William Lovell v. Isidore Newman Son

• Decision Date: 24 February 1913
• Docket Number: No. 593,593
• Parties: WILLIAM S. LOVELL, Trustee in Bankruptcy of Knight, Yancey, & Company, Piff. in Err., v. ISIDORE NEWMAN & SON et al
• Court: U.S. Supreme Court

227 U.S. 412

33 S.Ct. 375

57 L.Ed. 577

WILLIAM S. LOVELL, Trustee in Bankruptcy of Knight, Yancey, & Company, Piff. in Err.,

v ISIDORE NEWMAN & SON et al.

No. 593.

Submitted January 13, 1913.

Decided February 24, 1913.

[Syllabus from pages 412-414 intentionally omitted] Messrs. W. A. Blount, H. Generes Dufour, and Walker Percy for plaintiff in error.

Messrs. John W. Griffin and Everett P. Wheeler for defendants in error.

Mr. Justice Day delivered the opinion of the court:

This case is submitted upon motion to dismiss or affirm. The action was brought by William S. Lovell, trustee of Knight, Yancey, & Company, against Isidore Newman & Son and others, in the United States circuit court for the eastern district of Louisiana, to recover stipulated damages in the sum of $98,500 on a certain bond. issues were joined and the case was tried and a judgment rendered in favor of the defendants. 188 Fed. 534. On writ of error, the circuit court of appeals affirmed that judgment. 113 C. C. A. 39, 192 Fed. 753.

A writ of certiorari to the judgment of the circuit court of appeals was prayed and denied. (December 23, 1912.)

The question of jurisdiction presented is, Was the judgment of the circuit court of appeals final, or is it subject to review by writ of error in this court? As the present suit was upon a bond, and concerns the right of the trustee to recover thereon, it presents a controversy arising in a bankruptcy proceeding, the finality of which in the circuit court of appeals depends upon the application of the circuit court of appeals act to the case. Hewit v. Berlin Mach. Works, 194 U. S. 296, 48 L. ed. 986, 24 Sup. Ct. Rep. 690; Coder v. Arts, 213 U. S. 223, 233, 53 L. ed. 772, 777, 29 Sup. Ct. Rep. 436, 16 Ann. Cas. 1008; Knapp v. Milwaukee Trust Co. 216 U. S. 545, 553, 54 L. ed. 610, 613, 30 Sup. Ct. Rep. 412; Tefft, W. & Co. v. Munsuri, 222 U. S. 114, 118, 56 L. ed. 118, 119, 32 Sup. Ct. Rep. 67. If the jurisdiction in the present case rests alone upon diverse citizenship, then, under the circuit court of appeals act, the judgment of the circuit court of appeals is final; if, as contended by the plaintiff in error, the peti- tion in the case discloses, as a ground of jurisdiction in addition to that of diverse citizenship, that the case arises under the laws of the United States, then the judgment of the circuit court of appeals is not final, and the case can come here from that court. And it is well settled that this question must be decided, not because of questions which may have arisen or which might arise in the subsequent progress of the case, but upon the grounds of jurisdiction asserted in the petition. Macfadden v. United Staes, 213 U. S. 288, 53 L. ed. 801, 29 Sup. Ct. Rep. 490.

