1. In a civil contempt proceeding against a bankrupt for failure
to comply with an order to turn over to the trustee assets of the
estate found to be in his possession or under his control at the
time such order was issued (20 months earlier in this case), the
bankruptcy court should not adjudge the bankrupt in contempt and
commit him to jail to coerce compliance if it appears that he is
presently unable to comply, even though the previous finding that
he had possession of the property when the turnover order was
issued has become
res judicata. Pp.
333 U. S.
69-78.
2. Courts of bankruptcy have no authority to compensate for any
neglect or lack of zeal in applying the criminal sanctions
prescribed by the Bankruptcy Act by perversion of civil remedies to
ends of punishment. P.
333 U. S.
62.
Page 333 U. S. 57
3. The summary turnover procedure, fashioned by bankruptcy
courts as a means of retrieving concealed assets or books of
account, is essentially a proceeding for restitution of property,
rather than indemnification, and the primary condition of relief is
possession of existing chattels or their proceeds capable of being
surrendered by the person ordered to do so. Pp.
333 U. S.
62-63.
4. Resort to a turnover proceeding is not appropriate when the
property and its proceeds have already been dissipated, no matter
when that dissipation occurred. Pp.
333 U. S.
63-64.
5. In a turnover proceeding, the burden is upon the trustee to
prove by clear and convincing evidence that the property has been
abstracted from the bankrupt estate and is in the possession of the
party proceeded against.
Oriel v. Russell, 278 U.
S. 358. P.
333 U. S.
64.
6. The presumption that possession of property of a bankrupt,
once proven, continues until the possessor explains when and how
possession ceased is not a rule of law to be applied in all cases,
but a rule of evidence to be applied only when the time element and
other factors make that a fair and reasonable inference. Pp.
333 U. S.
64-66.
7. A turnover order should not be issued or affirmed on a
presumption thought to arise from some isolated circumstance, such
as one-time possession, when the reviewing court finds from the
whole record that the order is unrealistic and unjust. Pp.
333 U. S.
66-67.
8. When a turnover proceeding is completed and terminated in a
final order, it becomes
res judicata, and is not subject
to collateral attack in a subsequent proceeding in civil contempt
to coerce obedience . Pp.
333 U. S.
68-69.
9. Even though a turnover order has become
res judicata
as to the issue of possession of the goods in question at the time
of the turnover proceedings, a subsequent proceeding in civil
contempt to coerce compliance tenders the issue as to present
willful disobedience, which must be tried like any other issue, and
the Court is entitled to consider all evidence relevant to it. Pp.
333 U. S.
74-75.
10. In a civil contempt proceeding to coerce compliance with a
turnover order, the bankrupt may not challenge the previous
adjudication of possession made when the turnover order was issued,
but he may be permitted to deny his present possession and to give
any evidence of present conditions or intervening events which
corroborate such denial. Pp.
333 U. S.
75-76.
11. In a civil contempt proceeding to enforce a turnover order,
a trial court is obliged to weigh not merely the facts that a
turnover order has issued and has not been obeyed, but also all
other evidence
Page 333 U. S. 58
properly before it, in determining whether or not there is
actually a present ability to comply and whether failure to do so
constitutes deliberate defiance which a jail term will break. Pp.
333 U. S.
76-77.
12. This Court regards turnover and contempt orders, and
petitions for certiorari to review them, as usually raising only
questions of fact to be solved by a careful analysis of evidence,
which should take place in the lower courts, and this Court is
loath to review particular cases, especially where the order
carries approval of the referee, the district court, and the
circuit court of appeals. P.
333 U. S.
70.
13. When a misapprehension of the law has led both courts below
to adjudicate rights without considering essential facts in the
light of the controlling law, this Court will vacate the judgments
and remand the case to the district court for further proceedings
consistent with the principles laid down in this Court's opinion.
P.
333 U. S.
77.
157 F.2d 951, judgments vacated and case remanded.
A referee in bankruptcy found the bankrupt in contempt for
failure to comply with a turnover order previously affirmed by the
District Court and the Circuit Court of Appeals. The District Court
affirmed, and ordered the bankrupt committed to jail until he
complied or until further order of the court. The Circuit Court of
Appeals affirmed, although it said it knew that the bankrupt could
not comply with the turnover order. 157 F.2d 951. This Court
granted certiorari. 330 U.S. 816. Judgments vacated and case
remanded to the District Court, p.
333 U.S. 78.
MR. JUSTICE JACKSON delivered the opinion of the Court.
Joseph Maggio, the petitioner, was president and manager of Luma
Camera Service, Inc., which was adjudged bankrupt on April 23,
1942. In January of 1943, the
Page 333 U. S. 59
trustee asked the court to direct Maggio to turn over a
considerable amount of merchandise alleged to have been taken from
the bankrupt concern in 1941 and still in Maggio's possession or
control. After hearing, the referee found that
"the trustee established by clear and convincing evidence that
the merchandise hereinafter described, belonging to the estate of
the bankrupt, was knowingly and fraudulently concealed by the
respondent [Maggio] from the trustee herein, and that said
merchandise is now in the possession or under the control of the
respondent."
A turnover order issued and was affirmed by the District Court
and then unanimously affirmed by the Circuit Court of Appeals,
Second Circuit, without opinion other than citation of its own
prior cases.
Zeitz v. Maggio, 145 F.2d 241. Petition for
certiorari was denied by this Court. 324 U.S. 841.
As Maggio failed to turn over the property or its proceeds, the
Referee found him in contempt. After hearing, the District Court
affirmed and ordered Maggio to be jailed until he complied or until
further order of the court. Again, the Circuit Court of Appeals
affirmed. 157 F.2d 951, 955.
But, in affirming, the Court said:
"Although we know that Maggio cannot comply with the order, we
must keep a straight face and pretend that he can, and must thus
affirm orders which first direct Maggio 'to do an impossibility,
and then punish him for refusal to perform it.'"
Whether this is to be read literally as its deliberate judgment
of the law of the case or is something of a decoy intended to
attract our attention to the problem, the declaration is one which
this Court, in view of its supervisory power over courts of
bankruptcy, cannot ignore. Fraudulent bankruptcies probably present
more difficulties to the courts in the Second Circuit than they do
elsewhere. These conditions are reflected in conflicting views
within the Court of Appeals, which we need not detail, as they
are
Page 333 U. S. 60
already set out in the books:
In re Schoenberg, 70 F.2d
321;
Danish v. Sofranski, 93 F.2d 424;
In re
Pinsky-Lapin & Co., 98 F.2d 776;
Seligson v.
Goldsmith, 128 F.2d 977;
Rosenblum v. Marinello, 133
F.2d 674;
Robbins v. Gotthetter, 134 F.2d 843;
Cohen
v. Jeskowitz, 144 F.2d 39;
Zeitz v. Maggio, 145 F.2d
241.
The problem is illustrated by this case. The court below says
that, in the turnover proceedings, it was sufficiently established
that, towards the end of 1941, a shortage occurred in this
bankrupt's stock of merchandise. It seems also to regard it as
proved that Maggio personally took possession of the corporation's
vanishing assets. But this abstraction by Maggio occurred several
months before bankruptcy, and over a year before the turnover order
was applied for. The only evidence that the goods then were in the
possession or control of Maggio was the proof of his one-time
possession supplemented by a "presumption" that, in the absence of
a credible explanation by Maggio of his disposition of the goods,
he continues in possession of them or their proceeds. Because the
Court of Appeals felt constrained by its opinions to adhere to this
"presumption" or "fiction," it affirmed the turnover order. Now it
says it is convinced that, in reality, Maggio did not retain the
goods or their proceeds up to the time of the turnover proceedings,
and that the turnover order was unjust. But it considers the
turnover order
res judicata, and the injustice beyond
reach on review of the contempt order.
The proceeding which leads to commitment consists of two
separate stages which easily become out of joint because the
defense to the second often in substance is an effort to
relitigate, perhaps before another judge, the issue supposed to
have been settle in the first, and because, while the burden of
proof rests on the trustee, frequently evidence of the facts is
entirely in possession of his adversary, the bankrupt, who is
advantaged by nondisclosure.
Page 333 U. S. 61
Because these separate but interdependent turnover and contempt
procedures are important to successful bankruptcy administration,
we restate some of the principles applicable to each, conscious,
however, of the risk that we may do more to stir new than to settle
old controversies.
I
The turnover procedure is one not expressly created or regulated
by the Bankruptcy Act. It is a judicial innovation by which the
court seeks efficiently and expeditiously to accomplish ends
prescribed by the statute, which, however, left the means largely
to judicial ingenuity.
The courts of bankruptcy are invested "with such jurisdiction at
law and in equity as will enable them" to "cause the estates of
bankrupts to be collected, reduced to money and distributed, and
determine controversies in relation thereto. . . ." Title 11 U.S.C.
§ 11(a)(7), and the function to "collect and reduce to money the
property of the estates" is also laid upon the trustee. 11 U.S.C. §
75(a)(1). A correlative duty is imposed upon the bankrupt fully and
effectually to turn over all of his property and interests, and, in
case of a corporation, the duty rests upon its officers, directors
or stockholders. 11 U.S.C. § 25.
