Case Name: Wooden v. Reese and Sheriff, Appellants
Court: Superior Court of Pennsylvania
Jurisdiction: Pennsylvania
Decision Date: 1921-07-14
Citations: 77 Pa. Super. 162
Docket Number: Appeal, No. 142
Parties: Wooden v. Reese and Sheriff, Appellants.
Judges: Before Orlady, P. J., Porter, Henderson, Head, Trexler, Keller and Linn, JJ.
Reporter: Pennsylvania Superior Court Reports
Volume: 77
Pages: 162–166

Head Matter:
Wooden v. Reese and Sheriff, Appellants.
Bes adjudicata — Bankruptcy — Proof of claim — Becovery of special fund.
It is the essence of the doctrine of res adjudicata that the proposition, respecting which it is invoked, must have been adjudicated either expressly or by necessary implication.
Proof and allowance of a claim in bankruptcy is not such a judicial determination of the rights of the parties, as to estop the bankrupt’s trustee from afterwards suing the creditor to avoid a preference, or to recover property which had been deposited upon a special trust.
Where a debtor pays his creditor a sum of money for a specific purpose, and the creditor fails to apply it to that purpose, the trustee in bankruptcy of the debtor may recover the sum thus paid, even though in the meantime the creditor has proved a claim against the bankrupts estate and received dividends thereon.
Argued November 8, 1920.
Appeal, No. 142, Oct. T., 1920, by defendants, from judgment of O. P. Lycoming County, June T., 1918, No. 189, making absolute rule for judgment for want of a sufficient affidavit of defense in tbe case of Frederick G. Wooden, Trustee in Bankruptcy of tbe George Webster Lumber Company, v. B. S. • Beese and E. B. Sheriff, copartners, trading under tbe firm name of Reese-Sberiff Lumber Company.
Before Orlady, P. J., Porter, Henderson, Head, Trexler, Keller and Linn, JJ.
Affirmed.
Assumpsit to recover purchase price of lumber not delivered. Before Whitehead, P. J.
Rule for judgment for want of a sufficient affidavit of defense.
Tbe facts are stated in tbe opinion of tbe Superior Court.
Tbe court made absolute tbe rule. Defendants appealed.
Error assigned was the order of the court.
Mortimer C. Rhone, and with him A. R. Jackson, for appellants.
The bankruptcy court has exclusive jurisdiction in the matter of proving and allowing claims and settling disputes between the bankrupt and his creditors: U. S. F. & G. Co. v. Bray, 225 U. S. 205; Acme Harvester Co. v. Beckman Lumber Co., 222 U. S. 300.
Where a court has jurisdiction of the cause of action the subject-matter and the parties, its judgments or decrees are conclusive of all relevant matters which were or could have been raised: First National Bank v. Dissinger, 266 Pa. 349; Hartranft v. Ives, 64 Pa. Superior Ct. 338.
Max L. Mitchell, and with him Charles 8. Ballard and Charles J. Weston, for appellee.
A creditor who accepts a payment or deposit with directions to apply it in a particular manner is bound to so apply it: Kann v. Kann, 259 Pa. 583; Bank v. MacAlester, 9 Pa. 475; Hall v. Marston, 17 Mass. 575; Bank v. Meredith, 2 Wash. (U. S.) 47.
The Bankrupt Act works no change in the rules governing set-off and the trustee takes the place of the bankrupt and stands in his shoes: Libby v. Hopkins, 104 U. S. 303; Lehigh Valley Coal Sales Co. v. Maguire, 251 Fed. 581.
July 14, 1921:

Opinion:
Opinion by
Porter, J.,
The plaintiff brings this action to recover the money which came into the hands of the defendants in the following circumstancés. The George Webster Lumber Co., in January, 1915, sent to the defendants an order for a carload of maple lumber, enclosing a check for $400, designating it "as advance payment on car." "With the understanding that you return us check promptly to cover the difference, if any, between the net amount of your invoice and this check for $400." The defendants replied to this letter, saying: "We acknowledge receipt of your check for $400 on account of the shipment of 8/4 maple and thank you for the same. The matter will have our prompt attention." The defendants made no attempt to ship the lumber. A petition in bankruptcy was filed against the George Webster Lumber Co., on February 18, 1915, and the company was, on May 3, 1915, duly adjudicated a bankrupt. On August 6, 1915, the Reese-Sheriff Lumber Co. filed with the referee in bankruptcy a proof of claim for $177.37 against the estate of the bankrupt, which claim was on that day duly allowed by the referee. Frederick G. Wooden was, on November 12, 1915, duly appointed trustee in bankruptcy of the estate of the George Webster Lumber Co., and now brings this action to recover of the defendants the amount paid to them as above stated. The court below entered judgment against the defendants for want of a sufficient affidavit of defense, from which judgment they have taken this appeal.
