In re Thomas

• Citation: 45 F. 784
• Parties: In re THOMAS. v. THOMAS. BLYTHE
• Decision Date: 11 April 1891
• Court: U.S. Court of Appeals — Fourth Circuit

45 F. 784

In re THOMAS.

BLYTHE v. THOMAS.

United States District Court, D. South Carolina.

April 11, 1891

Wm. E Earle and Mitchell & Smith, for assignee.

I. P K. Bryan, for defendant.

SIMONTON J.

The record and testimony in this case are voluminous, and so much only will be referred to as may be necessary to understand the questions involved in it. William M. Thomas was adjudicated a bankrupt on his own petition on 3d February 1871, and has not yet been discharged. A. Blythe was appointed his assignee in February, 1871, and qualified as such 31st August, 1871. This case comes up in this way William M. Thomas was the owner and holder of a sealed note of Mary Raymond, dated 25th August, 1863, for $7,000, secured by a mortgage of a lot of land in Greenville, S.C. He began proceedings for foreclosure of the mortgage in the court of equity for Greenville district, and obtained his decree 22d January, 1868. The cause was stubbornly contested. During its progress Mary Raymond died intestate, and the proceedings were revived and continued against her only child and heir, H. H. Raymond, finally resulting in a sale of the property, application of the proceeds to the debt, and a balance unpaid of $3,421.04. The creditors of Mary Raymond then joined in a suit in Charleston county against her estate, under the name of Warren v. Raymond, to which suit W. M. Thomas was a party, and acted as his own attorney. The result of this suit was that this claim was established in the sum of $ . . . . During the contest between Thomas and the Raymonds in Greenville, the court of common pleas,-- the successor of the court of equity,-- passed an order, stating the bankruptcy of Thomas, and allowing his assignee to continue the action in his own name. The date of this order was 28th July, 1871. The assignee, however, did not interfere until 29th April, 1876, when he filed in the clerk's office for Charleston county, to which a transcript of judgment had been sent in Thomas v. Raymond from Greenville county, a formal notice that he claimed the judgment as a part of the bankrupt estate. In the case of Warren v. Raymond, on the motion of some of the creditors contesting the Thomas claim, the assignee was made a party, and Peter Thomas, Stephen Thomas, Jr., trustee, and the minor children of William M. Thomas. The answers of Peter Thomas and S. Thomas, Jr., are simply protests against the proceeding making them parties, neither stating or denying any claim. The answer of the infants by guardian ad litem is the formal answer of an infant. William M. Thomas is the attorney on record for these parties, as well as the guardian ad litem of the infants. The assignee claimed the fund. The court in which Warren v. Raymond was settled did not decide to whom the amount payable on the Thomas judgment belonged. Apparently that court seemed to think that the only controversy was between William M. Thomas, claiming it as his own, and the assignee, claiming it as a part of the bankrupt estate. However this may be, it did not decide to whom it must be paid, but sent the fund into this court, where this question could be determined. Warren v. Raymond, 19 S.C. 605. The petition or bill before us sets out a history of this Raymond note, and claims that the proceeds are a part of the bankrupt estate to be administered by the assignee. The answer of W. M. Thomas denies that he owned the Raymond note when he went into bankruptcy. That he had, 10 months previous thereto, assigned it to S. Thomas, Jr., trustee, for a valuable consideration; and he avers that neither S. Thomas, Jr., nor his cestuis que trustent have ever waived any claim to the note. He brings to the attention of the court the statutes of limitations in sections 5129 and 5057, Rev. St.; charges that the assignee and his counsel, Mr. Earle, both knew of this assignment, and have known of it since 1871; says that there are no unpaid creditors of his estate; claims that in any event he is entitled to counsel fees for securing the fund; and prays that the fund be paid over to S. Thomas, Jr., to be dealt with by him in accordance with his trust. The cause came to a hearing before Judge BRYAN, recently the district judge. He signed an order on motion of Mitchell & Smith for the assignee on proof of notice to defendant, referring the issues arising upon the petition and answer to Mr. Seabrook, register, with instructions to take the testimony to be offered by the parties, and report his conclusions of law and fact upon said issues. Mr. Seabrook has made his report in favor of the petitioner, the assignee, A. Blythe. The defendant has filed very many exceptions to this report, some of them going to the right to grant such an order of reference, and his right to make any report; others to the report on its merits. Just here it is well to settle the force and effect of the order of reference in this case. It does not refer the case to Mr. Seabrook to hear and decide the issues of law or of fact in the case; nor is there anything in the language of the order authorizing the construction that he is to determine any issue. The court could grant such an order. property, he denies any ownership at the date of his adjudication, for Haggett v. Welsh, 1 Sim. 134; Dowse v. Coxe, 3 Bing. 20; Prior v. Hembrow, 8 Mees.& W. 873; Newcomb v. Wood, 97 U.S. 581. But this would require the consent of all the parties, as it would, in effect, withdraw the case, and submit the controversy to a tribunal of their own selection. But the court 'cannot, of its own motion, or upon the request of one party only, abdicate its duty to determine by its own judgment the controversy presented, and devolve that duty upon any of its officers. ' Kimberly v. Arms, 129 U.S. 525, 9 S.Ct. 355. The learned judge who signed the order of reference in this case evidently had this in mind. He made the order on motion of one party, and in the absence of the other, although after notice. He carefully used language excluding any determination by his referee,-- 'The special master is instructed to take the testimony, and report his conclusions of law and fact. ' The information which is communicated by his findings in such a case upon the evidence presented to him is merely advisory to the court, which it may accept and act upon, or disregard in whole or in part, according to its own judgment as to the weight of evidence. Kimberly v. Amrs, supra; quoting and affirming Basey v. Gallagher, 20 Wall. 670; Quinby v. Conlan, 104 U.S. 420. The court considers the cause as presented on the pleadings and proof without reference to the report except so far as it contains the testimony. It accords to the findings of the report all the weight due to the careful and well-considered opinion of an able and impartial lawyer, whose qualifications fully justify his selection by the judge. This disposes of all preliminary questions made by the defendant to the validity of the order of reference and to the character of the report thereon. The first exception, because of the want of a replication to the answer, comes too late. Fischer v. Wilson, 16 Blatchf. 220; Jones v. Brittan, 1 Woods, 667.

