In re Cadillac Brewing Co., 7784.

• Decision Date: 17 March 1939
• Docket Number: No. 7784.,7784.
• Citation: 102 F.2d 369
• Parties: In re CADILLAC BREWING CO. BAITINGER et al. v. ADLER CONTRACTING CO. et al.
• Court: U.S. Court of Appeals — Sixth Circuit

102 F.2d 369 (1939)

In re CADILLAC BREWING CO. BAITINGER et al. v. ADLER CONTRACTING CO. et al.

No. 7784.

Circuit Court of Appeals, Sixth Circuit.

March 17, 1939.

Nathan N. Kaplan, of Detroit, Mich. (Finkelston, Lovejoy & Kaplan and Benjamin W. Grant, all of Detroit, Mich., on the brief), for appellants.

Arthur J. Hass, of Detroit, Mich. (Arthur J. Hass and Miller, Bevan, Horwitz & DesRoches, all of Detroit, Mich., on the brief), for appellees.

Before HICKS, SIMONS, and ALLEN, Circuit Judges.

SIMONS, Circuit Judge.

A court of bankruptcy is without jurisdiction to adjudicate in a summary proceeding a controversy over property held adversely to the bankrupt estate unless the adverse claimant consents or the claim be merely colorable, and a claim is not to be held merely colorable unless a preliminary inquiry shows that it is so unsubstantial and obviously insufficient, either in fact or law, as to be plainly without color or merit and a mere pretense. Harrison, Trustee v. Chamberlin, 271 U.S. 191, 46 S.Ct. 467, 70 L.Ed. 897; Beeler v. Schumacher, 6 Cir., 71 F.2d 831, affirmed Schumacher v. Beeler, 293 U.S. 367, 55 S. Ct. 230, 79 L.Ed. 433.

After adjudication of the bankrupt in the court below, the trustee filed a petition requesting a clearing of title to real estate. The petition recited that certain lands therein described were assets of the bankrupt estate, that the appellants were asserting a claim thereto by suit in the State court, and that the referee, pursuant to an order to show cause, had ordered a sale of the property free of the appellants' claim. The District Court entered an order on October 19, 1936, purporting to clear the title, discharge the lis pendens filed by the appellants in the State court, and permanently enjoining the appellants from prosecuting their suit. On March 16, 1937, the appellants filed a petition to vacate and set aside the order. It in substance alleged that they had been fraudulently induced by agents of the bankrupt to convey the entire property to them for a consideration in stock and a parol agreement for the reconveyance of a portion of the property, that the agents had conveyed the entire premises to the bankrupt for an increased consideration, and that these matters had been set up in a bill of complaint filed in the State court in 1933. The petition also alleged that the appellants had at all times been in actual and open possession of the property. To this petition the Adler Contracting Company answered that it had purchased the property from the trustee. On April 24, 1937, the District Court denied the petition and later allowed appeal.

The allowance of the appeal by the court below was proper under section 24a of the Bankruptcy Act, 11 U.S.C.A. § 47(a). Harrison v. Chamberlin, supra. The question raised by it is one of jurisdiction. The overruled petition asserts a meritorious claim adverse to the trustee by one in possession of the property and a suit thereon in the State court. There was no preliminary consideration of the substantial character of this claim. If it be substantial there is no jurisdiction in the District Court to determine title to the property in summary proceedings. Appellants have asserted open possession adverse to the trustee....