Source: http://supreme.nolo.com/us/299/77/case.html
Timestamp: 2019-06-25 13:33:26
Document Index: 59856494

Matched Legal Cases: ['§ 33', '§ 109', '§ 57', '§ 63', '§ 57', '§ 70', '§ 77', '§ 77', '§ 33', '§ 1474', '§ 77']

FOUST V. MUNSON STEAMSHIP LINES, 299 U. S. 77 - Volume 299 - 1936 - Full Text - US Supreme Court Center - USSC Cases - Nolo
US Supreme Court Center > Volume 299 > FOUST V. MUNSON STEAMSHIP LINES, 299 U. S. 77 (1936) > Full Text
Petitioner is the administrator of the estate of Coy E. Foust and, February 1, 1934, commenced an action at law under § 33 of the Merchant Marine Act of 1920 [Footnote 1] in
Page 299 U. S. 79
the United States court for the Southern District of New York against the Munson Steamship Lines. His complaint alleges that, February 27, 1930, while deceased was at work for defendant as seaman on its steamship Mundelta, his death was caused by defendant's negligence and, for the benefit of petitioner as surviving father, prays damages in the sum of $15,000. Defendant's answer denies the negligence charged against it and alleges decedent's death was caused by risks assumed and his own negligence.
January 26, 1935, petitioner applied for leave to prosecute his suit and supported his application by an affidavit of his attorney suggesting: the debtor is covered by liability insurance; if petitioner gets judgment, he will sue insurer to enforce its liability under § 109 of the Insurance Law of New York; [Footnote 3] the stay is unjust to the surviving
Page 299 U. S. 80
father, gives no advantage to the debtor, and benefits only the insurer. The affidavit asserts that plaintiff is entitled to a jury trial, and that prosecution of his action at law should not be stayed. The trustees, by affidavit of one of their attorneys, opposed petitioner's application, but did not say that the debtor is not protected by insurance. The court denied petitioner's motion and ordered that a special master be appointed to report on the claim. Petitioner applied to the Circuit Court of Appeals for leave to appeal. After hearing the parties, it filed an opinion announcing that appeal would be granted, but that the argument would be confined to the question whether the action can be stayed. Later, the court entered an order unqualifiedly allowing the appeal. Meyer v. Kenmore Granville Hotel Co., 297 U. S. 160, 297 U. S. 165.
After argument, limited as suggested, the court, in its first opinion on the appeal, held petitioner's claim provable and dischargeable and the District Court empowered to stay prosecution of the suit. In re Munson S.S. Lines, 80 F.2d 859. Then there remained for consideration the question -- which had not been argued -- whether, in the exertion of that power, the District Court abused its discretion. The court suggested that, if, petitioner would stipulate not to use as a claim against the estate any judgment he might recover, there could be no objection to allowing his action to proceed. It held the appeal should not be finally determined without giving the parties a chance to present their views as to whether the District Court ought not to allow the action to proceed and directed that, if petitioner failed to file such a stipulation within a specified time, supplemental
Page 299 U. S. 81
briefs would be received relating to the propriety of the exercise of the judicial discretion of the District Court. Petitioner having declined so to stipulate, the parties submitted their briefs. In his, petitioner stated that, under the insurance policy, the first $2,500 of petitioner's claim would be borne by the insured; that the value of the claim was not over $5,000, and that such stipulation would mean that the administrator would relinquish a substantial part of his claim. Upon consideration of the additional briefs, the court, in its second opinion on the appeal, held that the District Court had not abused discretion, and affirmed the order. In re Munson S.S. Lines, 82 F.2d 289.
Page 299 U. S. 82
Section 77B gives to the District Judge power, to be exerted in accordance with its provisions, to alter the rights of creditors or any class of them. Subdivision (b)(10) declares the term "creditors" shall include, for all the purposes of the section, the holders of claims of whatever character and whether or not they would otherwise constitute provable claims under the Bankruptcy Act; that the term "claims" includes debts, securities, other than stock, liens, or other interests of whatever character. Subdivision (h) directs that the final decree shall discharge the debtor from its debts and liabilities. Subdivision (c)(8) provides that, if a plan is not proposed or accepted, or if proposed and accepted but not confirmed, the court may direct the estate to be liquidated. Subdivision (k)(4), upon order for liquidation, authorizes to be proved as provided in § 57 claims provable under § 63, [Footnote 4] but declares that none of the sections mentioned in subdivision (k) except subdivisions (g), (i), (j), and (m) of § 57 [Footnote 5] and subdivisions a and e of § 70 [Footnote 6] shall apply in proceedings under § 77B unless and until an order has been made directing liquidation of the estate. Mere reading of pertinent parts of the above-mentioned provisions makes it plain that "creditors" and "claims," as used in proceedings under § 77B, are more comprehensive than in the act before the addition of that section. See American Surety Co. v. Marotta, 287 U. S. 513, 287 U. S. 517. Undoubtedly "creditors," "claims," and "liabilities" to
Page 299 U. S. 83
be dealt with in the reorganization proceeding include petitioner, the cause of action he asserts, and the judgment he seeks to recover.