Turning, then, to the petition for the assertion of the cause of action upon which this suit was brought, we find from its averments that Knight, Yancey, & Company, partners, doing business in Decatur, Alabama, were adjudicated bankrupts by the district court of the United States for the northern district of Alabama on the 20th of April, 1910; that Lovell, the trustee in bankruptcy, is a citizen of the state of Alabama, and also that the members of the partnership and each of them are citizens of other states than Louisiana. It appears in the petition that on the 3d of May, 1910, C. E. Frost and Lovell, who were then receivers in bankruptcy of Knight, Yancey, & Company, filed, as such receivers, in the United States district court for the eastern district of Louisiana, their petition, which is attached to and made part of the petition in this case, setting forth that certain cotton was in the possession of the master of the Steamer Ingelfingen at the port of New Orleans, and would, unless reatrained, be shipped beyond the jurisdiction of the court; that certain persons in Italy held spurious bills of lading upon which they would seek to obtain possession of such cotton; that the original bills of lading had been destroyed or made away with, and were not in the hands of bona fide holders; that therefore the legal title to the cotton was in the petitioners, and that any attempt to ship the cotton to a foreign country would result in depriving the bankrupt estate of that asset, and would subject it to the claims of foreign creditors, and would constitute an unlawful preference within the meaning and intendment of the bankruptcy act in favor of the foreign holders of the spurious bills of lading; and they prayed for an injunction, or that, in the alternative, the court would order the United States marshal to seize and take possession of the cotton, and prayed for an order upon the master of the Steamer Ingelfingen, its owners and agents, to show cause, if any they could, why the relief prayed for should not be granted. A restraining order was issued by the district court, the master of the Ingelfingen appeared, excepted to the petition, alleging that the receivers had no right or capacity to institute suit and that the court was without jurisdiction, and afterwards filed an answer in which he set up that the partnership had sold cotton to various Italian purchasers under contracts in the usual mercantile course, that is, it had shipped the cotton to Italy to its order, upon through bills of lading, and drafts for the price of the cotton, with the bills of lading attached, had been discounted, the Italian purchasers finally taking up the drafts and securing the cotton covered by the bills of lading; that in February, 1910, the partnership discounted, and the Italian purchasers subsequently paid, certain drafts with bills of lading attached, alleged in the petition to be forged, covering 1,400 bales of cotton bearing certain marks, and they acquired the bills of lading in the regular course of business, prior to the filing of the petition in bankruptcy, for value and in ignorance of the forgery; that in March and April of that year the partnership shipped the cotton called for by the bills of lading, the cotton bearing the same marks and the bills of lading being substantially identical with the alleged forged bills of lading, and being the bills of lading alleged in the petition to have been made away with, and that 89 bales of the cotton were previously exported and the 1,311 remain- ing bales were on board the Ingelfingen. The master further alleged that the cotton was the property of the Italian purchasers, and rightfully in his possession as bailee, and that the bankrupt estate had no interest in the cotton; that if the bills of lading in the hands of the purchasers were spurious, they were forged by the partnership, and that the cotton was shipped under genuine bills of lading which were not now outstanding, but of which the alleged forged bills of lading were duplicates; that the partnership was paid for the cotton, which was apportioned to cover the bills of lading held by the purchasers in good faith and at a time when the partnership was not known to be insolvent; that the purchasers and their agents were ignorant of the forgery or that the shipment was other than in regular course, and that no preference was given them. The master also alleged that the partnership had for some time been following this practice, and that the purchasers had been securing their cotton under forged bills of lading, of which practice they were ignorant until after the filing of the petition in bankruptcy. The master further alleged that he was the bailee under regular bills of lading, and bound to deliver to the true owners, for whom he was obliged to protect the cotton for which he had issued receipt, and was entitled to earn his freight, for which and other charges he had a lien on the cotton, and that the charges would be increased by further delay. He denied the inadequacy of a remedy at law. The agent of the steamer also appeared and adopted the answer of the master of the Ingelfingen as its own. The court, upon a hearing, ordered a temporary injunction upon the receivers giving bond in the sum of $10,000, and thereupon, the bond having been given and the temporary injunction awarded, the bond now in suit was executed and delivered, running to the receivers and such trustee as might be elected or appointed, which after reciting the order of injunction, provided:

'Whereas, it was further provided in said order or injunction that said cotton might be removed out of said jurisdiction upon the filing by the respondents in said proceeding, or either of them, of a bond for the value of said cotton, which has been fixed by agreement for purposes of bonding at the sum above mentioned.

'Now, therefore, the condition of this obligation is such that if said Th. Ruhne and Isidore Newman & Son, New Orleans, Louisiana, above mentioned, shall well and truly pay to said obligees the said sum of ninety-eight thousand, five hundred ($98,500) dollars, or such part thereof as the court may direct, if, in a suit or action at law or in equity that may or shall hereafter he brought on this bond by said receivers, or by said trustee or trustees, or by said estate in bankruptcy against the obligors herein, or either of them, in the circuit or district court of the United States for the eastern district of Louisiana, it shall be adjudged that said receivers, or said trustee or trustees of said Knight, Yancey, & Company, or the bankrupt estate of said Knight, Yancey, & Company, have the right, title, or interest in or to said cotton, or any part thereof, then and in such case this obligation shall be null, void, and of no effect; otherwise the same shall remain in full force and effect.'

From this recital it is apparent that the proceeding in the United States district court for the eastern district of Louisiana was ancillary to the original proceeding in the court of bankruptcy in Alabama, where the adjudication was had. It was long in doubt whether, under the act of 1898 [30 Stat. at L. 544, chap. 541, U. S. Comp. Stat. 1901, p. 3418], such...