To compel these persons to discharge their duty, the statute
imposes criminal sanctions. It denounces a comprehensive list of
frauds, concealments, falsifications, mutilation of records, and
other acts that would defeat or obstruct collection of the assets
of the estate, and prescribes heavy penalties of fine or
imprisonment or both. 11 U.S.C. § 52(b). It also confers on the
courts power to arraign, try, and punish persons for violations,
but "in accordance with the laws of procedure" regulating trials of
crimes. 11 U.S.C. § 11(a)(4). And it specifically provides for jury
trial of offenses against the Bankruptcy
Page 333 U. S. 62
Act. Special provisions are also made to induce vigilance in
prosecuting such offenses. It is the duty of the referee and
trustee to report any probable grounds for believing such an
offense has been committed to the United States Attorney, who
thereupon is required to investigate and report to the referee. In
a proper case, he is directed to present the matter to the grand
jury without delay, and if he thinks it not a proper case, he must
report the facts to the Attorney General and abide his
instructions. 11 U.S.C. § 52(e).
Courts of bankruptcy have no authority to compensate for any
neglect or lack of zeal in applying these prescribed criminal
sanctions by perversion of civil remedies to ends of punishment, as
some judges of the Court of Appeals suggest is being done.
Unfortunately, criminal prosecutions do not recover concealed
treasure. And the trustee, as well as the Court, is commanded to
collect the property. The Act vests title to all property of the
bankrupt, including any transferred in fraud of creditors, in the
trustee, as of the date of filing the petition in bankruptcy, 11
U.S.C. § 110, which puts him in position to pursue all plenary or
summary remedies to obtain possession.
To entertain the petitions of the trustee, the bankruptcy court
not only is vested with "jurisdiction of all controversies at law
and in equity" between trustees and adverse claimants concerning
property acquired or claimed by the trustee, 11 U.S.C. § 46, but it
also is given a wide discretionary jurisdiction to accomplish the
ends of the Act, or, in the words of the statute, to
"make such orders, issue such process, and enter such judgments,
in addition to those specifically provided for, as may be necessary
for the enforcement of the provisions of this title."
11 U.S.C. § 11(a)(15).
In applying these grants of power, courts of bankruptcy have
fashioned the summary turnover procedure as one
Page 333 U. S. 63
necessary to accomplish their function of administration. It
enables the court summarily to retrieve concealed and diverted
assets or secreted books of account the withholding of which,
pending the outcome of plenary suits, would intolerably obstruct
and delay administration. When supported by "clear and convincing
evidence," the turnover order has been sustained as an appropriate
and necessary step in enforcing the Bankruptcy Act.
Oriel v.
Russell, 278 U. S. 358;
Cooper v. Dasher, 290 U. S. 106.
See also Farmers' & Mechanics' National Bank v.
Wilkinson, 266 U. S. 503.
But this procedure is one primarily to get at property, rather
than to get at a debtor. Without pushing the analogy too far, it
may be said that the theoretical basis for this remedy is found in
the common law actions to recover possession -- detinue for
unlawful detention of chattels and replevin for their unlawful
taking -- as distinguished from actions in trespass or trover to
recover damages for the withholding or for the value of the
property. Of course, the modern remedy does not exactly follow any
of these ancient and often overlapping procedures, but the object
-- possession of specific property -- is the same. The order for
possession may extend to proceeds of property that has been
disposed of, if they are sufficiently identified as such. But it is
essentially a proceeding for restitution, rather than
indemnification, with some characteristics of a proceeding
in
rem; the primary condition of relief is possession of existing
chattels or their proceeds capable of being surrendered by the
person ordered to do so. It is in no sense based on a cause of
action for damages for tortious conduct such as embezzlement,
misappropriation, or improvident dissipation of assets.
The nature and derivation of the remedy make clear that it is
appropriate only when the evidence satisfactorily establishes the
existence of the property or its proceeds,
Page 333 U. S. 64
and possession thereof by the defendant at the time of the
proceeding. While some courts have taken the date of bankruptcy as
the time to which the inquiry is directed, we do not consider
resort to this particular proceeding appropriate if, at the time it
is instituted, the property and its proceeds have already been
dissipated, no matter when that dissipation occurred. Conduct which
has put property beyond the limited reach of the turnover
proceeding may be a crime, or, if it violates an order of the
referee, a criminal contempt, but no such acts, however
reprehensible, warrant issuance of an order which creates a duty
impossible of performance, so that punishment can follow. It should
not be necessary to say that it would be a flagrant abuse of
process to issue such an order to exert pressure on friends and
relatives to ransom the accused party from being jailed.
II
It is evident that the real issue as to turnover orders concerns
the burden of proof that will be put on the trustee, and how he can
meet it. This Court has said that the turnover order must be
supported by "clear and convincing evidence,"
Oriel v.
Russell, 278 U. S. 358, and
that includes proof that the property has been abstracted from the
bankrupt estate, and is in the possession of the party proceeded
against. It is the burden of the trustee to produce this evidence,
however difficult his task may be.
The trustee usually can show that the missing assets were in the
possession or under the control of the bankrupt at the time of
bankruptcy. To bring this past possession down to the date involved
in the turnover proceedings, the trustee has been allowed the
benefit of what is called a presumption that the possession
continues until the possessor explains when and how it ceased. This
inference, which might be entirely permissible in
Page 333 U. S. 65
some cases, seem to have settled into a rigid presumption which
it is said the lower courts apply without regard to its
reasonableness in the particular case.
However, no such presumption, and no such fiction, is created by
the bankruptcy statute. None can be found in any decision of this
Court dealing with this procedure. [
Footnote 1] Language can, of course, be gleaned from
judicial pronouncements and texts that conditions once existing may
be presumed to continue until they are shown to have changed. But
such generalizations, useful enough, perhaps, in solving some
problem of a particular case, are not rules of law to be applied to
all cases, with or without reason.
Since no authority imposes upon either the Court of Appeals or
the Bankruptcy Court any presumption of law, either conclusive or
disputable, which would forbid or dispense with further inquiry or
consideration of other evidence and testimony, turnover orders
should not be issued, or approved on appeal, merely on proof that,
at some past time, property was in possession or control of the
accused party, unless the time element and other factors make that
a fair and reasonable inference. [
Footnote 2] Under some circumstances it may be
permissible, in resolving the unknown from the known, to reach the
conclusion of present control from proof of previous possession.
Such a process,
Page 333 U. S. 66
sometimes characterized as "presumption of fact," is, however,
nothing more than a process of reasoning from one fact to another,
an argument which infers a fact otherwise doubtful from a fact
which is proved.
Of course, the fact that a man at one time had a given item of
property is a circumstance to be weighed in determining whether he
may properly be found to have it at a later date. But the inference
from yesterday's possession is one thing, that permissible from
possession twenty months ago quite another. With what kind of
property do we deal? Was it salable or consumable? The inference of
continued possession might be warranted when applied to books of
account which are not consumable or marketable, but quite
inappropriate under the same circumstances if applied to perishable
merchandise or salable goods in considerable demand. Such an
inference is one thing when applied to a thrifty person who
withdraws his savings account after being involved in an accident,
for no apparent purpose except to get it beyond the reach of a tort
creditor,
see Rosenblum v. Marinello, 133 F.2d 674; it is
very different when applied to a stock of wares being sold by a
fast-living adventurer using the proceeds to make up the difference
between income and outgo.
Turnover orders should not be issued or affirmed on a
presumption thought to arise from some isolated circumstances, such
as one time possession, when the reviewing court finds from the
whole record that the order is unrealistic and unjust. No rule of
law requires that judgment be thus fettered; nor has this Court
ever so prescribed. Of course, deference is due to the trial
court's findings of fact, as prescribed by our rules, but even this
presupposes that the trier of fact be actually exercising his
judgment, not merely applying some supposed rule of law. In any
event, rules of evidence as to inferences from facts are to aid
reason, not to override it. And
Page 333 U. S. 67
there does not appear to be any reason for allowing any such
presumption to override reason when reviewing a turnover order.
We are well aware that these generalities do little to solve
concrete issues. The latter can be resolved only by the sound sense
and good judgment of trial courts, mindful that the order should
issue only as a responsible and final adjudication of possession
and ability to deliver, not as a questionable experiment in
coercion which will recoil to the discredit of the judicial process
if time proves the adjudication to have been improvident and
requires the courts to abandon its enforcement.
III
Unlike the judicially developed turnover proceedings, contempt
proceedings for disobedience of a lawful order are specifically
authorized by two separate provisions of the Act and are of two
distinct kinds. The court is authorized to "enforce obedience by
persons to all lawful orders, by fine or imprisonment, or fine and
imprisonment." 11 U.S.C. § 11(a)(13). This creates the civil
contempt proceeding to coerce obedience, now before us. There is
also provision for a criminal contempt proceeding whose end is to
penalize contumacy, the court also being authorized to "punish
persons for contempts committed before referees." 11 U.S.C. §
11(a)(16). These contempts before referees are defined to include
disobedience or resistance to a lawful order, and the statute
provides for a summary proceeding before the District Judge who, if
the evidence "is such as to warrant him in so doing," may punish
the accused or commit him upon conditions. 11 U.S.C. § 69.
