Court Opinion

ID: 9444302
Source: CourtListenerOpinion
Date Created: 2023-08-03 20:55:47.61112+00
Date Added: 2024-06-11T17:29:48.293384
License: Public Domain

PICKETT, Circuit Judge
(dissenting in part).
I concur in the majority opinion except that part which upholds the so-called1 “turnover order”. This order conditions the allowance of the Central States* claim as a common creditor upon its delivery to the trustee of 867,191 pounds of milo, or its value, fixed at $19,771.95.
The referee found that this amount of grain did not belong to the bankrupt, but was the property of those who had deposited it in the bankrupt’s elevator. Concededly, this grain could not become an asset of the bankrupt estate. When-received, the trustee will deliver it, or its value, to the depositors. It will not in the slightest degree affect the assets of the bankrupt. It is true that a deter*47mination of the title to the grain may affect the amount of the claim of the depositors or Central States, but it will not affect the bankruptcy estate. So long as Central States retains the grain, its claim will be reduced and the claim of the depositors will be increased in the amount of the value of the grain. If the grain was wrongfully delivered, the depositors could proceed directly against Central States to recover the grain, or the amount which they have been damaged, and I think it is a matter to be settled between the claimants outside the bankruptcy’ court. If this type of a proceeding, as it related to this particular grain, is sanctioned, it will permit the use of the broad powers of the bankruptcy court to be used in a summary manner to adjudicate claims to property in which the trustee has no interest and will result in no benefit to the bankrupt estate.
It is recognized that the bankruptcy court does not have jurisdiction over controversies exclusively between third parties which do not involve the bankrupt or his property. Evarts v. Eloy Gin Corp., 9 Cir., 204 F.2d 712, certiorari denied 346 U.S. 876, 74 S.Ct. 129; In re Lubliner & Trinz Theatres, 7 Cir., 100 F.2d 646; Smith v. Chase Nat. Bank of City of New York, 8 Cir., 84 F.2d 608. It is said that the bankruptcy court does, however, have jurisdiction and power to determine disputes between third parties concerning the ownership of property which does not belong to the estate, if it is impossible to completely administer the bankrupt estate without determining that dispute. In re Burton Coal Co., 7 Cir., 126 F.2d 447, and In re International Power Securities Corp., 3 Cir., 170 F.2d 399, 405, are cited as authority for these statements. The proceedings in these cases were for reorganization. In the Burton Case there was a dispute as to the ownership of stock in the bankrupt corporation which was seeking a reorganization. The court there said that the reorganization could not proceed without a settlement of that dispute. In the International Power Case, the question of jurisdiction arose over the right to enjoin or dispose of bonds of the corporation which was seeking, reorganization. In upholding its jurisdiction, the court stated that the “reorganization could not be formulated prior to the resolution of the questions of ownership of the bonds and the asserted equitable rights.” The facts in those cases clearly distinguish them from this case. I have found no case which has upheld the jurisdiction of the bankruptcy court in an ordinary bankruptcy proceeding to enter a turnover order with respect to property which was not claimed as the property of the bankrupt estate. Collier on Bankruptcy, 14th Ed., Sec. 23.10. I would hold that the bankruptcy court does not have jurisdiction to determine the depositors’ title to grain which had been delivered to a purchaser prior to bankruptcy. It appears to me that the trustee is assuming the burdens and expense of the grain depositors in this matter.
In determining the amount of grain which Central States was required to account for and turn over, the referee allowed Central States to retain only the overage which the bankrupt owned at the date the purchase was made. The purchaser of grain from a warehouseman who receives delivery at a time when the warehouseman has a shortage is as a general rule, liable to the depositors of grain for the amount in excess of his pro rata share. 56 Am.Jur. Warehouses Sec. 208. But, if subsequent to the excessive delivery the warehouseman substitutes other grain therefor and places it in the commingled mass, then the title to the substituted grain is vested in the depositors and holders of the warehouseman’s receipts. State ex rel. Her-mann v. Farmers Elevator Co., 59 N.D. 679, 231 N.W. 725, 727; Carson State Bank v. Grant Grain Co., 50 N.D. 558, 197 N.W. 146; Kastner v. Andrews, 49 N.D. 1059, 194 N.W. 824, 827-829; Hall v. Pillsbury, 43 Minn. 33, 44 N.W. 673, 7 L.R.A. 529; National Exchange Bank *48v. Wilder, 34 Minn. 149, 24 N.W. 699. The evidence does not disclose, and the referee made no finding, as to the condition of the bankrupt’s grain account after delivery to Central States was made. Consequently, I am of the view that the turnover order was based upon improper criteria and cannot stand.