After an assignee in bankruptcy, aided by a creditor, has twice
contested before the district court or its referee the claim of a
person who has been allowed to prove his claim, and after all the
evidence which could then or afterwards be produced, it has been
twice decided that the claim was a valid one, no bill lies in the
circuit court (either under the general provisions of the Bankrupt
Act or under the second section of it, giving to the circuit court
a general superintendence and jurisdiction of all cases and
questions arising under the act) against either the assignee or the
person who has been allowed to prove his claim, to have the order
allowing it reversed. Such a bill may be demurred to for want of
equity.
On the 4th of February, 1870, the Troy Woolen Company was
adjudged a bankrupt by the District Court for the Northern District
of New York, and on the 11th of March, 1870, one Tappan became the
assignee. Soon afterwards, Cooper,
Page 87 U. S. 172
Vail & Co. proved a debt against the bankrupt amounting to
$67,029, and on the 24th of July, 1870, filed the probate with the
assignee. Subsequently, on the 29th of November, on petition of the
First National Bank of Troy, which had also proved a debt against
the bankrupt, the district court made an order allowing them and
the assignee to contest the validity of the claim of Cooper, Vail
& Co. It was them referred to W. Frothingham, Esq., to take the
proofs and accounts respecting the claim, to determine its legality
and amount, and to report his conclusions to the court. Permission
was also given to the assignee, and to any creditor of the
bankrupt, if they desired to contest the claim, to attend the
proceedings before the referee, and it appears that the bank did
attend, that evidence in opposition to the claim was submitted, and
that the referee reported the whole of it as due from the bankrupt.
To his report joint exceptions were filed on behalf of the bank and
the assignee, and argued in the district court upon the evidence
taken before the referee. These exceptions were overruled, and on
the 13th of July, 1871, the court made an order allowing the debt
as proved by Cooper, Vail & Co., and directing the bank to pay
the costs and expenses of the reference.
In this condition of things, the bank filed a bill in the
circuit court below against Cooper, Vail & Co., and the
assignee, to procure a reversal of the order. The bill, after
setting forth the facts above stated, made a general averment that
Cooper, Vail & Co. had no legal claim against the bankrupt;
that they had fraudulently proved their claim; that they knew this
when the exceptions were taken to the referee's report as well as
when the court made the decree allowing the debt, and that it was
thus proved before the district court. The bill then averred that
the decree was erroneous because there was no legal debt due by the
bankrupt to Cooper, Vail & Co., because the evidence before the
court proved that there was no such debt, and because the court
should have disallowed it.
This was one aspect of the bill. It further charged that the
assets in the hands of the assignee were insufficient to
Page 87 U. S. 173
pay fifty cents on the dollar of the legal debts of the bankrupt
even if the claim of Cooper, Vail & Co. were disallowed, and it
averred that the assignee refused to appeal from the decision of
the district court or to allow the creditors to appeal in his name,
stating that he was advised that the bank had a right to have the
decree reviewed under section second of the Bankrupt Act and that
if the creditors desired a review, they would have to take that
course. It then charged that the assignee was guilty of neglect of
duty in omitting to appeal from the decree of the district court,
and renewed the averment that the bankrupt was not, and never was,
liable for the debt proved against it by Cooper, Vail & Co., or
for any part of it.
The prayer of the bill was that the decree made by the district
court might be "reviewed, examined, revised, and annulled, and that
the proof of debt filed with the assignee by Cooper, Vail & Co.
might be rejected and expunged."
The second section of the Bankrupt Act, through which it was
alleged that the assignee had told the creditors if they wished
relief they would have to resort, declares that the several circuit
courts of the United States, within and for the districts where the
proceedings in bankruptcy shall be pending, shall have a general
superintendence and jurisdiction of all cases and questions arising
under the act, and, except when special provision is otherwise
made, may, upon bill, petition, or other process of any party
aggrieved, hear and determine the case (as) in a court of
equity.
Cooper, Vail & Co. demurred:
1. For want of equity.
2. For want of jurisdiction.
3. For want of privity between the complainant and the
defendant.
4. That the matters had been adjudicated and that the
adjudication was conclusive.
5. That the appeal was not within the time prescribed by
law.