The record contains no opinion or statement of the District Judge to disclose the grounds on which he rested his denial. In reorganization proceedings, neither the act nor any rule of law entitles debtors or trustees as a matter of right to enjoin the trial of actions such as that brought by petitioner. The court is to exercise the power conferred by subdivision (c)(10) according to the particular circumstances of the case, and is to be guided by considerations that, under the law, make for the ascertainment of what is just to the claimants, the debtor, and the estate. Osborn v. U.S. Bank, 9 Wheat. 738, 22 U. S. 866; The Styria v. Morgan, 186 U. S. 1, 186 U. S. 9; Langnes v. Green, 282 U. S. 531, 282 U. S. 541; Burns v. United States, 287 U. S. 216, 287 U. S. 222-223. By § 33 of the Merchant Marine Act, under which the petitioner sued, Congress ordained that, upon claims for personal
Page 299 U. S. 84
injuries or death suffered in the course of their employment, seamen or their personal representatives may maintain actions at law for damages with the right of trial by jury. The reorganization proceedings are not inherently inconsistent with jury trial for the liquidation of such claims. Unless satisfactorily shown that prosecution of petitioner's action would embarrass the administration of the debtor's estate, the District Court should have granted leave.
"represents the insurance carrier and consequently the defense of this case will impose no burden
Page 299 U. S. 85
whatsoever, either financial or otherwise, upon the trustees herein or their counsel."
The injunction was a comprehensive one plainly broad enough to cover petitioner's claim; it was entered without disclosure of the existence of that claim or the pending suit and before petitioner had opportunity to be heard on the propriety of making it apply to him. On his application for leave to bring his suit to trial, petitioner was seeking to remove the stay, and, under the circumstances, the position of debtor and trustees opposing him
Page 299 U. S. 86
and insisting that the restraint be continued was not substantially unlike that of suitors for injunction; the issue was whether liquidation of his claim in that manner would unjustly affect the estate. The facts bearing on that question were known to, or within the control of, the debtor and trustees. They had, and readily could submit to the court, definite evidence in respect of the insurance. Their failure to bring it forward tends strongly to discredit their opposition to petitioner's motion. The circumstances warrant the inference that the facts are not more favorable to respondent than those indicated by the affidavit as the grounds on which the petitioner sought release from the stay, and that, if disclosed, the policy or other evidence as to the insurance would not tend to support injunction against petitioner. Runkle v. Burnham, 153 U. S. 216, 153 U. S. 225; Kirby v. Tallmadge, 160 U. S. 379, 160 U. S. 383; Mammoth Oil Co. v. United States, 275 U. S. 13, 275 U. S. 52. The burden of frank disclosure was upon the debtor and trustees. Keystone Driller Co. v. Excavator Co., 290 U. S. 240, 290 U. S. 244. Cf. 2 High on Injunctions (4th Ed.) § 1474. In the absence of a showing of facts sufficient to require a finding that liquidation of petitioner's claim by jury trial would encumber the reorganization proceedings, the debtor and trustees were not entitled to have the injunction continued in force against petitioner. Langnes v. Green, 282 U. S. 531, 282 U. S. 541.
The Circuit Court of Appeals dealt with the case according to the facts indicated in petitioner's supporting affidavit as modified by the statement taken from his supplemental brief to the effect that the policy did not cover the first $2,500 of the debtor's liability. Petitioner emphasizes the fact that the record does not show the modification, and says that his statement as to the amount deductible was made in explanation of his refusal
Page 299 U. S. 87
to stipulate that he would not file against the estate a claim based on the judgment, if any, obtained in the pending suit. 80 F.2d 859, 861. He earnestly insists that the court erred in predicating its decision upon that statement. As, in the view we take of the case, the fact that debtor is only partially insured is not of controlling significance, we do not pass upon that assignment of error.
There is nothing in the record to warrant a finding that liquidation of petitioner's claim by trial of his pending action at law would hinder, burden, delay, or be at all inconsistent with the pending corporate reorganization
Page 299 U. S. 88
proceeding under § 77B. Injunction against that method of establishing the debtor's liability, if any there is, ought not to stand.