Case Name: STUART v. REYNOLDS
Court: United States Court of Appeals for the Fifth Circuit
Jurisdiction: United States
Decision Date: 1913-03-04
Citations: 204 F. 709
Docket Number: No. 2,310
Parties: STUART v. REYNOLDS.
Judges: Before PARDEE and SHELBY, Circuit Judges, and MEEK, District Judge.
Reporter: Federal Reporter
Volume: 204
Pages: 709–726

Head Matter:
STUART v. REYNOLDS.
(Circuit Court of Appeals, Fifth Circuit.
March 4, 1913.)
No. 2,310.
1. BANKRUPTCY (§ 440 )-PROCEEDING TO SUPERINTEND AND REVISE-MATTERS Reviewable.
in a proceeding to superintend and revise in matter of law the proceedings of a court of bankruptcy under Bankr. Act July 1, 1898, c. 541, § 24b, 30 Stat. 553 (IT. S. Comp. St. 3901, p. 3432), the court cannot review findings oí fact upon which the order of the lower court is based, but can only review questions of law arising on the record in the District Court.
[Kd. Note. — For other eases, see Bankruptcy, Cent. Dig. § 929; Dec. Dig. § 440.
Appeal and review in bankruptcy cases, see note to In re Eggert, 43 O. C. A. 9J
2. Bankruptcy (§ 136 ) — Order Requiring Bankrupt to Turn Over Property — Sufficiency of Evidence.
A court of bankruptcy is without authority to make an order adjudging a bankrupt guilty of contempt for failure to obey an order of a referee requiring him to turn over property or money of the estate to his trustee, except on clear and convincing proof that he lias present possession or control of the property or money and the ability to comply with the order.
[Fd. Note. — For other cases, see Bankruptcy, Cent. Dig. §§ 233, 235; Dec. Dig. § 130. ]
(For Shelby, Circuit Judge, concurring.)
3. Nature of Contempt — “Direct Contempt” — “Constructive Contempt.”
A “direct contempt” is one occurring within the presence of the court in session, or so near as to interrupt its proceedings, while a “constructive contempt” arises from matters not occurring in court. A refusal, when aide, to comply with a lawful order of court, is a constructive contempt.
I lid. Note. — For other definit ions, see Words and Phrases, vol. 2, pp. 140S. 1469; vol. 3, pp. 2071, 2072.]
4. Punishment of Contempt — Affidavit or Rule.
In a proceeding charging a constructive contempt, the affidavit, attachment, or rule, as the case may be, should be like an indictment to the extent of informing the contemnor of the charge against him, so as to give him an opportunity to defend.
5. ORDER for Surrender of Property op Bankrupt — Proceeding por Contempt — Burden and Measure op Proof.
A summary proceeding in a court of bankruptcy, under Bankr. Act July 1, 1898, c. 541, § 41b, 30 Stat. 556 (U. S. Comp. St. 1901, p. 3437), for punishment of a bankrupt for contempt for failure to comply with an order of a trustee to turn over property, is criminal in its nature, especially since a concealment of the property constitutes a crime under section 29b (1), and is governed by the rules of evidence and presumptions of law applied in criminal cases. In such proceeding the rule in civil eases as to the shifting of the burden of proof is not applicable, and evidence that the bankrupt has recently had the property in his possession does not create a presumption that he still has it, and east on him the burden of proving the contrary; but, to justify an order of commitment, the burden is on the trustee' to prove his present possession to the exclusion of a reasonable doubt.
6. Order for Surrender of Property of Bankrupt — Proceeding fob Contempt — Evidence.
In such proceeding, while the sworn answer of the bankrupt is not taken as true, in the sense that it cannot be contradicted, his sworn denial of his present possession of the property is evidence in his favor, requiring incontestable evidence, or evidence proving present possession beyond a reasonable doubt, to overcome it.
7. Imprisonment for Debt — Commitment of Bankrupt for Contempt.
An order of a bankruptcy court committing a bankrupt for contempt for failure to comply with an order to surrender property or money of the estate, of which he has present possession or control, is not in conflict with a state constitutional provision against imprisonment for debt; but where the evidence does not justify a finding that he has present possession or control of the property or money belonging to the estate, and is able to comply with the order, a commitment under the guise of punishing for contempt, but in reality for the purpose of forcing him to pay into court such sum as he may obtain, to be applied on his debts, whether it is a part of the bankrupt estate or not, is illegal, under the general law relating to contempts, and is also in conflict with a ■ state constitutional provision against imprisonment for debt.
