Morehouse v. Pacific Hardware & Steel Co.

• Decision Date: 14 February 1910
• Docket Number: 1,744.
• Citation: 177 F. 337
• Parties: MOREHOUSE et al. v. PACIFIC HARDWARE & STEEL CO. et al.
• Court: U.S. Court of Appeals — Ninth Circuit

177 F. 337

MOREHOUSE et al. v. PACIFIC HARDWARE & STEEL CO. et al.

No. 1,744.

United States Court of Appeals, Ninth Circuit.

February 14, 1910

This is a petition to review an order in bankruptcy. The petitioners allege: That on August 6, 1908, W. C. Stone filed in the district court for the First judicial district of Nevada for Esmeralda county a complaint, praying that a receiver be appointed for the Exploration Mercantile Company, a corporation of that state. That on said petition C. E. Wylie was appointed receiver, and took possession of the estate of said corporation. That thereafter, on September 12, 1908, the respondents herein filed in the United States District Court for Nevada a petition in bankruptcy, praying that the said Exploration Mercantile Company be adjudged a bankrupt. That said District Court issued an injunction against the alleged bankrupt, Walter C. Stone, and C. E. Wylie, as receiver their agents, servants, attorneys, and counselors, and also a restraining order directing said parties to appear on September 18th and answer a motion for the said injunction and restraining order. That on said last-named date said alleged bankrupt appeared and moved the District Court to dissolve said injunction. That said motion was heard but not decided. That thereafter, on July 9, 1909, the petitioners were required to appear in said District Court on July 21 1909, to show cause why they and each of them should not be adjudged guilty of contempt for disobedience of said injunction, and said order to show cause. That said injunction order was erroneous for the reasons: First, that said proceeding in the state court was not an action based upon a claim due or demand provable or dischargeable in bankruptcy, and that therefore the District Court had no power to issue the injunction; second, that by section 720 of the Revised Statutes (U.S. Comp. St. 1901, p. 581) said court was prohibited from issuing an injunction to stay proceedings in the state court; third, that the proceeding in the state court was not a bankruptcy or insolvency proceeding; fourth that the petition in bankruptcy, filed by the petitioner's creditors, does not specify any act or ground of bankruptcy; fifth, that the state court had separate and independent jurisdiction over which the federal court had no supervisory power, and had complete jurisdiction before proceedings were taken in bankruptcy.

Thompson Morehouse & Thompson, for petitioners.

J. L. Kennedy, for respondents.

Before GILBERT and MORROW, Circuit Judges, and HUNT, District Judge.

GILBERT Circuit Judge (after stating the facts as above).

The respondents move to dismiss the petition on several grounds, only one of which need be considered; and that is, that the matter complained of is not reviewable until the petitioners shall have been adjudged guilty of contempt in the court below. If the order which is complained of were conceded to be an order in a bankruptcy proceeding proper, and of the class of proceedings which are made subject to the supervisory control of this court, it would seem, nevertheless, that it is not reviewable on petition for the reason that it is not an interlocutory order which determines any substantial right of the petitioners.

An order to show cause is but the means prescribed by law for bringing the defendant into court to answer the plaintiff's demands. It is in the nature of process, and, in jurisdictions where interlocutory orders are made appealable if they affect substantial rights, it is held that an order to show cause is not of that nature. Gray et al. v. Gaither, Ex'r, 71 N.C. 55; McAuliffe v. Coughlin, 105 Cal. 268, 38 P. 730.

But conceding the order to show cause to be a judgment of the court affecting a substantial right, we are of the opinion that a proceeding to punish for contempt one who has committed an act in violation of an injunction of a court of bankruptcy in a collateral matter, as in this case, is not a 'proceeding in bankruptcy' which is subject to review in this court on original petition. Section 24 of the bankruptcy act of 1898 (Act July 1, 1898, c. 541, 30 Stat. 553 (U.S. Comp. St. 1901, p. 3431)), establishes the appellate jurisdiction of Circuit Courts of Appeals over 'controversies arising in bankruptcy proceedings' and their jurisdiction in equity, 'either interlocutory or final, to revise in matter of law proceedings of the inferior courts of bankruptcy. ' Section 25a provides for appeals from judgments in three certain enumerated steps in bankruptcy proceedings, 'in respect of which special provision therefor was required. ' Holden v. Stratton, 191 U.S. 115, 24 Sup.Ct. 45, 48 L.Ed. 116. There is in the language of the act nothing to indicate that the revisory power so given to the Circuit Courts of Appeals is more extensive than that which was exercised by the Circuit Courts under Bankr. Act March 2, 1867, c. 176, 14 Stat. 517. In Lathrop v. Drake, 91 U.S. 516, 23 L.Ed. 414, it was held that the appellate jurisdiction conferred on the Circuit Courts by the act of 1867 was of two classes of cases, one to be exercised under a petition for review, the other by the ordinary appeal or writ of error. The same distinction has been recognized in construing the bankruptcy act of 1898, and it has been held that the provisions for appeal and...