The proceeding before us sought only a coercive or enforcement
sanction. The petition asked commitment "until he shall have
complied with the aforesaid turnover order." The commitment was
only until he "shall have
Page 333 U. S. 68
purged himself of such contempt by complying with the turnover
order or until the further order of this court." Thus, no
punishment whatever was imposed for past disobedience, and every
penalty was contingent upon failure to obey. This is a decisive
characteristic of civil contempt and of the truly coercive
commitment for enforcement purposes, which, as often is said,
leaves the contemnor to "carry the key of his prison in his own
pocket."
Penfield Co. v. Securities & Exchange
Commission, 330 U. S. 585. We
thus have before us now a civil contempt of the same kind that was
before the Court in
Oriel v. Russell, 278 U.
S. 358,
278 U. S. 363.
What we say, therefore, is not applicable to criminal contempt
proceedings designed solely for punishment and vindication of the
court's flouted authority, such, for example, as a proceeding to
sentence one for destroying or mutilating books of account or
property in his possession which the court had ordered him to turn
over.
The question now arises as to whether, in this contempt
proceeding, the Court may inquire into the justification for the
turnover order itself. It is clear, however, that the turnover
proceeding is a separate one, and, when completed and terminated in
a final order, it becomes
res judicata, and not subject to
collateral attack in the contempt proceedings. This we long ago
settled in
Oriel v. Russell, 278 U.
S. 358, and, we think, settled rightly.
The court order is increasingly resorted to, especially by
statute, [
Footnote 3] to coerce
performance of duties under sanction
Page 333 U. S. 69
of contempt. It would be a disservice to the law if we were to
depart from the longstanding rule that a contempt proceeding does
not open to reconsideration the legal or factual basis of the order
alleged to have been disobeyed, and thus become a retrial of the
original controversy. The procedure to enforce a court's order
commanding or forbidding an act should not be so inconclusive as to
foster experimentation with disobedience. Every precaution should
be taken that orders issue, in turnover as in other proceedings,
only after legal grounds are shown and only when it appears that
obedience is within the power of the party being coerced by the
order. But, when it has become final, disobedience cannot be
justified by retrying the issues as to whether the order should
have issued in the first place.
United States v. United Mine
Workers of America, 330 U. S. 258,
330 U. S. 259;
Oriel v. Russell, 278 U. S. 358.
Counsel appears to recognize this rule, for the record in the case
now before us does not include the evidence on which the turnover
order was based. We could learn of it only by going outside of the
present record to that in the former case, which would be available
only because an application was made to this Court to review that
earlier proceeding.
We therefore think the Court of Appeals was right insofar as it
concluded that the turnover order is subject only to direct attack,
and that its alleged infirmities cannot be relitigated or corrected
in a subsequent contempt proceeding.
IV
But does this mean that the lower courts "must thus affirm
orders which first direct a bankrupt
to do an impossibility,
and then punish him for refusal to perform it.'"?
Whether the statement by the Court of Appeals that it knows
Maggio cannot comply with the turnover order
Page 333 U. S. 70
is justified by the evidence in this record we do not stop to
inquire. We have regarded turnover and contempt orders, and
petitions for certiorari to review them, as usually raising only
questions of fact to be solved by the careful analysis of evidence
which we expect to take place in the two lower courts. The
advantage of the referee and the District Court in having the
parties and witnesses before them, instead of judging on a cold
record, is considerable. The Court of Appeals for each circuit also
has the advantage of closer familiarity with the capabilities,
tendencies, and practices of the referee and District Judge. Both
lower courts better know the fruits of their course of decision in
actual practice than can we. Consequently, we have been loath to
venture a review of particular cases, especially where the turnover
order carries approval of the referee, the District Court and the
Court of Appeals.
However the court below appears to have affirmed the order for
commitment in this case by relying on the earlier finding of
previous possession to raise a presumption of willful disobedience
continuing to the time of commitment, even though that conclusion
is rejected by the court's good judgment. While the court protests
that such a presumed continuance of possession from the time of
bankruptcy to the time of the turnover order is unrealistic, it
seems to have affirmed the contempt order by extending the
presumption from the time of the turnover order to the time of the
contempt proceedings, although persuaded that Maggio had overcome
the presumption if it were rebuttable.
The fact that the contempt proceeding must begin with acceptance
of the turnover order does not mean that it must end with it.
Maggio makes no explanation as to the whereabouts or disposition of
the property which the order, earlier affirmed, declared him to
possess. But time
Page 333 U. S. 71
has elapsed between issuance of that order and initiation of the
contempt proceedings in this case. He does tender evidence of his
earnings after the turnover proceedings and up until November,
1944; his unemployment after that time allegedly due to his failing
health, and of his family obligations and manner of living during
the intervening period. He has also sworn that neither he nor his
family has at any time since the turnover proceedings possessed any
real or personal property which could be used to satisfy the
trustee's demands. And he repeats his denial that he possesses the
property in question.
It is clear that the District Court, in the contempt proceeding,
attached little or no significance to Maggio's evidence or
testimony, although the Court gave no indication that the evidence
was incredible. The District Court, in its opinion, cites only
In re Siegler, 31 F.2d 972, in which the Court of Appeals
reversed a District Judge who, because he believed the bankrupt's
testimony, had refused to commit him for contempt. The
Siegler case and other cases decided by the Court of
Appeals apparently led the District Judge to conclude that no
decision other than commitment of Maggio would be approved by that
court.
Nor did the Court of Appeals reject this view. Indeed, it
affirmed the commitment for contempt because it considered either
that present inability to comply is of no relevance or that there
is an irrebuttable presumption of continuing ability to comply even
if the record establishes present inability in fact. It seems to be
of the view that this presumption stands indefinitely, if not
permanently, and can be overcome by the accused only when he
affirmatively shows some disposition of the property by him
subsequent to the turnover proceedings. We do not believe these
views are required by
Oriel v. Russell, 278 U.
S. 358, despite some conflicting statements in the
opinion,
Page 333 U. S. 72
which the Court of Appeals construed as compelling affirmance of
the contempt decree.
This Court said in the
Oriel case that
"a motion to commit the bankrupt for failure to obey an order of
the court to turn over to the receiver in bankruptcy the property
of the bankrupt is a civil contempt, and is to be treated as a mere
step in the proceedings to administer the assets of the bankrupt as
provided by law, and in aid of the seizure of those assets and
their proper distribution. While, in a sense, they are punitive,
they are not mere punishment -- they are administrative but
coercive, and intended to compel, against the reluctance of the
bankrupt, performance by him of his lawful duty."
278 U. S. 278 U.S.
358 at
278 U. S.
363.
Of course, to jail one for a contempt for omitting an act he is
powerless to perform would reverse this principle, and make the
proceeding purely punitive, to describe it charitably. At the same
time, it would add nothing to the bankrupt estate. That this Court
in the
Oriel case contemplated no such result appears from
language which it borrowed from a Circuit Court of Appeals opinion
which, after pointing out that confinement often failed to produce
the money or goods, said,
"Where it has failed, and where a reasonable interval of time
has supplied the previous defect in the evidence, and has made
sufficiently certain what was doubtful before, namely the
bankrupt's inability to obey the order, he has always been
released, and I need hardly say that he would always have the right
to be released as soon as the fact becomes clear that he cannot
obey. [
Footnote 4]"
Moreover, the authorities relied upon in Chief Justice Taft's
opinion [
Footnote 5] make it
clear that his decision did not contemplate that a coercive
contempt order should issue when it appears that there is at
that
Page 333 U. S. 73
time no willful disobedience, but only an incapacity to comply.
[
Footnote 6] Indeed, the
quotation from
In re Epstein, cited
supra
(
333 U.S.
56fn4|>note 4) also stated:
"In the pending case,
Page 333 U. S. 74
or in any other, the court may believe the bankrupt's assertion
that he is not now in possession or control of the money or the
goods, and, in that event, the civil inquiry is at an end. . . .
[
Footnote 7]"
The source of difficulties in these cases has been that, in the
two successive proceedings, the same question of possession and
ability to produce the goods or their proceeds is at issue, but as
of different points of time. The earlier order may not be
impeached, avoided, or attacked in the latter proceedings, and no
relief can be sought against its command. But when the trustee
institutes the later proceeding to commit, he tenders the issue as
to present willful disobedience, against which the court is asked
to direct its sanctions. The latter issue must be tried just as any
other issue, and the court is entitled to consider all evidence
relevant to it. The turnover order
Page 333 U. S. 75
adjudges the defendant to be in possession at the date of its
inquiry, but does it also cut off evidence as to nonpossession at
the later time? Thus, the real problem concerns the evidence
admissible in the contempt proceeding. Of course, we do not attempt
to lay down a comprehensive or detailed set of rules on this
subject. They will have to be formulated as specific and concrete
cases present different aspects of the problem.
In
Oriel's case, this Court said:
". . . on the motion for commitment, the only evidence that can
be considered is the evidence of something that has happened since
the turnover order was made showing that, since that time, there
has newly arisen an inability on the part of the bankrupt to comply
with the turnover order."
