In re Erskine

• Decision Date: 15 August 1924
• Docket Number: No. 3298.,3298.
• Parties: In re ERSKINE. VOSS v. TAYLOR et al.
• Court: U.S. Court of Appeals — Seventh Circuit

1 F.2d 149 (1924)

In re ERSKINE VOSS v. TAYLOR et al.

No. 3298.

Circuit Court of Appeals, Seventh Circuit.

June 20, 1924.

Petition for Rehearing Overruled August 15, 1924.

Henry B. Walker, of Evansville, Ind., for petitioner.

Harold Taylor, of Indianapolis, Ind., for respondents.

Before ALSCHULER, EVANS, and PAGE, Circuit Judges.

PAGE, Circuit Judge.

Wilbur Erskine, on December 20, 1921, when adjudicated a bankrupt, was a resident of the state of Indiana, and was married to his first wife, who died March 21, 1922, survived by her husband and two children. Before the filing of the petition and adjudication, bankrupt owned, in fee simple, a considerable amount of real estate. His wife left a last will and testament, naming respondent Taylor trustee thereunder. Petitioner Voss was elected trustee of the bankrupt estate.

After the death of the wife, who had never joined in any conveyance, the real estate was sold, by stipulation between petitioner, respondent and bankrupt, all parties joining in the deeds. The rights of respondent, as trustee under the will, were, by agreement of all of the parties, submitted to the court in bankruptcy, and its holding was favorable to the claim of respondent and bankrupt that, upon the filing of the petition and the adjudication in bankruptcy, the wife became vested with the same rights in the estate of the bankrupt that she would have had thereunder had she survived her husband.

This case is brought here by petition to review and revise, and a motion is made to dismiss on the ground that the case should have been brought here by appeal. In support of his contention that this case is properly before this court on a petition to review and revise, petitioner's main reliance is upon Coder v. Arts, 213 U. S. 223, 29 Sup. Ct. 436, 53 L. Ed. 772, 16 Ann. Cas. 1008. Because of the difference between the facts in that case and the case at bar, it is inapplicable here to support petitioner's contention. In that case a creditor filed his claim, and it was allowed in bankruptcy. In connection therewith, and as a part thereof, he asked for priority, and the court held that the claim for priority was merely incident to the allowance of the claim. In the case at bar, respondent is not a creditor and is not seeking the allowance of a claim, as such. The sole thing that respondent and bankrupt are seeking to do is to have carved out and set aside to them, as their property, free from administration in bankruptcy, a very considerable portion of the property which would otherwise be administered in bankruptcy and distributed to creditors.

This court in Re Breyer Printing Co., 216 Fed. 878, 133 C. C. A. 82, pointed out so clearly the distinction between "proceedings in bankruptcy" and "controversies at law and in equity arising in the course of bankruptcy proceedings" that it will serve no good purpose to add to what was there said. We there also discussed Coder v. Arts, supra, and other leading cases wherein there is pointed out the distinction between "proceedings in bankruptcy" and "controversies at law and in equity arising in the course of bankruptcy proceedings."

It seems clear, under the facts in the instant case, that the question here involved is one "between the * * * trustee representing the bankrupt and his general creditors, as such, on the one hand, and adverse claimants respondents on the other, concerning property in the possession of the * * * trustee * * * to be litigated in appropriate plenary suits, and not affecting directly administrative orders and judgments, but only the extent of the estate to be distributed ultimately among general creditors." This is the language of In re Breyer Printing Co., supra.

Counsel for petitioner rely upon In re Petronio, 220 Fed. 269, 136 C. C. A. 285 in which we held that the proceeding in the District Court was of a summary nature, citing In re Goldstein, 216 Fed. 887, 889, 133 C. C. A. 91, 93, and In re Breyer Printing Co., supra. In the Goldstein Case, after distinguishing between summary and plenary methods of procedure, we said:

"The District Court may pursue the summary method to the point of ascertaining that the alleged adverse claim is substantial and not merely colorable. * * * A conclusion that the alleged adverse claim is a cover for the claimant's possession as agent or bailee of the bankrupt cannot be permitted to be reached by the District Court's rejection of the sworn answer and testimony, and thereupon finding that the alleged adverse claim is fraudulent. That end can only be attained if it is the just conclusion of a due trial of a plenary suit."

