The right of a person against whom an involuntary petition of
bankruptcy has been filed to a trial by jury under section 19 of
the Bankruptcy Act is absolute, and cannot be withheld at the
discretion of the court.
The trial is a trial according to the course of the common law,
and the court cannot enter judgment, as the chancellor may,
contrary to the verdict, but the verdict may be set aside or the
judgment may be reversed for error of law, as in common law
cases.
The distinction between a writ of error which brings up matter
of law only, and an appeal, which, unless expressly restricted,
brings up both law and fact, has always been observed by this Court
and recognized by the legislation of Congress from the foundation
of the government.
Congress did not attempt by section 25
a of the Bankrupt
Act, which provides for appeals as in equity cases from the
district court to the circuit court of appeals from judgments
adjudging or refusing to adjudge the defendant a bankrupt, to
empower the appellate court to reexamine the facts determined by a
jury under section 19 otherwise than according to the rules of the
common law. The provision applies to judgments where trial by jury
has not been demanded and the court proceeds on its own findings of
fact. In such case, the facts and the law are reexaminable on
appeal; but in case of a jury trial, the judgment is reviewable
only by writ of error for error in law, and alleged errors in
instructions, the giving or refusal of instructions or in the
admission or rejection of evidence which must appear by exceptions
duly taken and preserved by bill of exceptions
Page 187 U. S. 328
in the absence of which such alleged errors cannot be
considered, although the transcript of the record contains what
purports to be the evidence heard by the jury, exceptions reserved
to evidence, admitted or excluded, the charge and exceptions,
instructions asked and refused, and exceptions.
Elliott and others filed their petition for the adjudication of
Ferdinand Toeppner as a bankrupt in the District Court of the
United States for the Eastern District of Michigan, which averred
that Toeppner was insolvent, and that he had committed certain
enumerated acts of bankruptcy under subdivisions (1), (2), and (3)
of section 3
a of the Bankruptcy Act. Toeppner answered,
denying that he was insolvent at the time the petition was filed,
and denying insolvency at the time of the commission of the acts
charged under subdivisions (2) and (3), and at the same time filed
in writing his demand for a jury trial. The issues were tried
before a jury, who returned a verdict of not guilty. A motion for
new trial was made and overruled, and the court entered judgment
adjudging that Toeppner was not a bankrupt and dismissing the
petition. From this judgment petitioners prayed an appeal to the
circuit court of appeals, accompanied with an assignment of errors.
No bill of exceptions was asked or taken, and no writ of error was
asked or allowed.
The appeal was allowed and duly perfected by giving the bond
required, and a transcript of the record was filed in the Circuit
Court of Appeals for the Sixth Circuit, which included, in addition
to the proceedings before stated, what purported to be the evidence
heard by the jury; exceptions reserved to evidence admitted or
excluded, the charge of the court, and exceptions, and instructions
asked and refused, and exceptions.
The errors assigned related exclusively to errors alleged to
have been committed during the trial, before the jury, of the
issues submitted.
By the certificate to the transcript by the clerk of the
district court, and under its seal, it was certified that
"the above and foregoing is a full and true transcript of the
record in the matter above entitled; that I have carefully compared
the same with the original records and files of said matter in my
office, and find the same to be a true transcript of the said
originals
Page 187 U. S. 329
and of the whole thereof, together with the original exhibits
produced on the trial of said matter."
After the transcript had been filed, Toeppner moved the circuit
court of appeals to dismiss the appeal, and to strike from the
transcript so much as purported to set out the proceedings on the
jury trial of the issues submitted to the jury. The motions coming
on to be argued, the court, being in doubt, certified a statement
of the foregoing facts to this Court, together with the following
question:
"Has this Court, under the appeal granted from the judgment
refusing to adjudicate Ferdinand Toeppner a bankrupt, authority to
reexamine the proceedings upon the jury trial, and remand for a new
trial if it shall appear from the transcript, as certified to us
that there was error in instructions given or refused, or in the
admission or rejection of evidence?"
MR. JUSTICE FULLER delivered the opinion of the Court.
The judgment of the district court was a final judgment that
Toeppner was not a bankrupt, and that the petition be dismissed.
The question is whether the judgment could be otherwise revised
than on writ of error, for if a writ of error should have been
brought, then the circuit court of appeals had no authority to
reexamine the proceedings on the jury trial, on appeal, or to
remand for a new trial because of error in instructions given or
refused, or in the admission or rejection of evidence, exceptions
not having been preserved by a bill of exceptions.
Section 18
d of the Bankruptcy Act provides:
"If the bankrupt or any of his creditors shall appear within the
time limited and controvert the facts alleged in the petition, the
judge shall determine as soon as may be the issues presented
Page 187 U. S. 330
by the pleadings, without the intervention of a jury, except in
cases where a jury trial is given by this act, and make the
adjudication or dismiss the petition."