This language the Court of Appeals has construed to mean that
the accused can offer no evidence to show that he does not now have
the goods if that evidence, in the absence of an affirmative
showing of when and how he disposed of the goods, might tend to
indicate that he never had them, and hence to contradict findings
of the turnover order itself. We agree with the Court of Appeals
that the turnover order may not be attacked in the contempt
proceedings, because it is
res judicata on this issue of
possession at the time as of which it speaks. But application of
that rule in these civil contempt cases means only that the
bankrupt, confronted by the order establishing prior possession at
a time when continuance thereof is the reasonable inference, is
thereby confronted by a
prima facie case which he can
successfully meet only with a showing of present inability to
comply. He cannot challenge the previous adjudication of
possession, but that does not prevent him from establishing lack of
present possession. Of course, if he offers no evidence as to his
inability to comply with the turnover order, or stands mute, he
does not meet the issue. Nor does he do so by
Page 333 U. S. 76
evidence or by his own denials which the court finds incredible
in context. [
Footnote 8]
But the bankrupt may be permitted to deny his present possession
and to give any evidence of present conditions or intervening
events which corroborate him. The credibility of his denial is to
be weighed in the light of his present circumstances. It is
everywhere admitted that, even if he is committed, he will not be
held in jail forever if he does not comply. His denial of
possession is given credit after demonstration that a period in
prison does not produce the goods. The fact that he has been under
the shadow of prison gates may be enough, coupled with his denial
and the type of evidence mentioned above, to convince the court
that his is not a willful disobedience which will yield to
coercion.
The trial court is obliged to weigh not merely the two facts,
that a turnover order has issued and that it has not been obeyed,
but all the evidence properly before it in the contempt proceeding
in determining whether or not there is actually a present ability
to comply and whether failure so to do constitutes deliberate
defiance which a jail term will break.
This duty has nowhere been more clearly expressed than in the
Oriel case: [
Footnote
9]
". . . There is a possibility, of course, of error and hardship,
but the conscience of judges in weighing the evidence under a clear
perception of the consequences, together with the opportunity of
appeal and review, if properly taken, will restrain the courts
from
Page 333 U. S. 77
recklessness of bankrupt's rights, on the one hand, and prevent
the bankrupt from flouting the law, on the other. . . ."
Such a careful balancing was said to be required in turnover
proceedings because "coercive methods by imprisonment are probable,
and are foreshadowed." [
Footnote
10] Certainly the same considerations require as careful and
conscientious weighing of the evidence relevant in the contempt
proceeding. At that stage, imprisonment is not only probable and
foreshadowed -- it is imminent. And, without such a weighing, it
becomes inevitable.
V
We deal here with a case in which the Court of Appeals was
persuaded that the bankrupt's disobedience was not willful. It
appears, however, that the District Court did not, in the contempt
proceedings, weigh and evaluate the evidence before it, but felt
bound almost automatically to order Maggio's commitment in
deference to clear precedents established by the Court of Appeals.
Moreover, the Court of Appeals affirmed the commitment order
although it was convinced that Maggio was not deliberately
disobeying, but had established his contention that he was unable
to comply. On such findings, the
Oriel case would require
Maggio's discharge even if he were already in jail. It is hardly
consistent with that case, or with good judicial administration, to
order his commitment on findings that require his immediate
release.
When such a misapprehension of the law has led both courts below
to adjudicate rights without considering essential facts in the
light of the controlling law, this Court will vacate the judgments
and remand the case to the District Court for further proceedings
consistent with the principles laid down in this Court's opinion.
Manufacturers'
Page 333 U. S. 78
Finance Company v. McKey, 294 U.
S. 442,
294 U. S. 453;
Gerdes v. Lustgarten, 266 U. S. 321,
266 U. S. 327,
and cases cited. [
Footnote
11] That practice is appropriate in this case in view of what
has been said herein concerning the judgments below.
Vacated and remanded.
[
Footnote 1]
The Court of Appeals itself said: " . . . the Supreme Court has
never decided in favor of the fictitious "presumption" here
invoked. . . ." 157 F.2d 951, 954.
[
Footnote 2]
Other circuits have treated the presumption of continued
possession as one which "grows weaker as time passes, until it
finally ceases to exist" (C.C.A.8th in
Marin v. Ellis, 15
F.2d 321) and as one "only as strong as the nature of the
circumstances permits" and which "loses its force and effect as
time intervenes and as circumstances indicate that the bankrupt is
no longer in possession of the missing goods or their proceeds"
(C.C.A.4th in
Brune v. Fraidin, 149 F.2d 325, 328.)
See also Comments in 95 U. of Pa.L.Rev. 789 (1947) and 42
Ill.L.Rev. 396 (1947).
[
Footnote 3]
For examples of statutory provisions,
see Interstate
Commerce Act, 49 U.S.C. § 12(3); Securities Exchange Act of 1934,
15 U.S.C. § 78u(c); Public Utility Holding Company Act of 1935, 15
U.S.C. § 79r(d); Communications Act of 1934, 47 U.S.C. § 409(d);
National Labor Relations Act, 29 U.S.C. § 161(2); Federal Trade
Commission Act, 15 U.S.C. § 49; Administrative Procedure Act of
1946, 5 U.S.C. § 1005(c), and Atomic Energy Act of 1946, 42 U.S.C.
§ 1816(d).
[
Footnote 4]
278 U. S. 278 U.S.
358,
278 U. S. 366,
quoting from
In re Epstein (cited as
Epstein v.
Steinfeld), 206 F. 568, 569.
[
Footnote 5]
278 U. S. 278 U.S.
358,
278 U. S.
364.
[
Footnote 6]
The late Chief Justice said " . . . the following seem to us to
lay down more nearly the correct view," and cited
Toplitz v.
Walser, 27 F.2d 196, at 197, a contempt case in which it is
said,
"The sole question is whether the bankrupt is presently able to
comply with the turnover order previously made and, accordingly,
whether he is disobeying that order . . . ;"
Epstein v. Steinfeld, 210 F. 236, a turnover
proceeding, in which the Court delineates both turnover and
contempt procedures and states that a contempt order should not be
issued unless there is present ability to comply;
Schmid v.
Rosenthal, 230 F. 818, a turnover case, citing
Epstein v.
Steinfeld, supra; Frederick v. Silverman, 250 F. 75, a
contempt case, reciting the necessity for present ability to
comply;
Reardon v. Pensoneau, 18 F.2d 244, a contempt
case, holding the evidence there insufficient to establish present
inability to comply;
United States ex rel. Paleais v.
Moore, 294 F. 852, 856, involving a commitment for contempt,
stating " . . . the court should be satisfied of the present
ability of the bankrupt to comply . . . ;"
In re Frankel,
184 F. 539, a contempt case in which the evidence was held
insufficient to show present inability to comply;
Drakeford v.
Adams, 98 Ga. 722, 25 S.E. 833, a State contempt case
requiring present ability to comply to be "clearly and
satisfactorily established;" and Collier, Bankruptcy (Gilbert's
ed., 1927) 652. The cumulative effect of these authorities seems
clearly to be that, while a bankrupt's denial of present
possession, standing alone, may not be sufficient to establish his
inability to produce the property or its proceeds, if the Court is
satisfied from all the evidence properly before it that the
bankrupt has not the present ability to comply, the commitment
order should not issue.
Other decisions are to the same effect.
See, for example,
American Trust Co. v. Wallis, 126 F. 464;
Samel et al. v.
Dodd, 142 F. 68,
cert. denied, 201 U.S. 646;
In
re Nisenson, 182 F. 912;
In re Holden, 203 F. 229,
cert. denied, 229 U.S. 621;
In re McNaught, 225
F. 511;
Dittmar v. Michelson, 281 F. 116;
In re
Davison, 143 F. 673;
In re Marks, 176 F. 1018;
In
re Elias, 240 F. 448;
Freed v. Central Trust Co. of
Illinois, 215 F. 873;
In re Nevin, 278 F. 601;
Johnson et al. v. Goldstein, 11 F.2d 702;
In re
Magen, 14 F.2d 469;
id., 18 F.2d 288;
In re
Walt, 17 F.2d 588;
Clark v. Milens, 28 F.2d 457;
Berkhower v. Mielzner, 29 F.2d 65,
cert. denied,
279 U.S. 848;
In re Tabak et al., 34 F.2d 209;
In re
Weisberger, 43 F.2d 258.
See also Collier, Bankruptcy
(14th ed.) pp. 244-249; 2
id. pp. 535-542; 5 Remington,
Bankruptcy (4th ed.) pp. 624-681; 8 C.J.S., Bankruptcy, § 210; 6
Am.Jur. § 369, pp. 752-753.
[
Footnote 7]
Similarly, the following cases involving contempt orders for
failure to pay alimony were cited (278 U.S. at
278 U. S. 365)
as illustrating rules of evidence concerning ability to comply,
"much the same as here laid down for bankruptcy":
Smiley v.
Smiley, 99 Wash. 577, 169 P. 962, affidavit as to lack of
ability to comply being undenied, commitment for contempt by
failure to pay held erroneous;
Barton v. Barton, 99 Kan.
