Staunton v. Wooden

• Decision Date: 02 May 1910
• Docket Number: 1,776.
• Citation: 179 F. 61
• Parties: STAUNTON v. WOODEN. In re UNITED HARNESS CO.
• Court: U.S. Court of Appeals — Ninth Circuit

179 F. 61

STAUNTON v. WOODEN.

In re UNITED HARNESS CO.

No. 1,776.

United States Court of Appeals, Ninth Circuit.

May 2, 1910

The petitioner presents, in a petition for revision in bankruptcy, the following facts: The United Harness Company was a corporation of the state of California, having a branch store in Nevada.On April 22, 1908, a petition in bankruptcy was filed against the corporation, in the District Court of the United States for the Northern District of California and on May 12, 1908, at 12 o'clock m., the corporation was adjudged a bankrupt.On April 20, 1908, two days before the petition in bankruptcy was filed, certain personal property of the bankrupt in Nevada was attached in an action brought against the corporation in a court of that state.Judgment was rendered against the corporation in that action and on May 1, 1908, execution was issued against the attached property, and on May 12, 1908, at 2 o'clock p.m., the sheriff sold and delivered the same to Dave Staunton, the petitioner herein, and he paid the sheriff the purchase price therefor.On June 25, 1908, the trustee of the bankrupt was elected, and thereafter he made demand for the possession of the property so attached, which demand was refused.On February 23, 1909, the trustee filed a petition in the bankruptcy court, setting forth the facts above stated, and praying for an order that said Dave Staunton produce and surrender the said property to the trustee.The referee made an order fixing a time and place for hearing the petition and directed that said Staunton show cause why the prayer of the petition should not be granted.A copy of the petition and order were duly served upon him.At the time and place designated for the hearing, he specially appeared and objected to the jurisdiction of the court over the matter and the property in controversy.The referee overruled the objection, and made the order, and thereafter the District Court affirmed his ruling.

D. M. Duffy, for petitioner.

O. K. Cushing, Elliott McAllister, Charles S. Cushing, and Wm. S. McKnight, for respondent.

Before GILBERT, ROSS, and MORROW, Circuit Judges.

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

The petition presents two questions for review: First, had the court in which the bankruptcy proceedings were pending jurisdiction, on the petition of the trustee in bankruptcy, to act in personam against a citizen and resident of another state, who within that state was served with notice to appear and show cause before the bankruptcy court?And, second, conceding such jurisdiction, could the bankruptcy court require the surrender of the property by a summary order, or was it necessary to proceed by a plenary suit instituted by the trustee against the petitioner in the state in which he resided, and where the property was?

The moment a petition in bankruptcy is filed the jurisdiction of the bankruptcy court begins, and the petition so filed is lis pendens, and notice to all the world.It has the effect both of an attachment and an injunction, and the adjudication of bankruptcy discharges any attachment levied within four months prior to the filing of the petition, unless the bankruptcy court shall order the lien preserved for the benefit of the bankrupt's estate, and it operates as a seizure of the property, the title to which subsequently passes the trustee.Where the claim of possession as against the trustee's right of possession is based solely on an attachment lien, which is annulled by the adjudication in bankruptcy, the person or officer so in possession holds as bailee for the trustee, and must deliver the property upon proper demand, and may be required to do so by a summary order issued from the bankruptcy court.He is not an adverse claimant, and his mere refusal to surrender the property does not make him such.In re Walsh Bros. (D.C.)159 F. 560;White v. Schloerb,178 U.S. 542, 20 Sup.Ct. 1007, 44 L.Ed. 1183;In re Breslauer (D.C.)121 F. 910;In re Graessler & Reichwald,154 F. 478, 83 C.C.A. 304;Louisville Trust Co. v. Comingor,184 U.S. 25, 22 Sup.Ct. 293, 46 L.Ed. 413, Mueller v. Nugent,184 U.S. 1, 22 Sup.Ct. 269, 46 L.Ed. 405.

But can the bankruptcy court make a summary order which is directly enforceable outside of its territorial jurisdiction?It is said that the question is answered affirmatively in Wood v. Henderson,210 U.S. 246, 28 Sup.Ct. 621, 52 L.Ed. 1046.In that case the majority of the court held that the bankruptcy court in which bankruptcy proceedings are pending has jurisdiction under section 60d of the bankruptcy act (ActJuly 1, 1898, c. 541, 30 Stat. 562 (U.S. Comp. St. 1901, p. 3446)), to re-examine, on petition of the trustee, the validity of a payment or transfer made by the bankrupt, in contemplation of bankruptcy, to an attorney for legal services to be rendered by him, and to ascertain and adjudge what is the reasonable amount to be allowed for such services, and to direct payment of any excess to the trustee, and that, if such attorney is a nonresident of the district, an order directing him to show cause, or a citation or notice of the proposed hearing, may be served without the district.

This was held in view of the fact that section 60d gave to the bankruptcy court, and to no other court, jurisdiction to determine the question of the reasonableness of the amount so paid.Said the court:

'There is no provision for the enforcement of this section in any other court of bankruptcy, where the bankrupt may be personally served with process in a plenary suit.Such court is not given authority to re-examine the transaction.No other court has authority to determine the reasonable amount for which the transaction can stand'-- citing Swartz v. Frank,183 Mo. 439, 82 S.W. 60.

The court further held that, while section 60d made no provision for the service of process, reasonable and appropriate notice to the parties affected should be required, and an opportunity should be given them to be heard.But the decision does not go so far as to hold that the order of the bankruptcy court made upon such a hearing may be enforced by that court.In the opinion it is said:

'It may be that this order, though binding upon the parties,

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