By section 1 of the act,
"a person shall be deemed insolvent within the provisions of
this act whenever the aggregate of his property, exclusive of any
property which he may have conveyed, transferred, concealed, or
removed, or permitted to be concealed or removed, with intent to
defraud, hinder, or delay his creditors, shall not at a fair
valuation, be sufficient in amount to pay his debts."
By subdivision (1) of section 3, an act of bankruptcy is
committed when a person has
"conveyed, transferred, concealed, or removed, or permitted to
be concealed or removed, any part of his property with intent to
hinder, delay, or defraud his creditors, or any of them;"
but, by clause
c,
"it shall be a complete defense to any proceedings in bankruptcy
instituted under the first subdivision of this section to allege
and prove that the party proceeded against was not insolvent as
defined in this act at the time of the filing the petition against
him."
West Company v. Lea, 174 U. S. 590.
Under subdivisions (2) and (3), insolvency must exist at the
time of the commission of the acts specified.
In this case, so far as acts of bankruptcy under subdivision (1)
were charged, insolvency at the time of the filing of the petition
was denied, and so far as acts of bankruptcy under subdivisions (2)
and (3) were charged, insolvency at the time the acts were
committed was denied.
The burden of proving solvency in proceedings under the first
subdivision was on the alleged bankrupt by clause
c, and
on the petitioning creditors in proceedings under the second and
third subdivisions, unless in the contingency named in clause
d.
The issues presented by the pleadings were clearly defined, and
Toeppner made written application for a trial by jury, to which he
was entitled by section 19, which reads:
"SEC.19. Jury Trials --
a. A person against whom an
involuntary petition has been filed shall be entitled to have a
trial by jury, in respect to the question of his insolvency, except
as
Page 187 U. S. 331
herein otherwise provided, and any act of bankruptcy alleged in
such petition to have been committed, upon filing a written
application therefor at or before the time within which an answer
may be filed. If such application is not filed within such time, a
trial by jury shall be deemed to have been waived."
"
b. If a jury is not in attendance upon the court, one
may be specially summoned for the trial, or the case may be
postponed, or, if the case is pending in one of the district courts
within the jurisdiction of a circuit court of the United States, it
may be certified for trial to the circuit court sitting at the same
place, or by consent of parties when sitting at any other place in
the same district, if such circuit court has or is to have a jury
first in attendance."
"
c. The right to submit matters in controversy, or an
alleged offense under this act, to a jury shall be determined and
enjoyed, except as provided by this act, according to the United
States laws now in force, or such as may be hereafter enacted, in
relation to trials by jury."
The right to a trial by jury on written application thus given
is absolute, and cannot be withheld at the discretion of the court.
In that respect, it differs from the trial of an issue out of
chancery, which the court of equity is not bound to grant, nor
bound by the verdict if such trial be granted. The court cannot, as
the chancellor may, enter judgment contrary to the verdict, but the
verdict may be set aside or the judgment may be reversed for error
of law as in common law cases.
Section 566 of the Revised Statutes provides that
"the trial of issues of fact in the district courts, in all
causes except cases in equity and cases of admiralty and maritime
jurisdiction, and except as otherwise provided in proceeding in
bankruptcy, shall be by jury."
The district courts as courts of bankruptcy are invested with
"such jurisdiction at law and in equity as will enable them to
exercise original jurisdiction in bankruptcy proceedings" in the
particulars named, it being provided that the specification of
certain powers should not deprive them of powers they would possess
but for the enumeration. The proceedings in administration of the
estate are equitable in their nature, but the bankruptcy
Page 187 U. S. 332
courts act under specific statutory authority, and when on an
issue of fact as to the existence of ground for adjudication a jury
trial is demanded, it is demanded as of right, and the trial is a
trial according to the course of the common law. This being so,
judgments therein rendered are revisable only on writ of error.
Insurance Company v.
Comstock, 16 Wall. 258;
Parsons v.
Bedford, 3 Pet. 448;
Duncan v. Landis, 106
F. 839.
By section 41 of the Bankruptcy Act of 1867, it was provided
that the courts should, if the debtor so demanded in writing, order
a trial by jury to ascertain the fact of the alleged bankruptcy,
and in
Insurance Company v. Comstock, Mr. Justice
Clifford, speaking for the Court, said:
"Such a provision is certainly entitled to a reasonable
construction, and it seems plain, when it is read in the light of
the principles of the Constitution and of analogous enactments, and
when tested by the general rules of law applicable in controversies
involving the right of trial by jury, that the process, pleadings,
and proceedings must be regarded as governed and controlled by the
rules and regulations prescribed in the trial of civil actions at
common law."
The first paragraph of section 2 of the act was referred to,
which provided
"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 this act; and, except when
special provision is otherwise made, may, upon bill, petition, or
other proper process, of any party aggrieved, hear and determine
the case in a court of equity,"
14 Stat. 517, c. 176, and it was held that the case was excluded
from the general superintendence and jurisdiction of the circuit
court by the exception, and that, even admitting that decrees in
equity rendered in the district court might be revised in a summary
way if Congress should so provide, it was
"clear that judgments in actions at law rendered in that court,
if founded upon the verdict of a jury, can never be revised in the
circuit court in that way, as the Constitution provides that 'no
fact tried by a jury shall be otherwise reexamined in any court of
the United States than according to
Page 187 U. S. 333
the rule of the common law.'"