727, 163 P. 179, 180, evidence held sufficient to justify
commitment although it is said " . . . the defendant cannot, of
course, be committed for the failure to do something which is
beyond his power . . . ;"
In re Von Gerzabek, 58 Cal. App.
230, 208 P. 318, a showing of inability to comply said to be "the
most effectual answer" to a contempt order;
Hurd v. Hurd,
63 Minn. 443, 65 N.W. 728;
Heflebower v. Heflebower, 102
Ohio St. 674, 133 N.E. 455, and
Fowler v.
Fowler, 61 Okla. 280,
161 P. 227, defendant's evidence insufficient to establish
inability to comply which would have prevented commitment.
[
Footnote 8]
These conclusions are supported by the cases cited in the
Oriel case as laying down "more nearly the correct view."
See note 6
supra. Of course, cases such as
Gompers v. United
States, 233 U. S. 604;
Michaelson v. United States, 266 U. S.
42,
Pendergast v. United States, 317 U.
S. 412, and
Cooke v. United States,
267 U. S. 517, all
involving criminal contempt charges, are of no relevance here, as
we deal only with civil contempts.
See text, p. 10.
[
Footnote 9]
278 U.S. at
278 U. S.
364.
[
Footnote 10]
278 U.S. at
278 U. S.
363.
[
Footnote 11]
Cf. Kay v. United States, 303 U. S.
1,
303 U. S. 10;
Prairie Farmer Publishing Company v. Indiana Farmer's Pub.
Co., 299 U. S. 156,
299 U. S. 159;
Buzynski v. Luckenbach S.S. Co., 277 U.
S. 226,
277 U. S.
228.
Separate opinion of MR. JUSTICE BLACK, in which MR. JUSTICE
RUTLEDGE concurs.
August 9, 1943, the referee in bankruptcy found that petitioner
had possession of certain merchandise belonging to a bankrupt
corporation and ordered him to turn it or the proceeds over to the
bankruptcy trustee. In these contempt proceedings (April 18, 1945),
the District Court found that petitioner had failed to prove he no
longer had possession of the property, and ordered him to be held
in jail until he delivered the property or its proceeds to the
trustee.
Had the petitioner been charged with embezzling this same
property after the 1943 turnover order, doubtless no one would even
argue that a doctrine of
res judicata barred him from
introducing evidence to show that the turnover findings of
possession were wrong, and that, in truth, he did not have
possession of the property or its proceeds either on, before, or
after August 9, 1943, or April 18, 1945. One basic reason why the
findings of fact in a turnover proceeding would not be
res
judicata in an embezzlement proceeding is that the burden of
proof is different in the two types of proceedings. In the first, a
turnover proceeding, "clear and convincing proof" is enough; in the
second, embezzlement, "proof beyond a reasonable doubt" is
required. The burden of proof is
Page 333 U. S. 79
heavier in the embezzlement case because a judgment of
conviction may embody a criminal punishment, while a turnover
judgment does not -- it is merely an order for the surrender of
property, similar to an order of delivery in a replevin suit.
There is no such reason for different measurements of proof in
contempt and embezzlement cases; consequentially, the two are
almost identical. Fine, imprisonment, or both can result from a
conviction of either. Here, if this contempt judgment is carried
out against the petitioner, he might be compelled to remain in
prison longer than he would had he been convicted and sentenced on
a charge of embezzlement. It is true that, if the court was correct
in finding that petitioner had possession of the property or its
proceeds (and if he still has it), he carries the keys of the jail
in his pocket, because he can turn the property or proceeds over to
the trustee at any time, and thus get his freedom. The crucial
question to petitioner in this contempt proceeding was whether he
had possession of the property or its proceeds June 5, 1945. And
that crucial question was decided against petitioner by the trial
court without holding that the evidence was sufficient to prove
beyond a reasonable doubt that petitioner still had possession of
the property.
I am unwilling to agree to application of a doctrine of
res
judicata that results in sending people to jail for contempt
of court upon a measure of proof substantially the same as that
which would support the rendition of a civil judgment for the
plaintiff on a promissory note, an open account, or some other
debt. All court proceedings, whether designated as civil or
criminal contempt of court or given some other name, which may
result in fine, prison sentences, or both, should, in my judgment,
require the same measure of proof, and that measure should be proof
beyond a reasonable doubt.
See Gompers v.
United
Page 333 U. S. 80
States, 233 U. S. 604,
233 U. S. 610,
611;
Michaelson v. United States, 266 U. S.
42,
266 U. S. 66-67;
Pendergast v. United States, 317 U.
S. 412,
317 U. S.
417-418.
The foregoing is written on the assumption that the
turnover-contempt procedure is legal, an assumption which I do not
accept. I share the opinion of the Circuit Court of Appeals that
this procedure is unauthorized by statute, and that it should not
be permitted to take the place of criminal prosecutions for fraud,
as apparently was done here. [
Footnote
2/1] This whole procedure flavors too much of the old
discredited practice of imprisonment for debts -- debts which
people are unable to pay. For here, if petitioner did wrongfully
dispose of the property, whether or not he was guilty of a crime,
he was probably liable in some sort of civil action, basically
similar to, if not actually, one for debt. Had a judgment been
obtained against him in such a civil case, I doubt if it would be
thought at this period that the bankruptcy court could have thrown
petitioner in jail for his failure to obey what would have been, in
effect, a court order to pay the debt embodied in the judgment.
Furthermore, the finding of possession of the merchandise as of
1943 may rest on an evidential foundation firm enough to support a
civil turnover order, but it is too shaky to support a sentence to
prison. Accepting that
Page 333 U. S. 81
finding, however, the presumption of present or 1945 possession
from the possible 1941 or 1943 possession achieves a procedural
result which runs counter to basic practices in our system of laws.
For, as the District Court said, it gave the prosecution the
advantage of a "presumption" which, of itself, was held to relieve
it from offering further proof of petitioner's guilt in a case
where forfeiture of his personal liberty and property was sought;
it threw upon the petitioner the burden of proving his innocence.
[
Footnote 2/2]
For the foregoing reasons, among others, I would reverse the
judgment of the Circuit Court of Appeals, with directions that the
petitioner be released and that no further contempt proceedings be
instituted against him based on his refusal to obey the turnover
order.
[
Footnote 2/1]
"We would hold that a
turnover proceeding may not, via a
fiction, be substituted for a criminal prosecution so as to deprive
a man of a basic constitutional right, the right of trial by
jury. We would note, too, that one consequence of the fiction
is that the respondent may be twice punished for the same offense,
since, if he is later indicted for violation of 11 U.S.C. § 52(b),
his imprisonment for contempt will not serve as a defense. We would
add that nowhere in the Bankruptcy Act has Congress even intimated
an intention to authorize such results, and that they stem solely
from a judge-made gloss on the statute."
In re Luma Camera Service, 157 F.2d 951, 953, 954.
[
Footnote 2/2]
In holding petitioner in contempt, the District Court said:
"Respondent has not sustained his burden of satisfactorily
accounting for the disposition of the assets by his mere denial of
possession under oath." It then made the following finding of
fact:
"4. The respondent, Joseph F. Maggio, has wholly failed to
comply with said turnover order, and he has failed to explain to
the satisfaction of this Court his failure to comply."
MR. JUSTICE FRANKFURTER, dissenting.
This is one of those rare cases where I find myself in
substantial agreement with the direction and main views of an
opinion, but am thereby led to a different conclusion. Too often,
we are called upon to dissentangle a snarled skein of facts into a
thread of legal principles. In this case, the Court's opinion seems
to me to snarl a straight thread of facts into a confusing skein of
legal principles. It was the record in a prior case involving the
same litigants that invited correction of a rule of bankruptcy
administration in the Second Circuit. We denied review. [
Footnote 3/1]
Page 333 U. S. 82
The record in this case precludes such correction, but the
Court's opinion is an effort to whip the devil round the stump.
The precise question before us may be simply stated. The
District Court ordered the bankrupt to turn over goods withheld by
him from the trustee. On the basis of two prior cases, [
Footnote 3/2] the Circuit Court of Appeals
affirmed this order per curiam. 145 F.2d 241. These earlier cases,
in turn, relied on a previous case. [
Footnote 3/3] All three enforced a rule of the Second
Circuit that goods in the possession of a bankrupt on the day of
bankruptcy are presumed to continue in his possession regardless of
the time that may have elapsed. In all three cases, the Circuit
Court of Appeals had affirmed the turnover orders although it was
maintained that the bankrupts could not obey them. [
Footnote 3/4] Likewise, in all three cases, that
court had declared its impotence to change what it regarded as an
untenable rule of bankruptcy administration, although fashioned by
it, and not by this Court. [
Footnote
3/5] In almost imprecating language, review and reversal by
this Court in these cases were invited. [
Footnote 3/6] In one of these cases, the bankrupt filed
a petition
Page 333 U. S. 83
for certiorari, which this Court denied. [
Footnote 3/7] Then came the prior case involving the
litigants now before us, with this Court's refusal to review the
turnover order. To be sure, the denial of a petition for certiorari
carries no substantive implications. Reference to it here is
relevant as proof of the finality with which the turnover order, as
affirmed by the Circuit Court of Appeals, was invested.