6. That the bill showed that the district court had decided the
questions presented by the bill, but that the bill
Page 87 U. S. 174
did not set forth the facts, or the evidence upon which the
order or decree of the district court complained of was made, or
any facts or evidence before the court when the order was made, or
the grounds upon which that court based its said decision and order
or decree.
7. That the bill of complaint did not set forth facts sufficient
to enable the court to determine whether or not the district court
erred in making the order or decree complained of.
8. That the bill did not show that the district court erred in
making the order or decree in the bill complained of.
The circuit court sustained the demurrer, and the bank took this
appeal.
MR. JUSTICE STRONG delivered the opinion of the Court.
The demurrer presents the question whether the complainants'
bill sets forth any equity sufficient to justify the court in
granting the relief sought against the defendants.
No doubt when an executor or administrator colludes with a
fraudulent claimant against a decedent's estate, and refuses to
take steps to resist the claim, any person interested in the estate
may maintain an action against such fraudulent claimant and the
executor or administrator for the purpose of contesting the claim.
Bills in equity of this nature have been maintained. And if an
assignee in bankruptcy, with knowledge, or with reason to believe
that one claiming to be a creditor of the bankrupt had proved a
debt against the bankrupt's estate which had no existence, or which
was tainted with fraud, should neglect or refuse to contest the
allowance to such debt, there is no reason why the other creditors,
having proved their debts, should not be permitted to interpose and
seek the aid of a court of equity to annul the allowance. But the
bill before us presents no such case. The assignee has resisted the
allowance of the debt claimed by Cooper, Vail & Co. He took
part with the appellants in contesting the debt before the
referee
Page 87 U. S. 175
to whose consideration it was submitted. He joined with them in
filing exceptions to the report allowing the claim. There is no
averment of any collusion between him and the claimants. The bill
exhibits nothing which ought to cast discredit upon his fidelity to
his trust. The referee decided against the appellants after hearing
all the evidence they had to submit. The district court reviewed
his decision upon exceptions taken to it, and came to the same
conclusion, allowing the debt claimed by Cooper, Vail & Co. Nor
is it pretended that any new evidence exists which ought to lead
the circuit court to any other conclusion than that at which the
district court arrived. In such a state of facts, it cannot be
maintained that it was the duty of the assignee to enter an appeal
to the circuit court, or even to allow an appeal in his name. After
two trials, in which he was aided by the appellants, after all the
evidence had been made use of in opposition to the claim which
could then be produced or which can now be obtained, and after two
decision allowing the claim, he may well have concluded, as he did,
that his duty to his trust did not require either expenditure of
the bankrupt's estate in further litigation or the delay which
might have been consequent upon an appeal. The bill, then, wholly
fails in exhibiting any equity against the assignee.
It is equally without equity as against Cooper, Vail & Co.
It is true the averment is made that they have no legal or valid
claim against the bankrupt, and that their claim was fraudulently
proved and made, but there is no allegation wherein the fraud
consists, or of any step they have taken in the assertion of their
claim which they might not lawfully take. Such a general averment
of fraud can be no foundation for an equity. Moreover it is
apparent that the only fraud intended in the averments of the bill
is the assertion of a claim which the complainants insist is not
sufficiently sustained by evidence. They objected to the claim at
the outset. They appealed to the district court, and they were
allowed to contest its validity. It was at their instance a referee
was appointed to examine and report upon it. Before that referee
they went to trial without objection. When
Page 87 U. S. 176
defeated, they brought the contest into court and renewed it
there, but unsuccessfully. And they do not now allege that in
either of these trials there was anything unfair or that Cooper,
Vail & Co. were guilty of any fraud in maintaining their claim,
other than the assertion of its existence, or that they themselves
made any mistake, or that they have any other case now than they
had and urged before the referee and the district court. Their only
ground of complainant is that the referee and district court came
to a different conclusion from that which they think should have
been adopted. The court thought the evidence established the
existence of a debt due Cooper, Vail & Co. They are of a
different opinion. They think the evidence did not establish the
existence of such a debt, and therefore they have filed this bill
in the circuit court to annul the action of the district court. In
effect, they are seeking a new trial of a question of fact which
has been decided against them, and this without averring anything
more than that the district court drew a wrong conclusion from the
evidence. Very plainly they have made no case for equitable
interference. There are some bills in equity which are usually
called bills for a new trial. They are sustained when they aver
some fact which proves it to be against conscience to execute the
judgment obtained, some fact of which the complainant could not
have availed himself in the court when the judgment was given
against him, if a court of law, or of which he might have availed
himself, but was prevented by fraud or accident unmixed with any
fault or negligence of his own. But a court of equity will never
interfere with a judgment obtained in another court because it is
alleged to have been erroneously given, without more. And such is
substantially this case.
