In re Sweeney

• Decision Date: 22 March 1909
• Docket Number: 1,859.
• Citation: 168 F. 612
• Parties: In re SWEENEY.
• Court: U.S. Court of Appeals — Sixth Circuit

168 F. 612

In re SWEENEY.

No. 1,859.

United States Court of Appeals, Sixth Circuit.

March 22, 1909

Grafton Green, for appellant.

Charles C. Trabue, for appellee.

Before LURTON and SEVERENS, Circuit Judges, and KNAPPEN, District judge.

LURTON Circuit Judge.

On December 13, 1907, E. E. Sweeney became voluntarily a bankrupt, and in due course Chas. C. Trabue was selected as trustee. There came into the possession of the trustee a stock of vehicles, including buggies, surreys, etc. Many of these vehicles had been purchased by the bankrupt, who was a dealer in such articles, carrying on business at Nashville from a copartnership engaged in the manufacture and sale of vehicles at Cincinnati, doing business under the name and style of Ratterman & Luth. This copartnership filed an intervening petition in the bankruptcy proceeding for the purpose of reclaiming such of the vehicles in the hands of the trustee as had been sold by them to the bankrupt. The ground for rescinding the contract of sale was that the sale had been made upon a credit in consequence of fraudulent representations made by Sweeney as to his solvency. The trustee answered and denied the right of reclamation. Thereupon the court referred the issues to the referee 'to hear proof and report upon the matters in controversy. ' Upon a stipulation as to facts and certain exhibits, including the sworn statement of the bankrupt as to his financial status and certain correspondence, there was a report filed by A. L. Childress, styling himself 'special master,' denying the right of rescission. To this exceptions were filed. These were overruled, and the findings of the 'special master' sustained, and the petition of the intervener dismissed. From this they have appealed.

The issues presented by the intervention were properly referred by the court to the referee for the purpose of hearing evidence and making a report. The referee was Mr. A. L Childress, who afterwards filed a report as special master. This was doubtless an inadvertence. There is no authority for converting the referee into a special master. The bankruptcy proceeding may be referred to the referee by a general order or to him as referee upon special issues, his power depending upon the order of reference. Loveland on Bankruptcy, Sec. 29 (3d Ed.); section 22, Bankr. Act 1898 (Act July 1, 1898, c. 541, 30 Stat. 552 (U.S. Comp. St. 1901, p. 3431)). For the most part the duties of a referee are those of a special master, and we know of no authority for the appointment of a special master to do the proper business of the referee. Nor do we know of any power to allow a referee the compensation of a special master. The fees and compensation of that officer were enlarged by the amendments of the act passed February 5, 1903. Section 40 (U.S. comp. St. 1901, p. 3436) amended by Act Feb. 5, 1903, c. 487, Sec. 9, 32 Stat. 799 (U.S. Comp. St. Supp. 1907, p. 1029). By section 72, added by that amendatory act, it is provided:

'Neither the referee nor the trustee shall in any form or guise receive, nor shall the court allow them, any other or further compensation for their services than that expressly authorized and prescribed in this act. ' U.S. Comp. St. Supp. 1907, p. 1033.

In re Mammoth Pine Lumber Company (D.C.) 116 F. 731, compensation for investigating and reporting upon liens claimed by the interveners was disallowed. So, also, In re Barker (D.C.) 111 F. 501. Both of these cases were before the very stringent provisions limiting their compensation in the act of 1903, set out above. But the parties, as well as the court below, treated this report as the proper report of the referee, under the very correct order making the reference to the referee as such, and we shall do the same.

Coming now to the merits. From a stipulation of facts it appears that the bankrupt had for some years prior to the transactions here involved been a customer of the petitioners. Between November 26, 1906, and April 9, 1907, he made four orders aggregating $3,607.12. The shipments under these orders were made as follows:

February 9, 1907 . . . $1,134 20

March 5, 1907 . . . 1,295 33

March 13, 1907 . . . 124 85

May 24, 1907 . . . 1,052 74

$3,607 12

The vehicles sought to be reclaimed are parts of each of the four shipments. For these orders notes were executed so as to divide each order into several notes maturing at varying dates. Five of these notes maturing between May 5, 1907, and July 5, 1907, aggregating $1,247.15, were paid at maturity. A sixth note, maturing July 20, 1907, was paid partly in money and partly by two small renewal notes, which were paid at maturity.

Another note was renewed and paid. The other notes were renewed, and small payments made from time to time. On December 13, 1907, petitioners held six renewal notes aggregating $1,370.79, on which date Sweeney filed his petition in bankruptcy. From the evidence it appears that Ratterman & Luth were not satisfied of the solvency of Sweeney and held up his orders for consideration. They had therefore received reports from sources not disclosed to the effect that Sweeney's financial condition was unsatisfactory. They then sent an agent to Nashville for the purpose of investigation. Brewer, the agent, reported by letter of January 14, 1907, that he had seen Sweeney and told him of the bad reports. That Sweeney had said, 'Some one has been lying on me, as I am now nearer out of debt than since I went into business. ' That he said his total indebtedness was about $6,000, and that he had on hand a $12,000 stock. Brewer then added significantly:

'By to-morrow morning you will get a complete statement from Mr. Sweeney and his financial standing and just how much he owes; so from the way he is fixing up his repository and painting he does not expect to break this year, anyway, so now it is all left for you to decide after you hear from Mr. Sweeney.'

Under date of January 18, 1907, Sweeney wrote Ratterman & Luth inclosing financial statement and complaining of his delay in shipping goods ordered. From that statement it appeared that his resources aggregated $20,319.01 and his liabilities $8,165.55. This being satisfactory, his orders were filled. It was stipulated that in fact Sweeney was insolvent then and throughout the year 1907, and that his liabilities were then between $15,000 and $20,000, instead of $8,000, as stated. The assets which came into the hands of his trustee, including those sought to be reclaimed by petitioner and the Courtland Company,...