In
Oriel v. Russell, 278 U. S. 358, a
unanimous bench, including in its membership judges of wide
experience with bankruptcy law, [
Footnote 3/8] held that, upon a citation for contempt to
compel obedience of a turnover order, the issues adjudicated by
that order could not be relitigated. That case decided nothing if
it did not decide that what the turnover order adjudicated -- that
the bankrupt withheld certain property from the bankrupt estate and
was still in control of this property on the day he was ordered to
turn it over -- is the definitive starting point for contempt
proceedings to exact obedience to the turnover order. In short, the
contempt proceedings must proceed from the turnover order, and
cannot go behind it. We should not ignore this relevant sentence in
Oriel v. Russell:
"Thereafter, on the motion for commitment, the only evidence
that can be considered is the evidence of something that has
happened since the turnover order was made showing that, since that
time, there has newly arisen an inability on the part of the
bankrupt to comply with the turnover order. [
Footnote 3/9] "
Page 333 U. S. 84
The Court today reaffirms
Oriel v. Russell. At the same
time, it makes inroad on the practical application of
Oriel v.
Russell. On virtually an identical record, [
Footnote 3/10] it reverses where
Oriel v.
Russell affirmed. The nature and scope of the inroad are
uncertain, because the Court's opinion, to the best of my
understanding, leaves undefined how the District Court is to
respect both
Oriel v. Russell and today's decision.
About some aspects of our problem, there ought to be no dispute.
We are all agreed that, while the bankrupt cannot relitigate the
determination of a turnover order that he had such and such goods
on the day of the order, he can avoid the duty of obedience to that
order if he "can show a change of situation after the turnover
order relieving him from compliance." [
Footnote 3/11] The right to be relieved from obeying
the turnover order by sustaining the burden of inability to
perform, on proof of circumstances not questioning the turnover
order, has never been disputed. Again, if a judgment of civil
contempt is rendered and the bankrupt is sent to jail until he
chooses to obey the court's command, he will not be kept there when
keeping him no longer gives promise of performance.
Oriel v.
Russell so pronounced. [
Footnote
3/12]
And so, since the fact that the bankrupt had possession of the
goods on the day of the turnover order is a fact
Page 333 U. S. 85
that cannot be controverted or relitigated because his
possession of the goods on that day was the very thing adjudicated,
the case reduces itself to this simple question: where, on failure
to obey the turnover order, the bankrupt stands mute, offers no
evidence as to a change of circumstances since the order or offers
evidence of a kind which the District Court may justifiably
disbelieve, has he met his burden of proof so as to preclude the
District Court from enforcing obedience by commitment for civil
contempt?
On the record and the findings of the District Court, this is
the precise question now presented. There is nothing else in the
record, except Judge Frank's statement below that the bankrupt was
ordered to perform although the court knew that it was impossible
for him to perform. [
Footnote
3/13] But this assertion of "impossibility" was not derived
from the record in these contempt proceedings. It derives from
Judge Frank's familiar hostility to what he deems the unfairness of
his court's rule of presumption in ordering turnover. [
Footnote 3/14] Judge Frank here merely
repeats his conviction that a turnover order like that rendered
against Maggio is an order to turn over goods which could not
be
Page 333 U. S. 86
turned over. But that was water over the dam in the contempt
proceeding. To give it legal significance when enforcement of the
turnover order is in issue is to utter contradictory things from
the two corners of the mouth. It is saying that the turnover order
cannot be relitigated -- that we cannot go back on the adjudication
that the bankrupt had the goods at the time he was ordered to turn
them over -- but we know he did not have the goods, so we
contradict the turnover order and do not respect it as
res
judicata.
I cannot reconcile myself to saying that we adhere to
Oriel
v. Russell and yet reject its only meaning -- namely, that we
cannot go behind the judicial determination made by the turnover
order that the bankrupt on such and such a day had the enumerated
goods. Moreover, the authorities relied upon in Chief Justice
Taft's opinion [
Footnote 3/15]
make it clear that his decision did contemplate that a coercive
contempt order should issue when it appears that the bankrupt has
introduced no evidence or, what is the same, evidence that may
properly not satisfy the District Court by establishing incapacity
to comply since the turnover order. [
Footnote 3/16] In this case, the District Court was
Page 333 U. S. 87
entirely warranted in finding that the bankrupt had produced no
evidence to contradict the adjudication of the turnover order that
he had the goods when he was told to
Page 333 U. S. 88
turn them over, unless, in place of what is usually deemed
evidence, an infirmity has been found to seep, by a process of
osmosis, into the turnover order respect for which in its entirety
is the starting point of our problem.
The time to have acted on the inference of impossibility of
performance of the turnover order, or to have taken notice of the
imprisoning rule of the Second Circuit as to the presumption of
continued possession of a bankrupt's withheld goods, was when we
were asked to review the Circuit Court of Appeal's denigrating
affirmance of the turnover order. [
Footnote 3/17] When we declined to review that
turnover
Page 333 U. S. 89
order, it became a final and binding adjudication. Neither court
below was under a misapprehension as to the applicable law in the
instant contempt proceeding. The District Court relied on
In re
Siegler, 31 F.2d 972. But surely reliance on a case that was
correctly decided is hardly an indication of misapprehension of
law. If the
Siegler decision had preceded, instead of
followed, [
Footnote 3/18]
Oriel v. Russell, it might well have been one of the
authorities relied upon in Chief Justice Taft's opinion. [
Footnote 3/19] Nor do we have to
speculate as to whether Judge Frank's conclusion that Maggio was
unable to comply was based on evidence in this record, or on doubt
as to the propriety of the turnover order. We have the same printed
record before us that he had, and it is barren of such evidence.
Presumably
Page 333 U. S. 90
Judge Frank did not travel outside this record and act on
undisclosed private knowledge. The whole course of this issue in
the Second Circuit in recent years makes it obvious that his
observation was merely another animadversion on that Circuit's
practice in issuing turnover orders. The Circuit Court of Appeals
did not purport to make an independent evaluation of Maggio's
evidence bearing on his incapacity to obey the turnover order. It
was beyond its power to do so. The Circuit Court was not at large.
Its power was limited to a consideration of the justifiability of
the District Court's findings on the basis of the record before
that court.
The cure for this procedural situation, if cure is called for,
is correction of the rule of the Second Circuit regarding
presumptions in turnover orders. [
Footnote 3/20] It ought not to be dealt with
indirectly, and at the cost of beclouding the doctrine of
res
judicata in proceedings for civil contempt. If Maggio has
become the unhappy victim of the procedural snarl into which the
Circuit Court of Appeals for the Second Circuit has involved itself
by its decisions on the appeals of turnover orders and by this
Court's refusal to review such adjudications, the law is not
without ample remedies. The District Court has power to discharge a
contemnor when confinement has become futile, or release may be had
through use of habeas corpus, which, in the now classic language of
Mr. Justice Holmes,
"cuts through all forms, and goes to the very tissue of the
structure. It comes in from the outside, not in subordination to
the proceedings. . . ."
Frank v. Mangum, 237 U. S. 309,
237 U. S. 346.
These are means available to correct whatever specific hardship
this case may present without generating cloudiness indeterminate
in range upon a legal principle of such social significance as that
of
res judicata and upon
Page 333 U. S. 91
a remedy so vital as civil contempt for the sturdy
administration of justice.
How is the conscientious District Court to carry out the
directions conveyed by the Court's opinion? If the District Court
gives unquestioned respect, as it is told to do, to the turnover
order of August 9, 1943, it will start with the fact that, on
August 9, 1943, the bankrupt was able to comply with that order.
With that as a starting point, will the District Court not be
entitled to find again, as it has already found, [
Footnote 3/21] that nothing presented by the
bankrupt in exculpation for not complying with the turnover order
disproves that he continued to have the property, which he was
found to have had as of August 9, 1943. If the District Court
should so find, would not the Circuit Court of Appeals and this
Court, if the case came here for review, be under duty bound to
hold that, on the basis of the situation as adjudicated by the
turnover order, the District Court could reasonably make such a
finding? Or is the District Court to infer that, in view of the
snarl into which these proceedings have got by reason of the
failure to upset the turnover order when directly under review,
this Court was indulging in benign judicial winking -- that, while
the fact of the possession of the property had been adjudicated by
the turnover order and could not verbally be questioned, the
District Court need not accept the determination of that order as
facts? But, if the District
Page 333 U. S. 92
may so drain the adjudication of the turnover order of its only
legal significance, why assert that
Oriel v. Russell is
left without a scratch? Why reaffirm that an adjudication
sustaining a turnover order may not be relitigated when obedience
is sought to such turnover order? These are questions which will
confront not merely the district judge to whom this case will be
remanded. After all, we are concerned with the practical
administration of the Bankruptcy Act by district judges all over
the United States.