But though the bill is destitute of equity when considered as an
original bill, it is contended that it may be regarded as an
application for the exercise of the supervisory jurisdiction of the
circuit court authorized by the second section of the Bankrupt Act.
That section declares that
"The several circuit courts of the United States within and for
the
Page 87 U. S. 177
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
process of any party aggrieved, hear and determine the case (as) in
a court of equity."
The complainants, having proved their debt against the bankrupt,
contend that they may be considered parties aggrieved by any order
of the district court allowing the probate of other debts against
the same bankrupt, when the assignee refuses to appeal from the
order, or allow an appeal to the circuit court. It is true their
bill was not filed in the circuit court until about four months and
a half after the order complained of was made. But the Act of
Congress prescribes no time within which the application for a
review must be presented. An appeal is required to be taken within
ten days. Not so with a petition or bill for a review. Undoubtedly
the application should be made within a reasonable time in order
that the proceedings to settle the bankrupt's estate may not be
delayed, but neither the act of Congress nor any rule of this Court
determines what that time is. At present, therefore, it must be
left to depend upon the circumstances of each case. Perhaps,
generally, it should be fixed in analogy to the period designated
within which appeals must be taken. [
Footnote 1] It is, however, to be observed that the bill
does not charge any fraudulent collusion between the assignee and
Cooper, Vail & Co. At most, it charges neglect of duty by the
assignee in omitting to contest the debt claimed and in failing to
appeal from a decree of the district court allowing the debt.
Whether this presents a proper case for a review under the second
section of the Bankrupt Act need not now be decided. For should it
be conceded that the complainants had a right to apply to the
circuit court for a review of the order of the district court, and
conceded also that this bill may be regarded as such an
application, the question would still remain whether the court
erred in dismissing
Page 87 U. S. 178
it. Had the court, in the exercise of its superintending
jurisdiction, heard the case and decided it, as the district court
did, the decision would have been final, and no appeal could have
been taken to this Court. [
Footnote
2] True, if the court had decided that it had no jurisdiction
to review, this Court might have entertained an appeal not for the
purpose of reviewing, but for the purpose of correcting an
erroneous decision respecting the power of the circuit court and
enabling the complainants to be heard on their application.
[
Footnote 3] But it does not
appear that this bill was dismissed because the court thought it
had no power to review the action of the district court at the suit
of these complainants. On the contrary, it rather appears the bill
was dismissed because it presented no case that called for the
exercise of the superintending jurisdiction of the court. The
statute, though conferring the power, does not make it obligatory
upon the circuit court to retry every decision of the district
court which a creditor supposing himself aggrieved may ask the
court to retry. And it may well be that when, as in this case, a
question of fact has been twice tried and twice decided in the same
way, when it is not averred that there has been any collusion
between the assignee and the creditor who has proved a debt, or
that the complaining party has any evidence which he has not
already submitted, or that he has been hindered by any accident or
fraud from presenting his case as fully in the district court as he
can in another tribunal, when the substance of all he alleges is
that, in his opinion, the court should have determined the facts
differently, it may well that the circuit court, in the exercise of
its discretionary power, looking also at the delay of the
application, may properly conclude that no sufficient case is
presented calling for a retrial of the facts.
We do not perceive, therefore, in the action of the circuit
court anything that requires correction, and the
Decree is affirmed.
[
Footnote 1]
Littlefield v. Delaware & Hudson Canal Co., B.R.,
vol. iv, p. 77.
[
Footnote 2]
Morgan v.
Thornhill, 11 Wall. 65;
Tracey v. Altmyer,
46 N.Y. 598.
[
Footnote 3]
People v. New York Central Railroad Co., 29 N.Y.
418.
