Rawlins v. Hall-Epps Clothing Co.

• Decision Date: 28 October 1914
• Docket Number: 2685.
• Citation: 217 F. 884
• Parties: RAWLINS et al. v. HALL-EPPS CLOTHING CO. et al.
• Court: U.S. Court of Appeals — Fifth Circuit

217 F. 884

RAWLINS et al. v. HALL-EPPS CLOTHING CO. et al.

No. 2685.

United States Court of Appeals, Fifth Circuit.

October 28, 1914

Alexander Akerman and Charles Akerman, both of Macon, Ga., for petitioners.

George S. Jones and Orville A. Park, both of Macon, Ga., for respondents.

Before PARDEE, Circuit Judge, and GRUBB and CALL, District Judges.

GRUBB District Judge.

This was a petition to superintend and revise an order of the District Court for the Southern District of Georgia directing the petitioners, hereafter designated 'the bankrupts,' against whom an involuntary petition in bankruptcy had been filed in that court, to appear before the referee in bankruptcy at Macon, Ga., to be examined as witnesses concerning the acts, conduct, and property of the bankrupt, which was a partnership composed of the petitioners, and with reference to the cause of its bankruptcy, its dealings with creditors and other persons the amount and the whereabouts of its property, and in addition all matters which may affect the administration and settlement of the estate. The order further required the petitioners to produce for inspection and examination before the referee at the time and place of the examination all of the books of account of the bankrupt and other writings and memoranda from which might be ascertained any of the matters and things to be covered in said examination. The petitioners, the alleged bankrupts, filed an answer, denying insolvency and the commission of an act of bankruptcy, and demanding a jury trial for those issues. The order complained of was made before adjudication, and before the appointment of a receiver. The petitioners' residence and place of business was distant from Macon, the place of examination.

The order is assailed for three reasons, and it is contended by petitioners:

(1) That the court was without authority to make the order in advance of an adjudication and when no receiver had been appointed in the case.

(2) That the order was made without notice to the bankrupts, and without affording them an opportunity to be heard upon it before it was made.

(3) That the order was unreasonable in its terms, in that it required the production of all the books of account and other writings and memoranda from which might be ascertained any matters to be covered by the proposed examination, without specification or identification, except by way of a general conclusion.

First. The authority for the examination is claimed to be found in section 21a of the act of 1898. The application was made by the petitioning creditors, as authorized by that section. The question is whether section 21a authorizes an examination of the bankrupt before adjudication and in the absence of the appointment of a receiver. This depends upon whether a bankrupt estate in that attitude can be said to be in the process of administration, within the meaning of that language in section 21a of the Bankruptcy Act. The Supreme Court of the United States in the case of Cameron v United States, 231 U.S. 710, 34 Sup.Ct. 244, 58 L.Ed. 448, has held with reference to a voluntary bankruptcy, in which a receiver had been appointed, that: 'The estate of the bankrupt is in process of administration after the petition has been filed and a receiver appointed, and an examination may be ordered at any time thereafter under section 21a of the Bankruptcy Act.'

While the decision may not be broad enough to extend to an involuntary bankruptcy and one in which there is no receivership, the reasoning of the court would indicate that the bankrupt court had authority to make such an order in an involuntary case in which no receiver had been appointed. Referring to the meaning of the words found in section 21a, 'a bankrupt whose estate is in process of administration under this act,' the court said (231 U.S.page 717, 34 Sup.Ct. 246, 58 L.Ed. 448):

'We are of opinion that the estate was in process of administration at the time when the examination before the commissioner was ordered and the testimony of Cameron given. This court has decided that the filing of the petition in bankruptcy operates to place the property of the alleged bankrupt in custodia legis and prevents any creditor from attaching it; and, although by the terms of the act the estate does not vest in the trustee until the date of the adjudication, it is placed at the time of the filing of the petition under the control of the court with a view to its ultimate distribution among creditors. Acme Harvester Co. v. Beekman Lumber Co., 222 U.S. 300, 307 (32 Sup.Ct. 96, 56 L.Ed. 208). And see Mueller v. Nugent, 184 U.S. 1, 14 (22 Sup.Ct. 269, 46 L.Ed. 405); Everett v. Judson, 228 U.S. 474, 478, 479 (33 Sup.Ct. 568, 57 L.Ed. 927, 46 L.R.A. (N.S.) 154). And this is true, notwithstanding, as contended by the petitioner, that, should the attempt to obtain an adjudication of bankruptcy fail upon the subsequent hearings, the receivership would necessarily be vacated and the property turned back to the alleged bankrupt.'

This would seem to imply that the bankrupt estate was in process of administration, for the purpose of section 21a, from the time of the filing of the petition. The language of the Supreme Court seems to apply to an involuntary case as well as to a voluntary case. In view of the language of the opinion, we are not disposed to hold that the court below was without authority to grant an order for the examination of the bankrupts, under proper terms and conditions, before adjudication and in the absence of a receivership.

The purpose of the examination is to develop the whereabouts of assets of the estate for the purpose of aiding its administration, and not to enable the petitioning creditors to elucidate evidence to assist them in establishing the insolvency of the bankrupt or the act or acts of bankruptcy relied upon by them. This is quite manifest from the following language of the Supreme Court in the case quoted from (231 U.S.at pages 717...