In re Rouse, Hazard & Co.

• Decision Date: 03 January 1899
• Docket Number: 556.
• Citation: 91 F. 96
• Parties: In re ROUSE, HAZARD & CO.
• Court: U.S. Court of Appeals — Seventh Circuit

91 F. 96

In re ROUSE, HAZARD & CO.

No. 556.

United States Court of Appeals, Seventh Circuit.

January 3, 1899

James M. Flower, for petitioner.

W.T Irwin, for respondent.

Before WOODS, JENKINS, and SHOWALTER, Circuit Judges.

JENKINS Circuit Judge, .

Subdivision b of section 24 of the act of the congress of the United States entitled 'An act to establish a uniform system of bankruptcy throughout the United States,' approved July 1, 1898, being chapter 541 of the statutes passed at the second session of the fifty-fifth congress, provides that:

'The several circuit courts of appeal shall have jurisdiction in equity, either interlocutory or final, to superintend and revise in matter of law the proceedings of the several inferior courts of bankruptcy within their jurisdiction. Such power shall be exercised on due notice and petition by any aggrieved party.'

Under this provision certain creditors of the bankrupt petitioned the court to review and revise an order of the district court of the United States for the Northern district of Illinois sitting in bankruptcy, made on the 11th day of November 1898. From the petition and order it appears that on the 1st day of November, 1898, an involuntary petition was filed in the court below against Rouse, Hazard & Co., a corporation existing under the laws of the state of Illinois, and that on the 11th day of November, 1898, that corporation was adjudicated a bankrupt; that on the 5th day of November, 1898, a petition was filed in the court below by a large number of workmen, laborers, and servants of Rouse, Hazard & Co., asking for the payment of their labor claims accruing to them prior to the filing of the petition, and that such claims be awarded priority in payment out of the bankrupt's estate. Rouse, Hazard & Co., on the 31st day of August, 1898, suspended business, its property on that date being seized by the sheriff of Peoria county, Ill., under executions issued upon judgments rendered against the corporation in the courts of the state of Illinois, and such property remained in the possession of the sheriff until it was sold by him, and the proceeds, under order of the bankrupt court, turned over to the temporary receiver appointed under the bankruptcy proceedings. The labor claims in question accrued within three months prior to August 31, 1898, the date upon which the corporation bankrupt suspended business by reason of the levy of the executions; none of the services for which payment was sought being rendered after that date. Specific objections were filed by certain general creditors to the allowance of priority of payment of these claims, and upon the hearing in the bankruptcy court it was ordered that the claims for wages as shown by the receiver's report be approved as preferred claims, not exceeding by any one claimant the sum of $300, and that such claims should be paid out of the bankrupt's estate in preference and priority to the general creditors. It is this direction for the payment of labor claims in priority to the general creditors that is asked to be reviewed here as a question of law.

The bankrupt law (chapter 7, Sec. 64b) provides that:

'The debts to have priority, except as herein provided, and to be paid in full out of the bankrupt's estate, and the order of payment shall be (4) wages due to workmen, clerks or servants which have been earned within three months before the date of the commencement of proceedings, not to exceed $300 to each claimant. (5) Debts owing to any person, who by the laws of the states, or of the United States, is entitled to priority.'

The laws of the state of Illinois with respect to voluntary assignments provides (Rev. St. Ill. 1898, p. 172, c. 10, Sec. 6):

'That all claims for the wages of any laborer or servant, which have been earned within the term of three months next preceding the making of such assignment, and to which no exception has been made, or to which exception has been made and the same having been adjudicated and settled by the court, shall, after the payment of the costs, commissions and expenses of assignment, be preferred, and first paid to the exclusion of all other demands and claims.'

By chapter 38a, p. 629, Rev. St. Ill. 1898, it is provided:

'That hereafter, when the business of any person, corporation, company or firm shall be suspended by the action of creditors, or be put into the hands of a receiver or trustee, then in all such cases the debts owing to laborers and servants which have accrued by reason of their labor or employment, shall be considered and treated as preferred claims, and such laborers or employes shall be preferred creditors, and shall be first paid in full, and if there shall not be sufficient to pay them in full the same shall be paid from the proceeds of the sale of the property seized.'

It is preliminarily insisted by the labor claimants, the respondents here, that this court cannot entertain jurisdiction of the matter, for the reason that no claim allowed amounted to the sum of $500 or over, and that the petitioners, the general creditors, cannot accumulate several claims which shall aggregate over $500, and thereby confer jurisdiction upon this court. The latter proposition is doubtless true, but we think that the contention that this court is without jurisdiction is made in misapprehension of the statute. The bankrupt act (section 24) invests the circuit courts of appeals with appellate jurisdiction of controversies arising in bankruptcy proceedings, and section 25 provides that an appeal may be taken (3) from a judgment allowing or rejecting a debt or claim of $500 or over. Such an appeal is to be taken within 10 days after the judgment appealed from. It is further provided by section 24, subd. b that the courts of appeal shall have jurisdiction in equity, 'either interlocutory or final, to superintend and revise in matter of law the proceedings of the several inferior courts of bankruptcy within their jurisdiction. Such power shall be exercised on due notice and by the party aggrieved. ' It will be seen that the statute contemplates two different proceedings, and for two different purposes. The one is a review of an adjudication touching the merits of a claim, which may rest upon a question of fact or a question of law. Such an adjudication can only be reviewed by appeal within 10 days from the adjudication, and will only lie where the claim adjudicated amounts to $500 or over. The appellate court reviews the facts as well as the law. In the other case the appellate court acts, not upon appeal, but by original petition of a complaining party, and is given authority to review and to revise, in matter of law only, the proceeding of the bankrupt court that is complained of. If the controversy coming before us was with respect to the merits of the several claims of these labor claimants, we should be wholly without jurisdiction, for there is neither an appeal nor does the amount allowed to any one claimant exceed the sum of $500. But there is no controversy here with respect to the merits of the claims. The debts are conceded. The counsel for the labor claimants, the respondents here, distinctly states in his brief, 'And no objection is raised in this court as to the validity or justness of any of such claims. ' The only question, then, sought to be raised by this petition is whether, conceding the justness of the claims, they are as a matter of law entitled to priority of payment over the general creditors of the bankrupt. That is a question which, we think, clearly...