By abstaining from expressing views regarding the requisites of
a turnover order, I mean neither to agree nor disagree with
observations made by the Court. There has been opportunity in the
past for adjudication of that matter, and there may be such an
opportunity in the future. This case does not present it. From all
of which I conclude that the judgment below should be affirmed,
leaving for another day, when the occasion makes it appropriate, to
consider directly and explicitly the principle that should govern
the issue of turnover orders by bankruptcy courts. [
Footnote 3/22]
[
Footnote 3/1]
324 U.S. 841.
[
Footnote 3/2]
Robbins v. Gotthetter, 134 F.2d 843, and
Cohen v.
Jeskowitz, 144 F.2d 39.
[
Footnote 3/3]
Seligson v. Goldsmith, 128 F.2d 977.
[
Footnote 3/4]
Seligson v. Goldsmith, 128 F.2d 977, 978, 979;
Robbins v. Gotthetter, 134 F.2d 843, 844;
Cohen v.
Jeskowitz, 144 F.2d 39, 41 (concurring opinion of Frank,
J.).
[
Footnote 3/5]
Presumably, this avowed inability of the Circuit Court of
Appeals for the Second Circuit to free itself from its own prior
decision in this situation is not the reflection of a principle
similar to that which binds the House of Lords to its past
precedents. It must be attributable to the fact that the Second
Circuit has six circuit judges who never sit en banc, and that
presumably they deem it undesirable for the majority of one panel
to have a different view from that of a majority of another
panel.
[
Footnote 3/6]
128 F.2d at 979; 134 F.2d at 844; 144 F.2d at 40-41.
[
Footnote 3/7]
In the first two of these cases, the bankrupt did not seek
review in this Court; in the
Jeskowitz case, the bankrupt
took the hint, but this Court denied certiorari. 323 U.S. 787.
[
Footnote 3/8]
Judge A. N. Hand's observation concurring, in the
Robbins case, 134 F.2d at 845, is also pertinent:
". . . all the justices of a court of which those exceptionally
alert guardians of civil rights, Justices Holmes, Brandeis, and
Stone, were members unanimously concurred in the opinion of Chief
Justice Taft. . . ."
[
Footnote 3/9]
278 U.S. at
278 U. S.
363.
[
Footnote 3/10]
See 333 U.S.
56app|>Appendix.
[
Footnote 3/11]
278 U.S. at
278 U. S.
364.
[
Footnote 3/12]
"'I have known a brief confinement to produce the money
promptly, thus justifying the court's incredulity, and I have also
known it to fail. Where it has failed, and where a reasonable
interval of time has supplied the previous defect in the evidence,
and has made sufficiently certain what was doubtful before, namely
the bankrupt's inability to obey the order, he has always been
released, and I need hardly say that he would always have the right
to be released as soon as the fact becomes clear that he cannot
obey.'"
278 U.S. at
278 U. S. 366,
quoting from Judge McPherson's opinion in
In Re Epstein,
206 F. 568, 570.
[
Footnote 3/13]
"Although we know that Maggio cannot comply with the order, we
must keep a straight face and pretend that he can, and must
thus affirm orders which first direct Maggio 'to do an
impossibility, and then punish him for refusal to perform it.'"
157 F.2d at 955 (italics supplied). Judge Frank made this
statement concerning the presumption of continued possession in
turnover order proceedings, and was not addressing his remarks to
the record before him in the contempt proceeding. The dictum began
with this sentence: "Were this a case of first impression involving
the validity of a turnover order, we would not accept such
reasoning." 157 F.2d 951, 953. The "thus" in his statement
indicates hostility to the basis of the turnover order because of a
virus which the lower court feels unable to extract, but which
automatically infects the contempt proceedings.
[
Footnote 3/14]
"With the turnover order once sustained, the contempt order
necessarily followed."
Id. 157 F.2d at 954.
[
Footnote 3/15]
278 U. S. 278 U.S.
358,
278 U. S.
364.
[
Footnote 3/16]
The Chief Justice said " . . . the following seem to us to lay
down more nearly the correct view," and cited
Toplitz v.
Walser, 27 F.2d 196 at 197, a Third Circuit contempt case in
which it is said:
"It therefore devolves upon the bankrupt in the latter
[contempt] proceeding to show how and when the property previously
adjudged in his possession or control had passed out of his
possession or control. . . . The trouble with the evidence in the
contempt proceeding, the only evidence properly here for review, is
that it is directed to the issue of the bankrupt's possession and
control of property at the date of bankruptcy raised an definitely
decided against her in the turnover proceeding. . . . Though not in
form, this is, in substance, a collateral attack upon the now
finally established turnover order, which, of course, is not
permissible.;"
Epstein v. Steinfeld, 210 F. 236, a turnover
proceeding, in which the Third Circuit delineated its procedure,
different from that followed in the Second Circuit, whereby if the
referee found a shortage at the time of bankruptcy the turnover
order was automatically entered, and the question of present
possession or ability to comply with that order was left open for
possible contempt proceedings, the presumption of continued
possession being applied in such proceedings since the bankrupt had
to show that, by reason of events occurring since the bankruptcy,
he was unable to comply (
cf. In re Eisenberg, 130 F.2d
160) (this distinction has no real bearing on the instant issue as
to either collateral attack or the presumption of continued
possession);
Schmid v. Rosenthal, 230 F. 818, a Third
Circuit turnover case, citing
Epstein v. Steinfeld, supra;
Frederick v. Silverman, 250 F. 75, a Third Circuit contempt
case citing
Epstein v. Steinfeld, supra; Reardon v.
Pensoneau, 18 F.2d 244 at 245, 246, an Eighth Circuit contempt
case, holding that the bankrupt had not met his burden of
establishing present inability to comply, in which it is said,
"They [turnover orders] establish the bankrupt's possession and
control on the day the referee's order was made. The burden was on
him to show what disposition had been made of the $6,900. Until
that showing is made relieving him of an intentional loss of its
possession and control, it must be presumed that he still has it. .
. . [A] bankrupt cannot escape an order for the surrender of
property belonging to his estate 'by simply denying under oath that
he has it.;'"
United States ex rel. Paleais v. Moore, 294 F. 852 at
857, a Second Circuit habeas corpus case following a commitment for
contempt, stating,
"If, at the time the turn-over order was made, the books and
papers were in the bankrupt's hands, the presumption is that they
continued to be in his possession or under his control until he has
satisfactorily accounted to the court of bankruptcy for their
subsequent disposition or disappearance. The burden is upon him
satisfactorily to so account for them. He cannot escape an order
for their surrender by simply denying under oath that he no longer
has them.;"
In re Frankel, 184 F. 539, a contempt case in which L.
Hand, then a District Judge, refused to commit for contempt because
he did not deem the turnover order binding as
res
judicata, but, on rehearing, reversed himself, holding that
the bankrupt could not show present inability by evidence
constituting an indirect attack on the turnover order, stating (at
p. 542),
"Therefore, insofar as the [turnover] order directs anyone to do
anything, he may not in the contempt proceeding question the
propriety of the direction, and insofar as the order determines an
existing fact, which is necessary in law to the validity of the
direction, he may not question its truth. To question such a fact
is to question the validity of the direction which depends upon it,
and is only an indirect way of reviewing the order. Therefore, now
to deny the fact that the bankrupt had the money in his possession
is in this case to assert that the order directing him to pay it
over was erroneous. On this account, therefore, that fact is
concluded, once it be granted that it was necessary to the validity
of the order, which I have shown. Quite reluctantly therefore I can
only conclude that I was wrong originally to inquire into the
merits, and that a commital must issue."
The cumulative effect of these authorities is that a bankrupt's
denial of present possession, standing alone, is not sufficient to
establish his inability to produce the property or its proceeds,
and that the bankruptcy court will not permit the bankrupt to prove
present inability to comply with the turnover order by evidence
which indirectly constitutes a collateral attack on that order.
[
Footnote 3/17]
For almost forty years, the Second Circuit has tenaciously
abided by the presumption of continued possession. While this
presumption was previously
sub silentio utilized
(
e.g., In re Schlesinger, 102 F. 117,
aff'g 97 F.
930),
In re Stavrahn, in 1909, 174 F. 330, appears to have
been the Second Circuit's case of first impression, and the
decision that sired the presumption. There, the court stated that
the bankrupt could not defend against a contempt citation following
a turnover order on the assertion that he had never taken the
assets in question, but had to come forward with some reasonable
explanation as to what had become of the assets since the turnover
order. In 1912, the Second Circuit reiterated the reasoning of its
earlier decision in
In Re Weber Co., 200 F. 404. The
presumption had been somewhat inarticulately phrased in the earlier
opinion, and the court in this case commended the District Judge
for aptly carrying out the mandate of the
Stavrahn
decision. The cases up to 1925 and before the
Oriel case
are listed and discussed at length in
In re H. Magen Co.,
10 F.2d 91, in which the court observed that "The law relating to
turnover orders is pretty well established in this circuit." 10
F.2d at 93.
In re Siegler, 333 U.S.
56fn3/18|>note 18,
supra, was decided three months
after this Court's decision in the
Oriel case. Then came:
Danish v. Sofranski, 93 F.2d 424;
In re Pinsky-Lapin
& Co., 98 F.2d 776;
Seligson v. Goldsmith,
333 U.S.
56fn3/3|>note 3
supra; Robbins v. Gotthetter,
333 U.S.
56fn3/2|>note 2
supra; Cohen v. Jeskowitz,
333 U.S.
56fn3/2|>note 2,
supra, and the per curiam
affirmance of the turnover order in the instant bankruptcy
proceedings.
