In re Wood

• Citation: 278 F. 355
• Decision Date: 14 December 1921
• Docket Number: 48.
• Parties: In re WOOD.
• Court: United States Courts of Appeals. United States Court of Appeals (2nd Circuit)

278 F. 355

In re WOOD.

No. 48.

United States Court of Appeals, Second Circuit.

December 14, 1921

P. L Housel, for appellants.

Arthur Carter Hume, of New York City (Harold E. Lippincott, of New York City, of counsel), for trustee.

Before ROGERS, HOUGH, and MANTON, Circuit Judges.

MANTON Circuit Judge.

James T. Wood, Isaac G. Terry, and Morris J. Terry owned, as tenants in common, real property situated at Sayville, Long Island. The property is a two-story frame store building and barn. The Terrys each owned a one-fourth interest, and Wood owned the other one-half. This one-half interest vested in Wood on September 9, 1911. Prior to that time he had a less interest in this one-half, together with other members of his family. The Terrys became vested of their one-half of the property through the death of their father in 1893. The property was vested in the family of Wood since 1849, and was used by the petitioners as a place of business until May 15 1915. For years prior to the adjudication in bankruptcy of Wood, the petitioners paid the Wood owners an annual rental of $200, less one-half of the taxes, insurance, and repairs. There was no lease or other formal agreement entered into. From May 15, 1915, until the commencement of this proceeding it was not occupied continuously, but it was rented to various tenants from time to time. On May 8, 1912, Wood conveyed his interest in the property to Nancy Harrison, and on July 19, 1912, he was adjudicated a bankrupt on an involuntary petition dated June 4, 1912, and the present trustee in bankruptcy was appointed September 26, 1912. The conveyance to Nancy Harrison was adjudicated fraudulent and void as to the trustee on January 10, 1920. During this ownership in common, the care of the property devolved entirely upon the petitioners. They paid the taxes and repairs, and kept the property insured for the benefit of themselves and the members of the Wood family during their respective ownership, and later for the benefit of Nancy Harrison after the conveyance to her.

On January 14, 1920, the referee in bankruptcy granted an order ex parte, which was served upon the petitioners, directing them to show cause why they should not account for all income, receipts, and profits of the property heretofore jointly owned by the bankrupt herein and the said petitioners, and 'then and there to pay over in cash to the trustee herein all the amounts due or found to be due to said trustee. ' Other relief was prayed for. On July 20 1920, the petitioners, on application to the District Court, obtained a stay of these proceedings under the referee's order, and directed that cause be shown on July 29, 1921, before the court, why the order should not be wholly vacated and the petition dismissed. On July 24, 1921, on an ex parte application, the District Judge modified his order, so as to allow the referee to proceed with the accounting ordered by the referee, and directed the petitioners to appear for that purpose before the referee on July 27, 1921. It thus appears that the accounting was summarily ordered without the petitioners' opposition having been heard, and counsel for them, believing that he had a legal excuse for not appearing on July 27th, advised his clients accordingly, and they did not appear before the referee. His excuse was held insufficient by the referee, and their failure to appear resulted in their being certified in contempt. The taking of testimony in the absence of the petitioners commenced, and was adjourned until July 29, 1920, on which day the application to vacate the referee's order came on to be heard in the District Court, and, upon representation made to the District Judge that they were in contempt, they were refused a hearing of their motion until they purged themselves of their contempt by appearing before the referee. They were directed by an order to show cause on August 5, 1920, why they should not be punished for contempt.

One of the petitioners appeared on the 29th before the referee, and was examined as to the matters relating to the account. When the motion to vacate the referee's order was heard, it resulted in the petitioners being directed to account 'for the use, income, receipts, profits, and enjoyments, occupancy, and benefits of the property of the bankrupt,' and they were directed to file a statement of all moneys and property 'received by them in their hands for which they are accountable, having to do with the property of the bankrupt herein,' and to appear before the referee on September 24, 1920, and thereafter submit to an examination as to said accounting and, upon full compliance therewith, it was ordered that the motion to punish them for contempt be denied. By a separate order, the motion to vacate the referee's original order was in all respects granted, except as to the accounting. Under the direction of these orders, an account was filed, to which the trustee filed objections. Hearings were had, and it resulted in an order of the District Court directing the petitioners to pay the balance of $2,809.25.

Upon this appeal, the propriety of the District Court granting this order is challenged, as well as the result reached upon the accounting had. The summary nature of the order appealed from is clearly an administrative order in the ordinary course of bankruptcy between the filing of the petition and the final settlement of the estate. Its character indicates the proceeding that should be undertaken for its review. We think it should be reviewed on a petition to revise, rather than by an appeal. Hoskins v. Funk, 239 F. 278, 152 C.C.A. 266. It was apparently intended to be in the nature of a turn-over proceeding, and the petition to revise is the only remedy. In re Shidlovsky, 224 F. 450, 140 C.C.A. 654. The appeal will therefore be dismissed.

We think that the trustee mistook his remedy in applying for and securing a summary order. It is within the power of the bankruptcy court to assert and exercise a summary power over the property of a bankrupt, and even against third persons holding property and claiming title, provided such claim is merely colorable or fraudulent. But, inasmuch as such...