage is said to have been made pursuant to section 2316b of the Revised Statutes of the State of Wisconsin of 1898. On May 26, 1899, the Langlade County Bank loaned to the bankrupt the further sum of $2,500, to be used, and which was used, by the company in payment of labor claims due and owing to its employes, and not in paying any obligation to the bank. For this loan a note for the amount was given, payable in 90 days, with interest, and, to secure the same, a chattel mortgage upon certain lumber and logs at the company's mill in the town of Ackley, the lumber in pile to be conspicuously marked on each pile 'L.C.B.' (meaning Langlade County Bank), and the lumber which might be sawed out of the logs to be marked in like manner. This mortgage was filed in the office of the town clerk of the town of Ackley, being the town where the personal property and where the mill of the company were situated; but it was not filed with the city clerk of the city of Antigo, where the company had its principal office.

No part of either debt to the bank having been paid, on September 7, 1899, the bank took possession of the property supposed to be covered by both chattel mortgages, and duly advertised the same for sale. This was four days before the filing of the petition in bankruptcy. Afterwards, and before the sale, an arrangement was effected between the bank and the trustee of the bankrupt, with the approval of the bankruptcy court, by which the property was turned over to and sold by the trustee, and the proceeds covered into the treasury of the bankruptcy court, where it now is, with the agreement that the proceeds should stand for the property, and that the bank might in the bankruptcy court pursue its claim against the fund with like effect as if it had retained and sold the property. Thereupon the bank filed its petition in the bankruptcy court, praying that it might have of the fund realized the amount of the two mortgages, with interest, and certain expenses for custody and insurance to which it has been subjected. The court below, held both mortgages void. Upon a rehearing it was shown that a small portion of the property, mortgaged November 25, 1898, remained on hand when possession was taken, admittedly to the amount of $287.05. The bank claimed that the proof showed an additional amount of $665.68, but this was disputed by the trustee. The court, however, did not pass upon this contention, holding the mortgage void in toto. On the 14th of March, 1901, the court entered an order by which it adjudged that the mortgage of November 25, 1898, 'is void against the trustee by reason of the understanding inferred from the acts of the parties giving the mortgagor the right to make sale from the mortgaged premises for his own use and benefit, and that the mortgage dated May 26, 1899, is void against the trustee for want of proper filing,' to review which order this petition is filed.

Before JENKINS, GROSSCUP, and BAKER, Circuit Judges.

JENKINS Circuit Judge, after stating the facts, .

A preliminary question suggests itself, whether the order to be reviewed is one in bankruptcy proceedings proper, or one in plenary suit or proceeding to determine the right of property. We have held In re Rusch, Bankrupt, 53 C.C.A. 631, 116 F. 270 (following In re Jacobs, 39 C.C.A. 647, 99 F. 539), that the power of the appellate court to review by original petition the ruling of the bankruptcy court extends only to an order made in the bankruptcy proceedings proper and does not embrace proceedings in suits by the trustee in bankruptcy. Here the petitioner was in possession of property claiming under the chattel mortgages in question. It was agreed that the property should be turned over to the trustee for sale by him, the proceeds to be covered into the registry of the bankruptcy court, the right of property to follow the fund. This being done, and the fund being placed in the registry of the bankruptcy court and in the bankruptcy proceedings, did that court have the right to determine, as a court of bankruptcy and in the bankruptcy proceedings, the respective rights of the parties to that fund? We take it that any court, whether one of equity, common law, admiralty, or bankruptcy, having in its treasury a fund touching which there is dispute, may, by virtue of its inherent powers, determine the right to the fund thus in its possession.

Jurisdiction in that respect is an incident of every court. Havens & Geddes Company v. Pierek, Trustee (C.C.A.) 120 F. 244; In re McCallum (D.C.) 113 F. 393. If otherwise, every court would be subject to the control of the co-ordinate courts, working havoc to the independence of judicial authority. A fund so possessed is in custodia legis and right to it may only be asserted and determined in the court which possesses it. In re Kellogg (D.C.) 113 F. 120. See White v. Schloerb, 178 U.S. 542, 20 Sup.Ct. 1007, 44 L.Ed. 1183. The question remains whether such a proceeding arises strictly on the bankruptcy side of the court, or comes within the general rule governing intervening petitions against a fund in court.

The several Circuit Courts of Appeals have, in the following cases, entertained petitions for review of like orders of the bankruptcy court. The precise question here involved, however, was either not presented or was passed sub silentio. Second Circuit: In re New York Economical Printing Company, 49 C.C.A. 133, 110 F. 514; In re Neely, 51 C.C.A. 167, 113 F. 210; In re Garcewich, 53 C.C.A. 510, 115 F. 87. Fourth Circuit: McNair v. McIntyre, 51 C.C.A. 89, 113 F. 113. Fifth Circuit: In re Georgia Handle Company, 48 C.C.A. 571, 109 F. 632; In re Oconee Milling Company, 48 C.C.A. 703, 109 F. 866; Carling v. Seymour Lumber Company, 51 C.C.A. 1, 113 F. 483; Philips v. Turner, 52 C.C.A. 358, 114 F. 726. Sixth Circuit: In re Lemmon & Gale Company, 50 C.C.A. 247, 112 F. 296; In re Shirley, 50 C.C.A. 252, 112 F. 301. Seventh Circuit: In re Richards, 37 C.C.A. 634, 96 F. 935; In re Eggert, 43 C.C.A. 1, 102 F. 735. Eighth Circuit: In re Pekin Plow Company, 50 C.C.A. 257, 112 F. 308. Ninth Circuit: In re Beaver Coal Company, 51 C.C.A. 519, 113 F. 889. In Mueller v. Nugent, 44 C.C.A. 20, 105 F. 581, the Circuit Court of Appeals on petition for review entertained jurisdiction and reversed the order of the bankruptcy court, adjudging in contempt a third person holding property claimed to belong to the bankrupt and refusing to deliver it to the trustee. This decision was reversed in the Supreme Court (Mueller v. Nugent, 184 U.S. 1, 22 Sup.Ct. 269, 46 L.Ed. 405), and the order of the bankruptcy court sustained upon the merits, no question being mooted of the propriety of the mode of procedure. See, also, Metcalf v. Barker (U.S. Supreme Court, decided December 1, 1902) 187 U.S. 165, 23 Sup.Ct. 67, 47 L.Ed.-- . In the First Circuit, in Re Hutchinson, 51 C.C.A. 159, 113 F. 202, it was ruled, apparently, that a review could only be had upon petition and not by appeal; but in Hutchinson v. Otis, 53 C.C.A. 419, 115 F. 937, the precise question is stated, but specially reserved and not resolved. In the Fifth Circuit it was held, in Re Abraham, 35 C.C.A. 592, 93 F. 767, that a petition for review, and not an appeal, was the proper remedy. In the Sixth Circuit, in Cunningham v. Bank, 43 C.C.A. 377, 103 F. 932, it was ruled that the question of the rank or lien of a claim was an incident to the allowance or rejection of the debt for which the lien was allowed or denied, and could be reviewed on appeal; and in Courier-Journal Job-Printing Company v. Schaefer-Meyer Brewing Company, 41 C.C.A. 614, 101 F. 699, by petition for review upon any matter of law. It would seem, however, that in these latter cases specific claims for debt were preferred against the estate, embodying, either originally or by amendment, the claim for a lien. In this respect they are perhaps distinguishable from the case before us, there being here no general claim of debt filed against the estate, but only a claim for specific lien upon the fund.

We are disposed to hold (although the question is one not free from difficulty) that the order is one made in the...