In re Martin

• Citation: 201 F. 31
• Decision Date: 07 November 1912
• Docket Number: 2,160.,2,091
• Parties: In re MARTIN et al. v. GLOBE BANK & TRUST CO. OF PADUCAH, KY., et al. MARTIN
• Court: U.S. Court of Appeals — Sixth Circuit

201 F. 31

In re MARTIN et al.

MARTIN v. GLOBE BANK & TRUST CO. OF PADUCAH, KY., et al.

Nos. 2,091, 2,160.

United States Court of Appeals, Sixth Circuit.

November 7, 1912

W. F Bradshaw, of Paducah, Ky. (Bradshaw & Bradshaw, of Paducah Ky., on the brief), for appellant.

D. H Hughes, of Paducah, Ky. (T. L. Crice and Wheeler & Hughes all of Paducah, Ky., on the brief), for appellees.

Before WARRINGTON, KNAPPEN, and DENISON, Circuit Judges.

WARRINGTON Circuit Judge.

February 13, 1912, the decree below was reversed and the cause remanded for further proceedings consistent with the opinion then handed down. 193 F. 841, 851, 113 C.C.A. 627. So many things have happened in the case since then that we deem it advisable briefly to allude to them. March 4th, on petition of the Globe Bank and the First National Bank, an appeal was allowed at chambers to the Supreme Court, and bond approved and filed. March 11th these banks filed a motion for allowance of appeal in open court; and on the next day they filed a motion to vacate the decree of reversal and enter final decree, also a request for separate findings of fact and conclusions of law. March 13th they filed a petition for rehearing. An order was then made fixing a time for hearing the motions to vacate and modify the decree and to allow appeal in open court, also directing that the mandate be withheld until such motions were disposed of; and the Old State Bank, on the same day, filed a petition for appeal, the allowance of which was postponed. Prior to July 19th separate findings of fact and conclusions of law were prepared, and on that date the cases were set for hearing at the opening of the October session on questions which then arose as to the proper remedy for reaching the Supreme Court. September 18th motion to extend record on appeal to petition to revise was filed by the trustee; and on the day following motions were filed by all the appellee banks to dismiss both the petition to revise and the appeal. October 7th, the day prior to the expiration of the term, for the purpose of preserving the pending questions of remedy, the appeals theretofore allowed were set aside.

The difficulties that have arisen since the decision in February grow out of the proceedings taken to bring the case as made below into this court and the failure to object to the remedies chosen. The trustee in bankruptcy and certain creditors sought to bring the case here by petition to revise in matter of law (but without transcript of record, which has since been supplied through stipulation), and the trustee alone subsequently resorted to appeal. The petition to revise was filed in this court July 27, 1910, and the transcript on appeal February 23, 1911, and two cases nominally were docketed here. On motion, an order was made postponing the hearing on the petition to revise until the hearing of the appeal; and the cases were, in fact, heard together, in connection with the transcript in the appeal proceeding, as one cause, without objection and without suggestion as to which was the proper remedy. Following the settled course in such circumstances, the court did not consider 'any question of remedy or jurisdiction.' 193 F. 845, 113 C.C.A. 627.

1. Jurisdiction. In the motion to dismiss the petition for revision, the court is asked to determine that question before acting upon any of the other motions. The briefs of counsel are suggestive of another order of disposing of the questions, which we think preferable. Despite the acquiescence of appellees in the remedies adopted and their delay in raising any question of jurisdiction, we feel bound to entertain and determine their motions to dismiss. M.C. & L.M. Ry. Co. v. Swan, 111 U.S. 379, 382, 4 Sup.Ct. 510, 28 L.Ed. 462; Fore River Shipbuilding Co. v. Hagg, 219 U.S. 175, 177, 31 Sup.Ct. 185, 55 L.Ed. 163; Chi., B. & Q. Ry. Co. v. Willard, 220 U.S. 413, 419, 31 Sup.Ct. 460, 55 L.Ed. 521. It is urged that the action of the court below was, in effect, a judgment allowing a debt or claim of more than $500, and consequently that an appeal should have been taken within 10 days after the rendition of such judgment. The final order of the court below was entered July 16, 1910, and the appeal was prayed for and allowed December 3d, upon the execution of a bond, with surety 'to be approved' by the court, which approval was given January 10, 1911. It follows that, if the contention that the action of the court below was a judgment of allowance within the meaning of section 25a(3) of the Bankruptcy Act be sound, the motion to dismiss the appeal must be granted, because the limitation to 10 days is both distinct and imperative. Conboy v. First Nat. Bk. of Jersey City, 203 U.S. 141, 145, 27 Sup.Ct. 50, 51 L.Ed. 128; Brady v. Bernard & Kittinger, 170 F. 576, 578, 95 C.C.A. 656 (C.C.A. 6th Cir.); In re McCall, 145 F. 898, 904, 76 C.C.A. 430 (C.C.A. 6th Cir.); Carriere & Son v. United States (C.C.) 163 F. 1009, 1010; Old Nick Williams Co. v. United States, 215 U.S. 541, 544, 30 Sup.Ct. 221, 54 L.Ed. 318.

