Bank v. Cooper - 87 U.S. 171 (1873)
U.S. Supreme Court
Bank v. Cooper, 87 U.S. 20 Wall. 171 171 (1873)
Bank v. Cooper
87 U.S. (20 Wall.) 171
After an assignee in bankruptcy, aided by a creditor, has twice contested before the district court or its referee the claim of a person who has been allowed to prove his claim, and after all the evidence which could then or afterwards be produced, it has been twice decided that the claim was a valid one, no bill lies in the circuit court (either under the general provisions of the Bankrupt Act or under the second section of it, giving to the circuit court a general superintendence and jurisdiction of all cases and questions arising under the act) against either the assignee or the person who has been allowed to prove his claim, to have the order allowing it reversed. Such a bill may be demurred to for want of equity.
On the 4th of February, 1870, the Troy Woolen Company was adjudged a bankrupt by the District Court for the Northern District of New York, and on the 11th of March, 1870, one Tappan became the assignee. Soon afterwards, Cooper,
Vail & Co. proved a debt against the bankrupt amounting to $67,029, and on the 24th of July, 1870, filed the probate with the assignee. Subsequently, on the 29th of November, on petition of the First National Bank of Troy, which had also proved a debt against the bankrupt, the district court made an order allowing them and the assignee to contest the validity of the claim of Cooper, Vail & Co. It was them referred to W. Frothingham, Esq., to take the proofs and accounts respecting the claim, to determine its legality and amount, and to report his conclusions to the court. Permission was also given to the assignee, and to any creditor of the bankrupt, if they desired to contest the claim, to attend the proceedings before the referee, and it appears that the bank did attend, that evidence in opposition to the claim was submitted, and that the referee reported the whole of it as due from the bankrupt. To his report joint exceptions were filed on behalf of the bank and the assignee, and argued in the district court upon the evidence taken before the referee. These exceptions were overruled, and on the 13th of July, 1871, the court made an order allowing the debt as proved by Cooper, Vail & Co., and directing the bank to pay the costs and expenses of the reference.
In this condition of things, the bank filed a bill in the circuit court below against Cooper, Vail & Co., and the assignee, to procure a reversal of the order. The bill, after setting forth the facts above stated, made a general averment that Cooper, Vail & Co. had no legal claim against the bankrupt; that they had fraudulently proved their claim; that they knew this when the exceptions were taken to the referee's report as well as when the court made the decree allowing the debt, and that it was thus proved before the district court. The bill then averred that the decree was erroneous because there was no legal debt due by the bankrupt to Cooper, Vail & Co., because the evidence before the court proved that there was no such debt, and because the court should have disallowed it.
This was one aspect of the bill. It further charged that the assets in the hands of the assignee were insufficient to
pay fifty cents on the dollar of the legal debts of the bankrupt even if the claim of Cooper, Vail & Co. were disallowed, and it averred that the assignee refused to appeal from the decision of the district court or to allow the creditors to appeal in his name, stating that he was advised that the bank had a right to have the decree reviewed under section second of the Bankrupt Act and that if the creditors desired a review, they would have to take that course. It then charged that the assignee was guilty of neglect of duty in omitting to appeal from the decree of the district court, and renewed the averment that the bankrupt was not, and never was, liable for the debt proved against it by Cooper, Vail & Co., or for any part of it.
The prayer of the bill was that the decree made by the district court might be "reviewed, examined, revised, and annulled, and that the proof of debt filed with the assignee by Cooper, Vail & Co. might be rejected and expunged."
The second section of the Bankrupt Act, through which it was alleged that the assignee had told the creditors if they wished relief they would have to resort, declares that the several circuit courts of the United States, within and for the districts where the proceedings in bankruptcy shall be pending, shall have a general superintendence and jurisdiction of all cases and questions arising under the act, and, except when special provision is otherwise made, may, upon bill, petition, or other process of any party aggrieved, hear and determine the case (as) in a court of equity.
Cooper, Vail & Co. demurred:
1. For want of equity.
2. For want of jurisdiction.
3. For want of privity between the complainant and the defendant.
4. That the matters had been adjudicated and that the adjudication was conclusive.
5. That the appeal was not within the time prescribed by law.
6. That the bill showed that the district court had decided the questions presented by the bill, but that the bill
did not set forth the facts, or the evidence upon which the order or decree of the district court complained of was made, or any facts or evidence before the court when the order was made, or the grounds upon which that court based its said decision and order or decree.
7. That the bill of complaint did not set forth facts sufficient to enable the court to determine whether or not the district court erred in making the order or decree complained of.
8. That the bill did not show that the district court erred in making the order or decree in the bill complained of.
The circuit court sustained the demurrer, and the bank took this appeal.