Opinion ID: 1495576
Heading Depth: 1
Heading Rank: 2

Heading: The first, fourth and fifth orders.

Text: While it would perhaps be possible to dispose of these orders on other grounds, we are dismissing the appeals with respect to them because the issues have become moot. On October 28, 1940, the creditors filed an application asking that Seix and Irahola be restrained from settling a civil suit which had been instituted by the debtor in the Insular District Court at Ponce, Puerto Rico. A copy of the application was sent to Seix and Irahola. The application was never set down for hearing and no notice of a hearing on the application was sent to Seix and Irahola. On November 29, 1940, the court issued an order temporarily restraining Seix and Irahola from settling the suit. Rule 65, Federal Rules Civil Procedure, 28 U.S.C.A. following section 723c, provides: (b)    Every temporary restraining order granted without notice    shall expire by its terms within such time after entry, not to exceed 10 days, as the court fixes   . Since the application was never set down for hearing and since Seix and Irahola received no notice of a hearing on the application, it would appear to be clear that they did not receive notice within the meaning of Rule 65, even though copies of the petition were mailed to them. Consequently, this temporary restraining order expired after ten days. Rule 65(b); Southard & Co., Ltd., v. Salinger, 7 Cir., 117 F.2d 194. This order has become moot and the appeal as to it is dismissed. Since Armstrong never qualified as receiver, the fourth and fifth orders have become moot. The appeal as to these orders is also dismissed. The second, third and sixth orders. The appellants contend that the order adjudicating the estate a bankrupt and directing its liquidation was erroneous because Jaime Seix Irahola, a resident of New York and heir of the debtor, did not receive proper notice of the proceedings. It is well established that the death of the debtor after the filing of the petition will not abate the bankruptcy proceedings. Rules 25 and 81(a)(1), Fed.Rules Civ. Proc.; General Order in Bankruptcy 37, 11 U.S.C.A. following section 53; Bankruptcy Act § 8, U.S.C.A. Title 11, c. 3, § 26; In re Schwab, 9 Cir., 1936, 83 F.2d 526; Shute v. Patterson, 8 Cir., 1906, 147 F. 509. This of course does not mean that the proceedings shall go forward before adjudication without any one representing the estate of the deceased.    it is necessary to bring in the representatives of the decedent by appropriate proceeding. In re Schwab, supra, 83 F.2d at page 529. As was said in Shute v. Patterson, supra, 147 F. at pages 512, 513: It is necessary that upon the death of the bankrupt before adjudication there should be brought into the proceedings, by personal or substituted service as conditions require, those who in law represent his estate.    We are of the opinion that the heirs and personal representatives of the deceased bankrupt should be brought in before adjudication, and that in doing so the court of bankruptcy may after the appropriate orders frame its process, personal or substituted, in analogy to the rules prescribed by the bankruptcy act for process to a bankrupt. (Italics supplied.) Before the court could have ordered bankruptcy adjudication and liquidation in this case it was necessary to notify the non-resident Irahola of the proceedings in the same manner as if he were an original debtor. We must determine the proper method of bringing a non-resident debtor into the proceedings. This requires an examination of the Federal Rules of Civil Procedure and the Bankruptcy Act. The Federal Rules provide: These rules    do not apply to proceedings in bankruptcy    except in so far as they may be made applicable thereto by rules promulgated by the Supreme Court of the United States. Rule 81(a)(1), Federal Rules Civil Procedure. The Supreme Court has promulgated a general order in bankruptcy which provides that the new Federal Rules shall insofar as they are not inconsistent with the [Bankruptcy] Act or with these general orders, be followed as nearly as may be. General Order No. 37. Rule 4(e), Federal Rules Civil Procedure provides: Whenever a statute of the United States or an order of court provides for service of a summons, or of a notice, or of an order in lieu of summons upon a party not an inhabitant of or found within the state, service shall be made under the circumstances and in the manner prescribed by the statute, rule, or order. Section 18, sub. a of the Bankruptcy Act, 11 U.S.C.A. § 41, sub. a, provides: Upon the filing of a petition for involuntary bankruptcy, service thereof, with a writ of subpena, shall be made upon the person therein named as defendant.    Such service shall be returnable within ten days, unless the court shall, for cause shown, fix a longer time, and shall be made at least five days prior to the return day, and in other respects shall be made in the same manner that service of such process is had upon the commencement of a suit in equity in the courts of the United States; but in case personal service cannot be made within the time allowed, then notice shall be given by publication in the same manner as provided by law for notice by publication in suits to enforce a legal or equitable lien in courts of the United States, except that, unless the court shall otherwise direct, the order shall be published only once and the return day shall be five days after such publication. It would appear to be clear that the applicable statute in this case is section 18, sub. a of the Bankruptcy Act. It was so held in Re Clarke, D.C.N.Y.1940, 35 F. Supp. 227. See the Note on Rule 4(e) written by the Federal Rules Advisory Committee which states that the statute providing for service in cases involving the enforcement of a legal or equitable lien against a non-resident is continued by Rule 4(e). 28 U.S.C.A. § 118. Since personal service could not be made on Irahola because he was not in the district, and since it does not appear that personal service upon him outside of the district was ever made or was practicable, it follows that notice should have been given by publication in the same manner as provided by law for notice by publication in suits to enforce a legal or equitable lien in courts of the United States, except that, unless the court shall otherwise direct, the order shall be published only once and the return day shall be five days after such publication. This Section 18, sub. a has been held to have adopted the publication provision of Section 57 of the Judicial Code, 28 U.S.C.A. § 118. Bauman Diamond Co. v. Hart, 5 Cir., 1911, 192 F. 498; In re Risteen, D.C.Mass.1903, 122 F. 732. Section 57 provides:    Where such personal service upon such absent defendant or defendants is not practicable, such order shall be published in such manner as the court may direct, not less than once a week for six consecutive weeks. In case such absent defendant shall not appear, plead, answer, or demur within the time so limited, or within some further time, to be allowed by the court, in its discretion, and upon proof of the service or publication of said order and of the performance of the directions contained in the same, it shall be lawful for the court to entertain jurisdiction, and proceed to the hearing and adjudication of such suit in the same manner as if such absent defendant had been served with process within the said district; but said adjudication shall, as regards said absent defendant or defendants without appearance, affect only the property which shall have been the subject of the suit and under the jurisdiction of the court therein, within such district   . Therefore it was necessary to have served Irahola by at least one publication. This was not done. However, about five letters were sent to Irahola, two from the court, and three from the attorney for the creditors. Only one of these letters, the first one sent by the court, was returned. We may presume that the other letters were received by him. Since Irahola at least received an equivalent of the statutory method, it might be argued that he had been brought into the proceedings properly. Nevertheless, the statute provides a precise method for service. To hold that the statutory method need not be observed where an equivalent alternative has been employed would open the way for a great deal of litigation and might result in complicated methods of procedure. In the matter of service, it is essential that there be strict observance of the statute. No great burden is placed on the parties in requiring this. There was no publication in this case, and, therefore, Irahola was not brought into the proceedings properly. It follows that the order adjudicating the estate in bankruptcy and directing liquidation was made erroneously and must be set aside. Since the court was without jurisdiction to adjudicate the estate in bankruptcy, and since in this case the reference of the restraining order to the referee and the appointment of the receiver were necessarily bound up with the adjudication in bankruptcy, it follows that these orders were erroneous and must be set aside. The second, third and sixth orders are set aside; the appeals from the first, fourth and fifth orders are dismissed, and the case is remanded to the District Court for further proceedings not inconsistent with this opinion. The appellants recover costs of appeal.