That was a petition to review and revise, which raised only the question of the jurisdiction of the court to enter any order other than one of dismissal, after it was ascertained that there was a claim to property that was not merely colorable. The Petronio Case is of like character. There the District Court in the face of the fact that its jurisdiction was disputed, and the further fact that a substantial and not a colorable claim was set up, proceeded to adjudicate the matter in a summary way, and therefore both the Petronio and Goldstein Cases were reviews of summary orders in bankruptcy

The other authorities cited by petitioner are in harmony with the authorities here cited. The proceeding in the District Court was not a summary proceeding, but was a plenary proceeding, heard and decided in that court, and consent of the parties could not affect the method of procedure to procure a review.

For the above reasons, this case would have to be dismissed from this court, except for the provisions of section 4 of an Act of September 6, 1916 (39 U. S. Stats. at L. p. 727; section 1649a, U. S. Compiled Stats. 1916):

"That no court having power to review a judgment or decree rendered or passed by another shall dismiss a writ of error solely because an appeal should have been taken, or dismiss an appeal solely because a writ of error should have been sued out, but when such mistake or error occurs it shall disregard the same and take the action which would be appropriate if the proper appellate procedure had been followed."

While it is true that this section does not mention petitions for review, yet the clear legislative intent seems to be to remove the penalty for having misconceived a remedy. As the foregoing discussion shows, it has been easy to misconceive the remedy in matters coming from bankruptcy courts, and the difficulty in this case arose because counsel conceived that the matter dealt with was a proceeding in bankruptcy, reviewable under section 24b (Comp. St. § 9608), instead of a controversy arising in the bankruptcy proceeding, reviewable under section 24a. In enacting section 4, supra, Congress was not attempting to deal with appellate jurisdiction in proceedings in bankruptcy, but was dealing with appellate jurisdiction touching controversies arising in bankruptcy. Controversies arising in bankruptcy are lawsuits of the same kind and quality as other lawsuits not involved in bankruptcy. All such cases come to this court by appeal or writ of error, and we are of opinion that the use made of the terms "appeal" and "writ of error" should not be held to be a limitation upon what seems to be the broad command of the act not to dismiss a case merely because the remedy was misconceived, especially where, as here, the record before us is in all respects the same as it would be on appeal. We shall consider the matter as here on appeal.

Respondent Taylor, trustee, repudiates the suggestion of petitioner that he claims any title under the Indiana Judicial Sales Act of 1875, p. 178 (sections 3052 and 3055, Burns' 1914), but asserts "that the rights and interests of his decedent Mary E. Erskine in and to the lands of said bankrupt vested in her upon the adjudication by operation of law and by virtue of the general laws of the state of Indiana, being sections 3014, 3029, 3037 and 2864, Burns' 1914," which are, respectively, sections 17, 27 and 35 of the act of 1852 (Rev. St. 1852, c. 27) regulating descents, and section 122 of the Decedents' Estates Act of 1881, c. 45, for the settlement and distribution of estates.¹

What respondent's argument means by a vesting upon adjudication by operation of law seems to be based upon three things: (a) That under section 70a (5) of the Bankruptcy Act (Comp. St. § 9654) the inchoate right of dower of the wife does not pass to the trustee; (b) that upon adjudication, "so far as the bankrupt's property was concerned, after the adjudication, he was, as it were, civiliter mortuus; his rights in the property were the same as though he were dead"; (c) that, by reason of (a) and (b), there was vested absolutely in the constructive widow all of the rights that she would have had as actual widow of a deceased husband.

(a) may be conceded. In Bank v. Sherman and Hickling v. Sherman, 101 U. S. 403, 25 L. Ed. 866, relied upon in support of proposition (b), dower rights were not involved, but the court, commenting upon the effect of filing petition in bankruptcy, said:

"The filing of the petition was a caveat to all the world. * * * Thereafter all the property rights of the debtor were ipso facto in abeyance until the final adjudication. * * * If it were against him, they were extinguished as to him and vested in the assignee for the purposes of the trust with which he was charged. The bankrupt became, as it were, for many purposes, civiliter mortuus."

We think that what was said in Re Dayton Coal & Iron Co. (D. C.) 291 Fed. 390, as to a part of the above quotations is reasonably applicable to all of it. The statement, "The bankrupt became, as it were, for many purposes, civiliter mortuus," we think is used more as an illustration than as a judicial determination, and certainly should not be held to have any influence on the determination of the issue in this case. In Platner v. Sherwood, 6 Johns. Ch. (N. Y.) 118, 123, it is said:

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