8. Order to Surrender Property of Bankrupt — Proceedings for Contempt — Rules Governing.
The language of the opinion of the court in Re Purvine, 96 Red. 192, 37 C. C. A. 446, is not subject to objection, but the order of commitment in that case by the District Court was void, because the decree requiring the contemnor to pay $7,400 did not show his ability to obey the order, and because the sum was greatly in excess of the debts of the bankrupt shown by the record; and the case should not be a controlling authority, for the additional reason that, subsequent to the decision, the contemnor was discharged upon his obtaining and paying , to his trustee only $1,465.39, thus showing that it was never judicially ascertained that he was able to comply with the order. The proper rules for the decision of like cases are announced in Samel v. Dodd, 142 Fed. 71, 73 C. C. A. 254.
9. Order to. Surrender Property of Bankrupt — Proceedings for ConTEMPT.
The fact that a bankrupt has committed some crime in connection with his property, by which it has passed out of his possession, may be grounds for prosecution against him, but will not justify a proceeding for contempt for failure to comply with an order to deliver property not in his present possession.
10. Construction of Bankruptcy Act — Remedies for Withholding Assets.
Bankr. Act July 1, 189S, e. 541, §§ 29b (1), 41a (1), and 41b,- 30 Stat. 554, 556 (U. S. Comp. St. 1901, pp. 3433, 3437), should be construed so as to give both a field of operation and to conform to the legisla tive intention. Tlio latter applies to the refusal of a bankrupt to surrender property in obedience to the court’s order, the same being in his present possession; the former, to cases of concealment of assets from the trustee. When property of the estate is traced to the possession of the bankrupt, but not found in his immediate possession, if the evidence is sufficient, a ease is presented for prosecution under section 29b (1). If in concealment cases an order can be made requiring the bankrupt to surrender the concealed property, then not in his possession, and he can be imprisoned until he complies with the order, there would be no need for section 29b (1); but all eases of concealment could be prosecuted as contempt cases, which would make useless a provision of the act and defeat the legislative intention that concealment cases should be prosecuted by indictment and jury trial.
11. CONCEALMENT 01' ASSETS- — REMEDY.
If a bankrupt conceals assets of his estate from his trustee, he may be indicted therefor within 12 months after the commission of the offense, and such cases should not, and cannot legally, be prosecuted as contempt cases.
12. Punishment eor Contempt — Granting or Rule — Discretion oe Court,
It is within the discretion of the court to grant or refuse a rule or attachment in contempt cases, and when there is another remedy tlie court should be reluctant to grant such rule, and should usually direct resort to the other remedy.
Petition for Revision of Proceedings of the District Court of the United States for the Middle District of Alabama; Thomas Goode Jones, Judge.
In the matter of C. W. Reynolds, bankrupt. On petition by George Stuart, trustee, to superintend and revise an order of the District Court.
Affirmed.
For opinion below, see 190 Fed. 967.
Tliis petition for review results from the following proceedings: !
C. W. Reynolds, engaged in the general merchandise business at Clanton, Ala., was adjudged a voluntary bankrupt. After tlie appointment of a trustee for his estate he submitted to an examination by his creditors before the referee. After this examination, and an audit of his books kept in connection with his mercantile business, George Stuart, trustee, petitioned the referee for a rule against the bankrupt, Reynolds, requiring him to appear before the referee at a time fixed to show cause why he should not be forthwith required to turn over to his trustee goods, wares, and merchandise, or other equivalent in money, to the amount oí $19,249.35, which it was charged belonged to his estate, and were then in his possession or under his control.
This rule against the bankrupt, after hearings, resulted in orders being passed by the referee directing the bankrupt to turn over to the trustee “goods, wares, and merchandise, money, and other property, of the value of $20,969.60.” The bankrupt failed to comply with these orders, and the proceedings at last eventuated in a finding by the referee “that the said bankrupt, C. W. Reynolds, has now in his possession or under his control certain goods, wares, merchandise, or money, the proceeds thereof amounting to tlie sum of $19,'722.96, or that he has in his possession or under his control goods, wares, and merchandise in part, and money in part, to the aggregate value of $19,722.96.” On this finding the referee passed an order that tlie bankrujit, on or before the 7th day of February, 1911, should turn over and deliver to the trustee in bankruptcy “the sum of $19,722.96 in goods, wares, and merchandise, or in money.” The bankrupt, feeling aggrieved at this order, in due course and on the 4th day of February, 1911, petitioned for a review thereof by the judge. Thereupon there was certified to tlie judge the order passed against the bankrupt by the referee and the fact of the bankrupt’s failure to comply therewith; also a summary of the evidence upon which the action of the referee was based.
The judge, after hearing and consideration, found as follows:
“1 cannot find, after careful examination of the evidence, that it sustains the findings of the referee that the bankrupt has now in his possession,- or at the time the order was made, either the goods or the money proceeds amounting to ¡¡>19,722.96, or any other sum. While the evidence leaves no -shadow of a doubt in the mind of the court that the bankrupt had goods of that value, for which he has not accounted, or has converted into money, which at one time he had under his control, X do not think the proof justifies the referee in finding that at the time of the order, or at the timé of his examination, the bankrupt still had in his possession or under his control either the goods or the money. After a somewhat exhaustive investigation of his affairs, no evidence develops showing the disposition of any specific goods, or tracing to him the possession of any considerable sum of money, or other evidence of such conduct as indicates that he now has any of the goods, or money derived from their conversion, in his possession or under his control.”
With this finding as a basis, the court, on October 18, 1911, passed an order reversing and holding for naught the order theretofore entered by the referee, requiring the bankrupt to pay over to his trustee in bankrupt^ the sum of $19,772.96 In goods, wares, and merchandise, or in mone3'-, and discharging the rule upon the bankrupt to show cause why he should not be punished for failure to comply with the referee’s order.
John London and Henry Fitts, both of Birmingham, Ala., for petitioner.
Jones, Foster & Field, of Montgomery, Ala., and Tipton Mullins and J. Osmond Middleton, both of Clanton, Ala., for respondent.
Before PARDEE and SHELBY, Circuit Judges, and MEEK, District Judge.
For other oases see same topic & § number hi Dec. & Am. Digs. 1907 to date, & Rep’r Indexes

Opinion:
MEEK, District Judge
(after stating the facts as above). This proceeding is brought here under the provisions of section 24b of the Bankruptcy Act (Act July 1, 1898, c. 541, 30 Stat. 553 [U. S. Comp. St. 1901, p. 3432]). Therefore we are not authorized to determiiie questions of fact upon which the order of the lower court is based, but may only superintend, and, if need be, revise, its action in the matter of law. This is now the settled interpretation given section 24b. Matter of Loving, 224 U. S. 183, 32 Sup. Ct. 446, 56 L. Ed. 725; Coder v. Arts, 213 U. S. 223, 29 Sup. Ct. 436, 53 L. Ed. 772, 16 Ann. Cas. 1008; First National Bank v. Title & Trust Company, 198 U. S. 280, 25 Sup. Ct. 693, 49 L. Ed. 1051; Mueller v. Nugent, 184 U. S. 1, 22 Sup. Ct. 269, 46 L. Ed. 405; Samel v. Dodd (Fifth Cir.) 142 Fed. 68, 73 C. C. A. 254; Tn re Purvine (Fifth Cir.) 96 Fed. 192, 37 C. C. A. 446. The matter of law to be passed on is the validity of the order of the lower court of October 18, 1911, and this is to be determined on the record of the District Court. Mueller v. Nugent, cited supra.
From the evidence before him, which was of a conflicting nature, the judge was unable affirmatively to find as a fact that the bankrupt, at the time of the making of the order against him by the referee, then had in his possession or under his control either the goods orthe money he was'directed to turn over to the trustee of his estate. Failing to find this, it was incumbent on the judge to reverse the action of the referee and discharge the rule against the bankrupt. No other order than the one passed by him was compatible with or justified by the judge's view of the evidence and the conclusions entertained by him.
In view of the brief and argument submitted in behalf of the petitioner, we deem it appropriate to say the doctrine announced by this court in Re Purvine, cited supra, has neither been modified nor changed. The same doctrine was subsequently announced and sanctioned by the Supreme Court of the United States in Mueller v. Nugent, 184 U. S. 1, 22 Sup. Ct. 269, 46 L. Ed. 405. There is no departure from this doctrine in Samel v. Dodd, cited supra. In the latter case it was held the court, finding in a summary proceeding that bankrupts had in their possession or under their control goods and merchandise, the property of their estate in bankruptcy, had not the power lawfully to order them to pay over the value of such goods and merchandise in money under penalty of commitment for contempt; that in such a proceeding the court was restricted to ordering a return of the goods and merchandise in specie or kind, and this only when it was made clear by proof that the bankrupts were in possession or control of them. '
The petition for a revision of the action of the judge will be denied.
PARDEE. Circuit Judge, concurs in the foregoing opinion and decision.