The affidavit of defense averred that at the time the bankrupt paid to them the $400 for the specific purpose stated in its letter, with which purpose the defendants undertook to comply, the George Webster Lumber Co., the bankrupt, was really indebted to the defendants in the sum of $577.37 and that the amount for which they filed their proof of claim against the bankrupt estate was only the balance remaining after applying the $400, received for another purpose, on account of the general indebtedness of the bankrupt to the defendants. The remitting of the $400 by the George Webster Lumber Co. to the defendants, to be applied by the latter according to specific instructions, did not make the defendants the debtors of the bankrupt, but its trustees. The defendants did not beaome creditors of the bankrupt in that transaction, within the meaning of the Bankrupt Act. The indebtedness was all on the side of the George Webster Lumber Co. These defendants owed that company nothing. They held this money in trust to apply as by it directed. There did not exist between the parties mutual credits or debts, which were the subject of set-off, within the meaning of the Bankrupt Act: Libby v. Hopkins, 104 U. S. 303; Alvord v. Ryal, 212 Federal 83; Lehigh Valley Coal Sales Co. v. Maguire, 251 Federal 581. The learned counsel for the defendants, in their oral argument and printed brief, do not seriously contend that they had the right, under the Bankrupt Law as construed by the courts of the United States, to set off the indebtedness of the bankrupt upon its general account, against the claim of the trustee for this specific fund. Their only contention now is that the proceedings in the bankrupt court, set forth in the statement of claim and affidavit of defense, constituted an adjudication of the question presented by this suit. Are those proceedings an adjudication of the rights here involved ? The record of their proof of claim against the bankrupt estate, attached to the affidavit of defense, which the defendants seek to interpose as a bar to this action, did not disclose that the defendants were attempting to set off the amount which they had received for a specific purpose against the indebtedness of the bankrupt upon its general account. It contains no mention of this sum of $400, nor does it make any attempt to show how they arrive at the balance which they asserted to be due. The record, as printed in the paper-book, merely discloses that the defendants asserted that there was due them from the estate of the bankrupt the sum of $177.37, and that the proof of claim was allowed by the referee. Neither referee nor the court could ascertain^ from this record] that the amount of the claim which the defendants were entitled to was larger, nor was there in the record any suggestion that the defendants had reduced the amount of their claim against the bankrupt estate by setting off a part of it against moneys of the bankrupt which they held as trustees. The trustee in bankruptcy had not at that time been appointed, but if he had been the law imposed upon him no duty to insist that creditors should prove the full amount of their claims, and the claim presented by the defendants would have given him no notice of what the latter were attempting to do. It is argued, however, on the part of the defendants, .that because of the mere proof and allowance of the appellants' claim filed in the bankruptcy court, no appeal having been taken therefrom, the matter is finally concluded between all parties, including the trustee in bankruptcy.
The summary and informal procedure provided by the Bankrupt Act, for the proof and allowance of claims, which must be ex parte, unless some creditors or other interested person happens to object, lends no color to the argument that a trustee is so far bound by a judgment of allowance as to be estopped from afterwards suing a claimant to avoid a preference, or recover property of the bankrupt deposited upon a special trust: Buder v. Columbia Distilling Co., 70 Southwestern 508; Utah Association of Credit Men v. Boyle Furniture Co., 117 Pacific Rep. 800; Stearns Salt & Lumber Co. v. Hammond, 217 Federal Rep. 559. It is the essence of the doctrine of res adjudicata that the proposition respecting which it is invoked be adjudicated either expressly or by necessary implication. "Neither the judgment of a concurrent nor exclusive jurisdiction is evidence of any matter which came collaterally in question, though within the jurisdiction; nor of any matter incidentally cognizable; nor of any matter to be inferred by argument from the judgment": Cavanaugh v. Buehler, 120 Pa. 457. The record upon which the defendants rely as a bar to the present action does not disclose that the matter here involved came in question even collaterally. The defendants may in that proceeding, if the allegations of their affidavit of defense are true, have proved a claim against the estate of the bankrupt in an amount less than the debt really due them, but, if so, they carefully kept out of the record any suggestion of the manner in which they had arrived at the balance they alleged to be due.
The judgment is affirmed.