"Two modes only were known to the common law to reexamine such
facts, to-wit, the granting of a new trial by the court where the
issue was tried or to which the record was returnable, or,
secondly, by the award of a
venire facias de novo by an
appellate court for some error of law which intervened in the
proceedings. All suits which are not of equity or admiralty
jurisdiction, whatever may be the peculiar form which they may
assume to settle legal rights, are embraced in that provision. It
means not merely suits which the common law recognized among its
settled proceedings, but all suits in which legal rights are to be
determined in that mode, in contradistinction to equitable rights
and to cases of admiralty and maritime jurisdiction, and it does
not refer to the particular form of procedure which may be
adopted."
In these observations Mr. Justice Clifford affirmed the rulings
in
Parsons v. Bedford, where Mr. Justice Story considered
the Seventh Amendment in connection with the language of Article
III and the Judiciary Act of 1789, and treated the last clause of
the amendment as "a substantial and independent clause," pointing
out that "the phrase
common law' . . . is used in
contradistinction to equity, and admiralty, and maritime
jurisprudence."
In
Duncan v. Landis, similar views as to review of
judgments on verdicts in trials by jury demandable as of right were
expressed by the Circuit Court of Appeals for the Third Circuit,
whose opinion by Gray, J., contains a lucid exposition of the
general subject.
We need not, however, be drawn into a discussion of the
controlling force of the Seventh Amendment, as we think the
provisions of the present Bankruptcy Act are consistent with the
conclusions heretofore announced.
By the twenty-fourth section of the act, the Supreme Court of
the United States, the circuit courts of appeals, and the supreme
courts of the territories are invested with
"appellate jurisdiction of controversies arising in bankruptcy
proceedings from the courts of bankruptcy from which they have
appellate jurisdiction in other cases."
And it is also provided, sec. 25
d, that
"controversies may be certified to the Supreme Court of
Page 187 U. S. 334
the United States from other courts of the United States, and
the former court may exercise jurisdiction thereof and issue writs
of certiorari pursuant to the provisions of the United States laws
now in force or such as may be hereafter enacted."
In
Bardes v. Hawarden Bank, 176
U. S. 526, we held that the fifth and sixth sections of
the Judiciary Act of March 3, 1891, were not changed by the
Bankruptcy Act. The sixth section gives the courts of appeals
jurisdiction to review by appeal or writ of error final decisions
in the district and circuit courts in cases other than those
provided for in the fifth section.
Section 24
b of the Bankruptcy Act is:
"The several circuit courts of appeal shall have jurisdiction in
equity, either interlocutory or final, to superintend and revise in
matter of law the proceedings of the several inferior courts of
bankruptcy within their jurisdiction. Such power shall be exercised
on due notice and petition by any party aggrieved."
This is confined to questions of law, and does not contemplate a
review of the facts.
Mueller v. Nugent, 184 U. S.
1,
184 U. S. 9.
Section 25
a provides that
"Appeals, as in equity cases, may be taken in bankruptcy
proceedings from the courts of bankruptcy to the circuit court of
appeals of the United States, and to the supreme courts of the
territories, in the following cases, to-wit: (1) from a judgment
adjudging or refusing to adjudge the defendant a bankrupt. . .
."
The distinction between a writ of error which brings up matter
of law only, and an appeal, which, unless expressly restricted,
brings up both law and fact, has always been observed by this
Court, and been recognized by the legislation of Congress from the
foundation of the government.
Dower v. Richards,
151 U. S. 658,
151 U. S. 663;
Wiscart v.
Dauchy, 3 Dall. 321.
So far from any restriction being imposed by section
25
a, the language used is "appeals, as in equity cases,"
and on appeals in equity cases the whole case is open.
But Congress did not thereby attempt to empower the appellate
court to reexamine the facts determined by a jury under section 19
otherwise than according to the rules of the common law. The
provision applies to judgments "adjudging or refusing to adjudge
the defendant a bankrupt," when trial
Page 187 U. S. 335
by jury is not demanded, and the court of bankruptcy proceeds on
its own findings of fact. In such case, the facts and the law are
reexaminable on appeal, while the verdict of a jury on which
judgment is entered concludes the issues of fact and the judgment
is reviewable only for error of law.
And it follows that alleged errors "in instructions given or
refused or in the admission or rejection of evidence" must appear
by exceptions duly taken and preserved by bill of exceptions.
In
Denver First National Bank v. Klug, 186 U.
S. 202, the point raised in this case was not suggested.
The question was whether the case as presented by the record could
be brought by appeal directly to this Court, and we held that it
could not. The case did not come within section 5 of the Judiciary
Act of March 3, 1891, nor within any provision of the Bankruptcy
Act.
The question is answered in the negative.