[
Footnote 3/18]
"Any difference of opinion respecting the force and effect of a
turnover order which may have prevailed before the decision of the
Supreme Court in
Prela v. Hubshman [companion case to
Oriel v. Russell] . . . is now out of place in any
discussion of the subject."
31 F.2d at 973.
[
Footnote 3/19]
Cf. In re Frankel, 333 U.S.
56fn3/16|>note 16
supra.
[
Footnote 3/20]
Cf. Brune v. Fraidin, 149 F.2d 325.
[
Footnote 3/21]
In the opinion, dated April 18, 1945, holding petitioner in
contempt of court, the District Court stated that:
"Respondent [petitioner here] has not sustained his burden of
satisfactorily accounting for the disposition of the assets by his
mere denial of possession under oath."
And that court's fourth finding of fact was as follows:
"The respondent, Joseph F. Maggio, has wholly failed to comply
with said turnover order, and he has failed to explain to the
satisfaction of this court his failure to comply."
[
Footnote 3/22]
"The proceedings in these two cases have been so long drawn out
by efforts on the part of the bankrupts to retry the issue
presented on the motion to turn over as to be, of themselves,
convincing argument that, if the bankruptcy statute is not to be
frittered away in constant delays and failures of enforcement of
lawful orders, the rule we have laid down is the proper one."
278 U.S. at
278 U. S.
363.
|
333 U.S.
56app|
Page 333 U. S. 93
APPENDIX TO OPINION OF FRANKFURTER, J.
Comparison between
Maggio v. Zeitz and
Prela v.
Hushman (companion case to
Oriel v.
Russell),
278 U. S. 358.
bwm:
----------------------------------------------------------------------------------------------------------------------------------------------------------------------
Identities Differences
---------------------------------------------------------------------------------------------------------------------------------------------
Maggio Prela Maggio Prela
----------------------------------------------------------------------------------------------------------------------------------------------------------------------
Name of bankrupt Joseph Maggio (R.cover) Samuel Prela (R.
cover)
----------------------------------------------------------------------------------------------------------------------------------------------------------------------
Name of trustee Raymond Zeitz (R.cover) Louis Hubshman (R.
cover)
----------------------------------------------------------------------------------------------------------------------------------------------------------------------
Type of property Photographic equipment (R. 2) Silk (R. 1)
----------------------------------------------------------------------------------------------------------------------------------------------------------------------
Date of proven pos- Before Jan. 1, 1942 Before Nov. 22, 1924
session (324 U.S. 841, R.13) (R.I.)
----------------------------------------------------------------------------------------------------------------------------------------------------------------------
Date of petition in Apr. 14, 1942 (324 Nov. 22, 1924 (R.1)
bankruptcy U.S. 841, R. 4)
----------------------------------------------------------------------------------------------------------------------------------------------------------------------
Date of petition for Jan. 7, 1943 (324 July 1, 1925 (R. 5)
turnover U.S. 841, R. 8)
----------------------------------------------------------------------------------------------------------------------------------------------------------------------
Interval between pe-
tition in bankruptcy Eight months more or less
and petition for
turnover
----------------------------------------------------------------------------------------------------------------------------------------------------------------------
Trustee's proof of Examination of Maggio's inven- Prela
manufactured blouses from
possession in bank- tories revealed discrepancies between silk;
each blouse required 1 1/2
rupt. sales and stock on hand at close of yards of silk;
examination of Prela's
last inventory (324 U.S. 841, R.7) books revealed discrepancy
between
blouses manufactured and silk on
hand (R. 1).
----------------------------------------------------------------------------------------------------------------------------------------------------------------------
Bankrupt's reply to 1. Inventory figures erroneous (un- 1.
Assumption from books erron-
above proof recorded sales)) (324 U.S. 841 (R. 53- ous --
manufactured a kind of blouse
61) that required more than 1 1/2 yards
of silk (R. 2, 19)
2. Denial of present possession of 2. Denial of present
possession of
the property (
Id. at 62) the property
(
Ibid.)
----------------------------------------------------------------------------------------------------------------------------------------------------------------------
District court's ruling 1. Assumptions as to past possession
correct 2. Bankrupt's denials of pre-
sent possession disbelieved.
(
325 U.S.
841, R. 111) (R. 1, 5)
----------------------------------------------------------------------------------------------------------------------------------------------------------------------
Date of turnover order Aug. 9, 1943 (R. 5) July 8, 1926 (R.
3)
----------------------------------------------------------------------------------------------------------------------------------------------------------------------
Interval between
dates of proven pos- 20 months, more or less
session and turnover
order
----------------------------------------------------------------------------------------------------------------------------------------------------------------------
Review of turnover Unanimously affirmed by CCA 2 without opinion
Cert. denied Feb. 5,
order L. Hand, Swan, and Clark, JJ., on Hough, Mack, and L.
Hand, JJ., on 1945, 324 U.S. 841
Oct. 25, 1944 (145 F.2d 241) Dec. 13, 1926 (unreported) (R.
15)
----------------------------------------------------------------------------------------------------------------------------------------------------------------------
Date of trustee's pe- Dec. 7, 1944 (R. 3) April 22, 1927 (R.
13)
tition for contempt
citation
----------------------------------------------------------------------------------------------------------------------------------------------------------------------
Trustee's proof of 1. Turnover order
contempt
2. Failure to comply
(R. 16) (R. 13, 15)
----------------------------------------------------------------------------------------------------------------------------------------------------------------------
Bankrupt's reply to 1. Did not have possession on date of
turnover order 3(a). Heart trouble 3(a). Paralytic stroke
above proof 2. Hasn't got it now (R. 15) (R. 24)
3. Has become physically incapacitated (b) Wife sick, too
(
Ibid., 25)
(R. 13, 17) (R. 17) 4. Merely repeated Filed affidavits of
for-
denial (R. 13, 17) mer cutter, salesman, and
blouse buyers to the effect
that blouses in question
used 2 and more yards of
silk (R. 27, 28, 29)
----------------------------------------------------------------------------------------------------------------------------------------------------------------------
District court's ruling 1. Trustee makes out
prima
facie case by proof of noncompliance with
turnover order
2. Turnover order cannot be collaterally attacked by proving
that bank-
rupt disposed of property prior to date of order to show present
inability
to comply with order.
3. To avoid contempt, bankrupt must prove present inability to
comply by
proof of disposition of property subsequent to turnover
order.
4. Bankrupt makes no claim that he has disposed of the property
since the
turnover order.
(R. 18, 19) (R. 48, 52)
5. Physical incapacity of bankrupt and/or bankrupt's wife
ignored.
6. Bankrupt's bare denial 6. Bankrupt's evidence
of present inability to com- and that of other witnesses
ply with turnover order dis- that, as a matter of fact,
believed (R. 19) bankrupt disposed of silk
prior to turnover order ex-
cluded and/or stricken
(R. 33-34, 45-46, 50, 54)
----------------------------------------------------------------------------------------------------------------------------------------------------------------------
Date of contempt Apr. 18, 1945 (R. 19) Sept. 9, 1927 (R. 52)
citation
----------------------------------------------------------------------------------------------------------------------------------------------------------------------
Interval between date 20 months 14 months Certiorari to review
Certiorari to review
turnover order applied for, turnover order not sought
opposed, and denied
----------------------------------------------------------------------------------------------------------------------------------------------------------------------
Review of contempt Affirmed Frank and L. Hand, JJ., Manton and
Swan, JJ.,
citation by CCA 2 157 F.2d 951 23 F.2d 413 with Swan, J.
(concurring with L. Hand, J., dissent-
in the result) ing.
1. "With the turnover order once "A disobedience of the order
to
sustained, the contempt order neces- turn over presents a prima
facie case
sarily followed." Citing the
Oriel of contumacy for
punishment." Cit-
case (at p. 954.). ing the CCA
Oriel case (at p.
414).
2. Findings in the turnover order proceeding are
res
judicata in the con-
tempt proceeding. (
Ibid.)
3. "That is to say" the district 3. "Having been directed to
turn 3(a). "Although we
court "had to accept it as true" that over property, it is
presumed that the
know that Maggio cannot
Maggio had possession on the date of offender continues in his
willful and comply with the order, we
the turnover order and that "this deliberate conduct when he
fails to must keep a straight face
possession continued . . . unless obey the order."
(
Ibid.) and pretend that he can. . . ."
Maggio showed that, since August 9, (at pp. 954-5.) (Italics
1943, he had been deprived of that supplied).
possession or had in some other way
become unable to comply with the
turnover order." (
Ibid.)
4. "As Maggio made no such show- 4. "No evidence was offered by
the
ing of an intervening change of facts, bankrupt to show what he
had done
there was no error in the entry of the with the property, since
he was ad-
contempt order." (
Ibid.) judged a bankrupt" (at p.
413).
5. Physical incapacity of bankrupt and/or bankrupt's wife
treated as
irrelevant.
----------------------------------------------------------------------------------------------------------------------------------------------------------------------
ewm: