In re Berry
| Decision Date | 11 September 1917 |
| Docket Number | 3305. |
| Citation | 247 F. 700 |
| Parties | In re BERRY. |
| Court | U.S. District Court — Eastern District of Michigan |
[Copyrighted Material Omitted]
Paul R Dailey, of Detroit, Mich., for trustee.
Bishop & Kilpatrick, of Detroit, Mich., for respondent.
This matter is before the court on a petition to review an order of the referee in bankruptcy in proceedings brought by the trustee against one Quinn, respondent herein, for the recovery of certain property alleged by said trustee to belong to the estate of the bankrupt. The referee by his order denied the petition of the trustee, and the latter seeks to review such order here. The question involved is whether the trustee is entitled to complete a certain executory contract made by the bankrupt and his wife for the purchase, from respondent, of certain land connected with the ownership of shares of stock in an incorporated summer resort association.
The corporation in question, the Hickory Island Company, was organized under Act 230 of the Michigan Public Acts of 1897 (sections 10034-10056 of the Complied Laws of Michigan of 1915), entitled 'An act to provide for the formation of corporations for the purpose of owning, maintaining and improving lands and other property kept for the purposes of summer resorts or for ornament, recreation or amusement ' Section 3 of the act in question provides that every such corporation shall be 'capable in law of owning, holding or purchasing and disposing of, in such manner as a majority of the stockholders shall direct, any real or personal property or estate whatever,' etc.
Section 14 of the act provides that 'the stock of every such corporation shall be deemed personal property, and may be transferred as shall be prescribed by this act and by the by-laws of the corporation. ' Section 21 of the act is as follows:
'Whenever any such corporation shall cause to be platted any part or portion of its lands in the manner prescribed in the foregoing section of this act, it may by its by-laws, provide the manner in which the lot or lots may be assigned, allotted or confirmed to its several stockholders, and the terms and conditions upon which the same shall be held by them: Provided, That any such lot or lots so assigned, allotted or confirmed to such stockholders shall be deemed and considered as appurtenant and attached to a certain share or shares of capital stock in such corporation, which shall be designated at the time of such assignment, allotment or confirmation, and any assignment, transfer or other disposition of such capital stock shall be held to carry with it, the right to such lot or lots so appurtenant or attached to the same; and it shall not be lawful for such stockholder to in any manner whatsoever, sell, assign, transfer or dispose of any right, title, claim or interest he may have or acquire in (an) any lot or lots assigned, allotted or confirmed under such by-laws and regulations, separated or detached from the share or shares of capital stock to which it shall be appurtenant or attached.'
The by-laws of the corporation in question authorize the board of directors to deed to each incorporator thereof one or more lots of the property owned by the corporation, each deed to contain a condition 'that the claimant therein, his heirs and assigns, shall never convey said lot or lots to any other person except a stockholder in this corporation; said condition to be valid and operative so long as this corporation shall continue in existence. ' They also provide that the lots not sold to incorporators may be sold to others on the same condition, no sales to be made 'to any person who is not a stockholder in the corporation to the extent of one share of stock for each five feet front of the lot he desires to buy.'
The respondent, who was an incorporator and stockholder of this corporation, received from such corporation a warranty deed to one of these lots, lot 14, which deed was in the usual form of a warranty deed, except that it contained the following conditional clause:
'Provided, however, and this conveyance is upon the express condition * * * that said lot is appurtenant and attached to certain shares of capital stock of the party of the first part * * * issued to the party of the second part and dated of even date herewith, and said lot or any interest therein shall never, during the existence of said corporation, the party of the first part, be sold, assigned, transferred or disposed of separated or detached from said shares of capital stock or contrary to the rules of the corporation governing the transfer of capital stock as that shall at the time of said transfer be in force.'
The certificate of the shares of stock referred to in said deed stated that respondent was the owner of such shares of stock 'appurtenant and attached to lot 14 of the said company's subdivision of the southeast part of Hickory Island, and not transferable separate from said lot,' and that such stock was transferable only by the consent of the board of directors of said corporation and on compliance with the rules and by-laws thereof. Thereafter, and before the filing of the petition in bankruptcy herein, respondent entered into a contract with the bankrupt and his wife, jointly, for the sale to them of said lot and shares of stock for the sum of $368.20, payable in equal monthly installments. This contract, in addition to the usual recitals in a land contract, contained the following clause:
'And it is further agreed that the parties of the second part agree to accept a deed of the within described property subject to all conditions set forth by the Hickory Island Company, said deed to be of the same printed form as all other landholders in said subdivision, these conditions being a part of the purchase price of said lot.'
The printed form of deed thus referred to was the same as that received by respondent as already mentioned. On this contract there is still due $185.29, but the contract has not been abandoned or terminated and the respondent recognizes the rights of bankrupt and his wife therein.
The trustee filed a petition with the referee in the bankruptcy proceedings praying for an order requiring the respondent to execute and deliver in blank an assignment of the said stock certificate upon the fulfillment of the contract with respondent, on the ground that the interest of the bankrupt therein became by his bankruptcy vested in the trustee, who was authorized to complete said contract on behalf of the estate of the bankrupt, and that thereupon the trustee would acquire the title therein which would otherwise have been acquired by the bankrupt. The trustee also contended that this interest in said stock is connected with, and carries with it, the same kind of an interest in the lot already mentioned, which is an interest in personal property. The referee declined to make such an order, ruling that the interest of the bankrupt and his wife in the land contract covering said lot constituted an estate by the entirety, and that, therefore, the interest of the bankrupt therein did not vest in this trustee, but an order was entered requiring the respondent, upon the payment to him by said trustee, but not out of the funds of the bankrupt estate, of the sum due him as already mentioned, to execute an assignment of the certificate of stock to the bankrupt and his wife, and to deliver the same to the bankrupt, who was restrained, by such order, from transferring such stock without the further order of the court. The trustee thereupon filed his petition to review such order, alleging that it was erroneous because it 'failed to direct respondent, upon payment to him of the sum of $185.29 by the trustee, but not from the assets of the bankrupt's estate, to execute an assignment of certificate No. 14, representing eight shares of the capital stock of the Hickory Island Company, to petitioner herein, said trustee, and to deliver the said certificate to petitioner.'
The questions, therefore, here presented concern and involve the nature and extent of the rights of the trustee in this stock and lot.
A preliminary objection to the jurisdiction of the bankruptcy court to entertain the present petition should be first considered. The respondent contends, first making the objection in this court, that as he is in possession of this certificate of stock, claiming adverse rights therein, the rights of the respective claimants in this property cannot be determined by the bankruptcy court in these proceedings, relying on section 23b of the Bankruptcy Act (Comp. St. 1916, Sec. 9607), providing that:
'Suits by the trustee shall only be brought or prosecuted in the courts where the bankrupt, whose estate is being administered by such trustee, might have brought or prosecuted them if proceedings in bankruptcy had not been instituted, unless by consent of the proposed defendant.'
The respondent raised no objection before the referee to his jurisdiction in these proceedings, answering the petition of the trustee upon the merits, going to a hearing before the referee and another hearing in this court on the petition for review, without making such objection, and presenting it first in his brief in this court. Under these circumstances it must be held that the respondent has consented to the institution of these proceedings in the bankruptcy court, and he has therefore waived his right to object to the jurisdiction of the court to entertain such proceedings. In re Connolly (D.C.) 100 F. 620; In re Steuer (D.C.) 104 F. 976; Ryttenberg v. Schefer (D.C.) 131 F. 313; Sheppard v. Lincoln (D.C.) 184 F. 182; ...
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