In re Hartzell

• Decision Date: 11 December 1913
• Docket Number: 3,793.
• Citation: 209 F. 775
• Parties: In re HARTZELL. v. ROBT. MOODY & SON et al. CENTURY SAVINGS BANK
• Court: U.S. Court of Appeals — Eighth Circuit

209 F. 775

In re HARTZELL.

CENTURY SAVINGS BANK v. ROBT. MOODY & SON et al.

No. 3,793.

United States Court of Appeals, Eighth Circuit.

December 11, 1913

Horatio F. Dale and W. G. Harvison, both of Des Moines, Iowa, for appellant.

S. F Prouty, of Des Moines, Iowa, N. P. Willis, of Canadian, Tex and Geo. F. Haid, of St. Louis, Mo., for appellee Robt. Moody & Son.

Before HOOK and SMITH, Circuit Judges, and VAN VALKENBURGH, District judge.

HOOK Circuit Judge.

This is a motion to dismiss the appeal of the Century Savings Bank from a decree of a District Court as a court of bankruptcy upon the ground that the exclusive remedy was by petition to revise. The appeal had been argued, submitted, and decided without suggestion by any one that appellant should have come here by a different route. After our opinion had been handed down (Century Savings Bank v. Robt. Moody & Son, 204 F 963, 123 C.C.A. 285), and a decree had been entered in favor of appellant reversing the decree of the District Court, the appellees requested us to set the decree aside and make findings of fact and conclusions of law according to General Order in Bankruptcy No. 36, subd. 3 (89 F. xiv, 32 C.C.A. xxxvi), to enable them to take the case to the Supreme Court. The general order provides that the findings and conclusions be made at or before the entering of the decree. It is our practice not to anticipate a further appeal, but to await request for findings and conclusions; and, if the decree has then been entered, to vacate it so that the order may be observed. Therefore, when appellees made their request the decree was vacated, but, that being done, they for the first time challenged the particular method by which this court had acquired cognizance and made the motion to dismiss.

Passing the matter of practice disclosed by the foregoing, the question presented depends upon the character of the proceeding below from which the appeal was taken. By section 2, p. 7, of the Bankruptcy Act, courts of bankruptcy have jurisdiction to 'cause the estates of bankrupts to be collected, reduced to money and distributed, and determine controversies in relation thereto. ' Section 24a gives Circuit Courts of Appeals jurisdiction by appeal of 'controversies arising in bankruptcy proceedings.' By 24b they have jurisdiction in equity to superintend and revise in matter of law proceedings in bankruptcy. Section 25a, which also relates to proceedings in bankruptcy or bankruptcy proceedings proper as distinguished from controversies, provides for appeals to the Circuit Court of Appeals in three classes of cases, the third being 'a judgment allowing or rejecting a debt or claim of five hundred dollars or over'; but this case is not of that character.

The following conclusions may be drawn from the decisions of the Supreme Court: The presentation for allowance of a demand against a bankrupt's estate is a step in bankruptcy proceedings as to which appeal is specially provided by section 25. If both a demand and a lien to secure it be presented at the same time, the procedure for the former dominates, the lien goes along as an incident, and the double presentation is also regarded as a step in the bankruptcy proceeding. To this effect are Coder v. Arts, 213 U.S. 223, 29 Sup.Ct. 436, 53 L.Ed. 772, 16 Ann.Cas. 1008, and In re Loving, 224 U.S. 183, 32 Sup.Ct. 446, 56 L.Ed. 725. Of Hutchinson v. Otis, 190 U.S. 552, 23 Sup.Ct. 778, 47 L.Ed. 1179, sometimes carelessly cited, the court said in Coder v. Arts:

'The contest in the Otis Case, as in this, was over the claim presented, and, incidentally, to establish a lien upon the bankrupt's estate.'

In none of the cases, however, has it been held that there cannot be an independent assertion of the lien alone so as to create a controversy appealable under section 24a. Knapp v. Milwaukee Trust Co., 216 U.S. 545, 30 Sup.Ct. 412, 54 L.Ed. 610, and Houghton v. Burden, 228 U.S. 161, 33 Sup.Ct. 491, 57 L.Ed. 780, are examples of controversies over liens. In the former, the trustee first petitioned for the sale of the bankrupt's property. A mortgagee then intervened 'and asked to have the lien of the mortgage established as the first lien on the property and satisfied out of the proceeds of the sale. The property was sold, and the question is as to the lien of these mortgages upon the fund. ' It was held this made an appealable controversy, not a bankruptcy proceeding. Houghton v. Burden, as explained by the report in the Court of Appeals, In re Canfield, 113 C.C.A. 562, 193 F. 934, also involved an independent assertion of a security or lien giving rise to a controversy appealable under section 24a. Coder v. Arts and In re Loving, on the one hand, and Knapp v. Milwaukee Trust Co. and Houghton v. Burden, on the other, are in entire harmony. Other instances of appeals in controversies over liens are Hurley v. Railway, 213 U.S. 126, 29 Sup.Ct. 466, 53 L.Ed. 729, Id., 82 C.C.A. 453, 153 F. 503, and Merchants' Nat. Bank v. Sexton, 228 U.S. 634, 33 Sup.Ct. 725, 57 L.Ed. 998, sub nom. In re Kessler, 108 C.C.A. 239, 186 F. 127, without discussion, however, of the particular appellate remedy. The latter case went to the Court of Appeals by both appeal and petition to revise, and it does not appear which was entertained, but as section 25 did not apply, and as there was a further appeal to the Supreme Court, jurisdiction depended upon 24a, not 24b. Had it been a petition to revise under 24b, see Holden v. Stratton, 191 U.S. 115, 24 Sup.Ct. 45, 48 L.Ed. 116. Whether there is a controversy for appeal or a mere bankruptcy proceeding for petition to revise does not necessarily depend upon who first brought it about. For example, in the Knapp Case, which was held to be a controversy, the trustee petitioned that the property be sold and then the mortgagee appeared for the assertion of his lien.

Is this case a controversy arising in a bankruptcy proceeding within 24a, or is it a bankruptcy proceeding under 24b? If the former, appeal is the remedy; if the latter, petition to revise. In our former opinion only those facts were recited which were necessary to present the question decided. It is now necessary to go further to determine the character of the proceeding in the District Court. One Hartzell had been adjudged bankrupt. In his estate were 960 acres of land heavily incumbered with mortgage, judgment, attachment, and tax liens. His homestead was included in this land and was claimed as such in his schedule, but the exemption was afterwards waived by him and his wife. The trustees in bankruptcy filed a petition that the land be sold free of all incumbrances, that the liens be marshaled and transferred to the proceeds, that a prior sale under a foreclosure of a mechanics' lien and also an attachment be declared null and void, and 'that these trustees have all other relief as may be necessary and proper in the premises. ' The appellant, the Century Savings Bank, had a valid mortgage...