In re Swartz

• Decision Date: 05 August 1942
• Docket Number: No. 7826,7864.,7826
• Citation: 130 F.2d 229
• Parties: In re SWARTZ et al. KAUSAL et al. v. LYNN.
• Court: U.S. Court of Appeals — Seventh Circuit

130 F.2d 229 (1942)

In re SWARTZ et al. KAUSAL et al. v. LYNN.

Nos. 7826, 7864.

Circuit Court of Appeals, Seventh Circuit.

July 6, 1942.

Rehearing Denied August 5, 1942.

J. Kentner Elliott, of Chicago, Ill., for appellants.

Charles R. Johnson, of Chicago, Ill., for appellee.

Before MAJOR, KERNER, and MINTON, Circuit Judges.

KERNER, Circuit Judge.

Appellants seek review of three orders: (1) Limiting the time within which creditors shall file claims; (2) striking appellants' claims; and (3) confirming assessment of costs.

On May 22, 1935, the debtors filed their petitions seeking confirmation of a plan for the composition of their debts under the provisions of § 74 of the Bankruptcy Act, 11 U.S.C.A. § 202. The second amended proposal, filed on January 24, 1936, alleged that the debtors were unable to pay their debts as they matured, that a plan of composition had been prepared, and that creditors owning more than a majority in amount of their indebtedness had accepted the plan in writing.

The District Court, on March 5, 1936, after appellants as creditors had consented to its adoption, approved and confirmed the plan. The plan provided for a delayed liquidation of the debtors' property consisting of two parcels of real estate. Pursuant to the plan, the holders of notes secured by mortgages upon the real estate, received, in lieu of the notes, certificates of interest. Two trust agreements were executed and approved by the court on November 29 and December 7, 1937, respectively. November 5, 1937, the court entered an order limiting the time within which creditors could file claims, and thereafter all of the debtors' creditors, save the appellants, filed their claims and accepted the certificates of interest. March 29, 1938, the court entered an order directing the appellants forthwith to deposit with the trustee the notes held by the appellants and receive in lieu thereof certificates of interest, and restrained appellants from interfering with or delaying the administration of the estate. The appellants having failed and refused to file their claims, the court, on August 12, 1941, entered an order that appellants within two days file their claims and deliver to the trustee the notes held by them and accept in lieu thereof certificates of interest, their failure to comply with the order to bar them from in any manner asserting any claims upon said notes. August 22, 1941, the appellants filed their claims upon the notes held by them and asserted that they were entitled to receive the face value thereof. September 10, 1941, the court held that the appellants had failed and refused to file proper claims, struck the claims filed, and ordered appellants to cease their unwarranted interference with and delay of the administration of the estate.

The appellants contend that the court was without authority to direct that they file claims and upon failure so to do, to bar them from any claim in the proceeds of the estate. With this contention we cannot agree.

We think it well established that the administration and distribution of the property of a bankrupt is a proceeding in equity, and that where a bankruptcy court acquires lawful custody of property, it has jurisdiction to inquire and determine who the lawful owners are, and to call before it and order all claimants to present their claims within a reasonable time, or be barred from any right or interest in the property or in its proceeds. Nisbet v. Federal, etc., 8 Cir., 229 F. 644, 647; In re Lathrop, Haskins & Co., 2 Cir., 223 F. 912, 917; Straton v. New, 283 U.S. 318, 51 S.Ct. 465, 75 L.Ed. 1060; and In re Wood and Henderson, 210 U.S. 246, 28 S.Ct. 621, 52 L.Ed. 1046.

Appellants next contend that the order striking the claims filed on August 22, 1941, was entered without a hearing.

It appears from the record that during the court's consideration of appellee's motion to strike the claims, appellants and their counsel were personally present; that they presented, but did not file, their objections to the motion to strike; that the court considered the files, records and proceedings, the evidence and arguments of counsel, and found that appellants had failed and refused to file any proper proof of claim, and had refused to accept and receipt a certificate of beneficial interest in compliance with and as required by the orders of the court. Under this state of the record, we are unable to see any merit in appellants' contention.

It is also contended that the order assessing costs was not supported by the evidence.

The record discloses that after the plan of composition was confirmed, and for more than five years thereafter, appellants persisted in bringing and urging upon the court not less than 32 oral and written petitions, seeking preferences, which no other similarly situated creditor could or did receive, and payment in full of their claims. Many of these petitions were withdrawn, and the remainder, after due consideration, were found by the court to be without merit. These actions of the appellants required 162 docket entries. Of 157 court appearances made by counsel for the trustee after appellants had consented to the adoption of the plan, 124 were necessarily made in preserving the plan from the attacks of the appellants. The referee in bankruptcy recommended that $1,000 be taxed as costs against the appellants.

The referee found that by reason of the unnecessary,...