An examination of the pleadings, confining ourselves to them, discloses this: The assignee asserts that the fund in court, arising from a contract made with the bankrupt himself, is a part of the bankrupt estate, to be administered in bankruptcy. He does not follow the usual form and technicality of a bill in equity; but he in effect alludes to and attempts to meet certain defenses which the defendant may set up. In the answer the defendant meets the averment that the fund is the property of the bankrupt estate, and while by implication he admits that at one time the note from which it arose was his property, he denies any ownership at the date of his adjudication, for that 10 months anterior thereto the same had been assigned to S. Thomas, Jr., trustee, for a valuable consideration. He denies that S. Thomas, Jr., or his cestuis que trustent had in any way waived their claim to this fund. He then pleads the statute of limitations peculiar to bankruptcy in sections 5057, 5129, Rev. St., and charges actual notice of this assignment to S. Thomas, Jr., upon the part of the assignee and of his attorney, Mr. Earle. He sets up by the way a claim on the fund for his own services as attorney in securing it, and concludes with a prayer that the fund be paid over to S. Thomas, Jr., trustee, to be dealt with by him in accordance with his trust. This, then, is the issue: Was the note of Mary Raymond, the source of the fund in the registry of this court, assigned to S. Thomas, Jr., trustee, 10 months before the adjudication of defendant as a bankrupt? If so, was the assignment of such a character as to prevent the fund, or any part of it, from ever becoming parcel of the bankrupt estate? On 20th April, 1870, William M. Thomas signed and delivered to S. Thomas, Jr., a paper in these words:

'I hereby assign to Mr. S. Thomas, Jr., a note of $7,000, dated-- -, 1863, made by Mrs. Mary Raymond to me, payable six months after peace, or sooner, at my option. This is to secure Peter Thomas in a note made by him to the state of South Carolina, upon which I was security, and the proceeds of which, to-wit, property at the state works in Greenville, South Carolina, was taken by me for the debts of Barksdale, Perry & Co., and which note is now out and unpaid.'

The original of this paper has been lost or mislaid. Its loss and its contents were proved to the satisfaction of the register. We assume that the paper was made. The evidence shows that both the assignee and Mr. Earle knew that the legal title to this Raymond note was in S. Thomas, Jr., and that they recognized the fact in December, 1871. There can be no doubt that...