However, we do not think the final order was the allowance of debts or claims. The claims in question are those of the three appellee banks before named. Proofs of the claims of the Globe Bank and the First National Bank were made January 9, 1909, and of the Old State Bank March 17, 1909. All of these claims were for moneys loaned, and it is distinctly stated in the claim of the First National Bank and that of the Old State Bank that no security for the debt had in any manner been received. The least of the six promissory notes proved by the Globe Bank, to wit, a demand note of $500, is stated to have been secured by three collateral notes (not involved here) executed by third persons. It is stated in the proof of the Globe Bank that an action (one of the attachment suits mentioned below) was pending in the McCracken circuit court on its notes, 'under which a lien is acquired and held on the real estate therein described, attacking a deed as fraudulent'; but it is further stated that the bank had not 'received any manner of security for said debt whatever, except three collateral notes,' before mentioned. The record filed here being silent as to formal allowance of these claims, a stipulation was filed in the cause October 16, 1912, in which it was agreed that the stipulation should be considered as part of the record in the two cases, and, in substance, that no order appears or was made in the original record,

'allowing or disallowing any of the claims filed by the respondents and appellees, either in respect of their original proofs of claim, or of any of the amended proofs or petitions of said banks, except the order of the referee of date May 23, 1910.'

The essential feature of such order of the referee, as well as that of the final order or decree of the court, is that only those creditors, namely, the three appellee banks, whose claims accrued prior to the date of the execution of the voluntary deed of the bankrupt, were entitled to share in the proceeds derived from the sale of the land covered by such deed; the order of the referee stating:

' * * * It is adjudged that the creditors of the bankrupt whose debts were created prior to the execution of the deed by the bankrupt, T. J. Atkins, to Ed. L. Atkins and others, and which have been proved and allowed herein, are the only class of creditors entitled to share or participate in the distribution of the funds realized from the sale of the real estate sold under the judgment of the McCracken circuit court. * * * '

The amount realized from such sale was stated and was insufficient to pay the debts of these banks; and it was held that they were entitled to the entire fund, subject to costs and taxes, and the trustee was ordered to pay same to such banks pro rata upon their respective debts. The theory upon which this conclusion was affirmed in the court below is stated in our original opinion, before cited. It is enough to say now that neither the order of the referee, nor the final decree of the court below, purports to be an allowance of the debt or claim, as such, of any of these three banks. Indeed, the debts as originally proved do not appear ever to have been questioned; and the sums so ordered to be paid on such claims were each materially less than the respective debts proved. The true analysis of the order is that it was an order of distribution. It was an order to distribute a fund derived from the recovery and sale of real estate, the conveyance of which had been made by the bankrupt in fraud of the rights of certain of his creditors, as pointed out in our original decision. This fund was so acquired in pursuance of an order of the bankruptcy court; and the validity of the order distributing the fund cannot, we think, be rightly tested by any question of allowance of claim within the meaning of section 25a, but rather by the question whether the pertinent provisions of the Bankruptcy Act, or those of sections 1906, 1907, and 1907a of the Kentucky Statutes (Carroll's Ky. Stat. 1909, pp. 854 to 857), are controlling.

We are not unmindful of the contention that, since in May, 1910 these three banks filed amended and supplemental petitions and proofs of their claims, in which they asserted liens upon the property covered by the judgments of the McCracken circuit court, the effect of the order of the court below was to allow such amended and supplemental claims. The Globe Bank had before filed pleadings in the bankruptcy proceeding, and had been instrumental in securing the order of the court below, authorizing the trustee to institute proceedings in the McCracken circuit court. In the so-called amended and supplemental proofs before alluded to, the judgments obtained in the McCracken circuit...