Smith v. Mason - 81 U.S. 419 (1871)
U.S. Supreme Court
Smith v. Mason, 81 U.S. 14 Wall. 419 419 (1871)
Smith v. Mason
81 U.S. (14 Wall.) 419
1. Where an assignee in bankruptcy claims a fund as the property of his bankrupt, which sometime before the bankruptcy a firm of which the bankrupt was a member transferred to a third party, and which the transferee now claims adversely to the assignee, the proceedings in the district court should not be summary and under the first section of the Bankrupt Act, but formal and under the second clause of the third section.
2. An appeal from a proceeding in bankruptcy disposing, under the first section, of such a claim, lies (other requisites allowing it) from the Supreme Court of the District of Columbia to this Court.
The Bankrupt Act [Footnote 1] enacts:
"SECTION 1. That the several district courts of the United States be courts of bankruptcy, and they shall have original jurisdiction in their respective districts in all matters and proceedings in bankruptcy, and they are hereby authorized to hear and adjudicate upon the same according to the provisions of this act. . . ."
"The said courts shall be always open for the transaction of business under this act, and the powers and jurisdiction hereby granted and conferred shall be exercised as well in vacation as in term time, and a judge sitting at chambers shall have the same powers and jurisdiction, including the power of keeping order and of punishing any contempt of his authority as when sitting in court."
"And the jurisdiction hereby conferred shall extend to all cases and controversies arising between the bankrupt and any creditor or creditors who shall claim any debt or demand under the bankruptcy; to the collection of all the assets of the bankrupt; to the ascertainment and liquidation of the liens and other specific claims thereon; to the adjustment of the various priorities and conflicting interests of all parties, and to the marshaling and disposition of the different funds and assets so as to secure the rights of all parties and due distribution of the assets among all the creditors;
and to all acts, matters, and things to be done under and in virtue of the bankruptcy, until the final distribution and settlement of the estate of the bankrupt and the close of the proceedings in bankruptcy. The said courts shall have full authority to compel obedience to all orders and decrees passed by them in bankruptcy, by process of contempt and other remedial process, to the same extent that the circuit courts now have in any suit pending therein in equity."
The second section, in its first clause, gives to the circuit courts "a general superintendence and jurisdiction of all cases and questions arising under this act, and, except when special provision is otherwise made," authorizes them, upon bill, petition, or other proper process of any party aggrieved, to hear and determine the case as in a court of equity.
By its third clause, the act enacts thus:
"Said circuit courts shall also have concurrent jurisdiction with the district courts of the same district of all suits at law or in equity which may or shall be brought by the assignee in bankruptcy against any person claiming an adverse interest, or by such person against such assignee, touching any property or rights of property of said bankrupt transferable to or vested in such assignee."
The eighth section of the act gives appeals and writs of error from the district to the circuit courts, when the debt or damage claimed amounts to more than $500. The section proceeds:
"And any supposed creditor whose claim is wholly or in part rejected, or an assignee who is dissatisfied with the allowance of a claim, may appeal from the decision of the district court to the circuit court from the same district."
The ninth section enacts:
"That in cases arising under this act, no appeal on writ of error shall be allowed in any case from the circuit courts to the Supreme Court of the United States unless the matter in dispute in such case shall exceed $2,000. "
The forty-ninth section enacts:
"That all the jurisdiction, power, and authority conferred upon and vested in the district courts of the United States by this act in cases in bankruptcy are hereby conferred upon and vested in the Supreme Court of the District of Columbia . . . when the bankrupt resides in the District of Columbia."
So far as to provisions of what is called the Bankrupt Act.
The Supreme Court of the District of Columbia, referred to in the section last quoted, and from which court this appeal came, was reorganized by an Act of March 3, 1863. [Footnote 2] The act gives it a general jurisdiction in law and equity. It is made to consist of four judges. Any one of them may hold the District Court of the United States for the District of Columbia, in the same manner and with the same powers and jurisdiction possessed and exercised by other district courts of the United States.
In this state of statutory law, Frederick P. Sawyer the bankrupt in this case, was the senior member of the firm of Sawyer Risher & Hall, of Washington, D.C., who held a claim against the United States, which they had put in the hands of George Taylor, for collection. On the 20th January, 1867, and while the claim was pending, the firm assigned it to Biddle & Co., of New York, by an order on Taylor to pay the proceeds over to them collected, which order was accepted by Taylor. Biddle & Co. assigned the order in turn, on the next day, to one Smith. Taylor collected about $100 on the claim, which he remitted to Smith, according to the arrangement. Sometime after this payment, and before any further collection was made, Sawyer went into bankruptcy (one Mason being appointed his assignee), and the firm of Sawyer Risher & Hall was dissolved, Risher and Hall closing the business of the firm as remaining partners. After this date, Taylor, by consent of all parties, received a further sum of $4,744.19, and there was an uncollected draft yet to be paid to him.
At the time of these collections, the accounts between the
bankrupt partner and the remaining ones were unsettled, and the partnership debts were unliquidated. The assignee therefore filed a bill for an account, but the remaining partners had not answered. At this stage of the proceedings, Mason the assignee of Sawyer on the 13th of October, 1868, presented a petition to one of the judges of the Supreme Court of the District of Columbia, sitting in bankruptcy, setting forth that he had filed his bill against Risher & Hall, the partners, carrying on the business of Sawyer Risher & Hall, for the settlement of the partnership accounts; that Taylor had collected the sum of $4,744.19, above mentioned, and that other funds would come into his hands for Sawyer Risher & Hall; that prior to the bankruptcy of Sawyer, the firm made the assignment (already mentioned) to Biddle & Co., as collateral security for the payment of a debt to the said firm, which debt had been paid, and that Biddle & Co. had assigned its claim to Smith.
Mason accordingly prayed an injunction on Taylor against his payment of the money pending his suit against Sawyer Risher & Hall. This application for an injunction was in truth apparently made at Taylor's instance in order that in any payments which he made of money that he received, he might act under an order of court. He did not appear, and the injunction was granted. Mason then, on the 7th of April, 1869, filed a petition against Smith, asking for an order on him to show cause why the money should not be decreed to him, Mason as assignee. Smith appeared and set up his claim to the money.
On the 10th of April, 1869, Risher & Hall, the remaining partners, now intervened and also claimed the money on the ground that the order on Taylor was a mere hypothecation of the claim and that Biddle & Co. had been fully paid.
The court thereupon went into an examination of the accounts between Sawyer Risher & Hall, and Biddle & Co., and (Biddle & Co. not being present, and having had no notice or order served upon them) decided that the debt originally due to Biddle & Co. had been satisfied, and that
the funds in the hands of Taylor should be paid over to Mason the assignee of Sawyer.
From this decree an appeal was taken by Smith. The court in banc reversed the decision of the court in bankruptcy, dissolved the injunction, and ordered the money to be paid over to Risher & Hall, the solvent and surviving partners, thus deciding the right of Biddle & Co. and Smith without notice to Biddle & Co., and in favor of the surviving partners.
From this decree Smith took the present appeal. Counsel for the appellee appeared generally. The record, which was not a very full one, did not perhaps show very well notice of the appeal, but it showed clearly enough that the appeal had been duly claimed, and that the appellant filed his appeal bond in open court, and that it was duly approved by the Chief Justice of the Supreme Court of the District, who presided at the hearing when the final decree was entered in the case.