Court Opinion

ID: 8787352
Source: CourtListenerOpinion
Date Created: 2022-11-26 13:39:02.725688+00
Date Added: 2024-06-11T17:03:09.225910
License: Public Domain

TRIEBER, District Judge
(after stating the facts as above). [1] Section 57d of the Bankruptcy Act (Act July 1, 1898, c. 541, 30 Stat. 560, 561 [U. S. Comp. St. 1901, p. 3443]) provides:
“Claims which have been duly proved, shall be allowed upon receipt by or upon presentation to the court, unless objection to their allowance shall bo made by parties in interest, or their consideration be continued for cause by the court upon its own motion.”
Section 57k provides:
“Claims which have been allowed may be reconsidered for cause and disallowed or rejected in whole or in part, according to the equities of the case, before, but not after, the estate has been closed.”
The only question involved is whether, in view of the fact that these appellants are the only persons who will be affected by the allowance of the claim of appellee, they being the only stockholders upon whom an assessment has been made, are “parties in interest” within the meaning of the statute. If this large claim of appellee is allowed, it will have to be paid by appellants, while, on the other hand, if the claim is found to be-fraudulent or unjust, and is disallowed or expunged, they will be relieved of paying the assessment made by the referee for the purpose of paying off this claim.
We are of the opinion that by “parties in interest” in this section of the Bankruptcy Act are included all persons who have an interest in the res which is to be administered. In Re Sully, 152 Fed. 619, 81 C. C. A. 609, it was held:
“The term ‘parties in interest’ applies to those who have an interest in the res which is 1o lie administered and distributed in the proceeding, and does not include those who are merely debtors or alleged deistors of the bankrupt.”
In the instant case the only parties who have any interest in the res of this bankrupt are the appellants, for they are the only persons who can be injuriously affected by the result of the determination of this claim of appellee.
It is true that it has been determined by this court in Chatfield v. O’Dwyer, 101 Fed. 797, 42 C. C. A. 30, that an appeal from an order of the District Court allowing a claim presented by a creditor against the estate of the bankrupt, and which was objected to and contested, by another creditor, can only be taken by the trustee in bankruptcy as. the representative of all the creditors, but it was further held in that case, if the trustee in such a case refuses to appeal from the allowance of the claim on the request of the objecting creditor, the latter may move the District Court to direct the trustee to take an appeái as requested, or to permit the creditor to prosecute an appeal in the name of the trustee. In that case the trustee was not a party to the petition for review, nor was there any effort made to have him becoriie a party to or permit the appellants to take an appeal in his name, while in the case at bar the trustee had joined appellants in the petition for review, and when it came up for hearing withdrew.
In Re Stern, 144 Fed. 956, 959, 76 C. C. A. 10, 13, the trustee had refused to move for a re-examination of a claim which had been al*842lowed, and upon application to the referee he declined to direct the trustee to file such a motion. The matter having been certified to the' District Judge, he sustained the action of the referee, holding:
“That the trustee is in a position to know or ascertain the facts, and his determination of such a matter will not be controlled or interfered with at the instance of others, who have no right to interpose such objection or plea.”
Thereupon the cause was brought to this court upon petition for revision, and was reversed. Judge (now Mr. Justice) Van Devanter, delivering the opinion of the court, said:
“In passing the order, now sought to be reviewed, the learned District Judge omitted a duty of supervision which cannot be put aside, and accorded to the action of the trustee a measure of consideration to which it is not entitled. Particularly is it apparent that the trustee's action was accorded undue consideration, when it is considered that from the inception of these proceedings he was represented and presumably advised by counsel who was also representing the creditor whose claim was challenged. Of course, this ought not to have been, no matter what may have been the belief of counsel respecting its propriety.”
In Re Hudson River Electric Power Co. (D. C.) 173 Fed. 934, 956, it was held that a receiver appointed by a Circuit Court for the property of a corporation has the right to contest proceedings in bankruptcy against such corporation, and upon appeal this case was affirmed in 183 Fed. 701, 106 C. C. A. 139, 33 L. R. A. (N. S.) 454.
In Henry v. Jeanes, 47 Ohio St. 116, 24 N. E. 1077, it was held that a stockholder of a corporation, where the corporation refuses to appeal from judgments affecting its interests, may appeal under a statute allowing an appeal to “a party or other person directly affected.”
Under these circumstances, and especially in view of the fact that the evidence in the record shows that many of the items of appellee’s claim are at least suspicious, and that the referee, after a full hearing, had expunged the entire claim as fraudulent, appellants, as the only parties affected by the allowance of the claim, ought not to be deprived of the right to be heard. This is especially true, in view of the fact that they had no notice of the motion for rehearing and the peculiar circumstances under which the consent decree allowing the claim of appellee was entered.
[2] Nor were the- appellants guilty of any laches, for immediately after learning of the action of the referee allowing the claim of appellee they filed the motion to set it aside.
We do not desire to express any opinion as to the merits of Mr. Dutton’s claim, but we are of the opinion that the court below erred in refusing to pass upon the merits of the case, and the cause is reversed, and remanded to the District Court, with directions to permit the appellants to proceed in the name of the trustee, to instruct the referee to permit them and the appellee to appear within a reasonable time, after at least 10 days’ notice to the parties or their attorneys of record, to present evidence, and then to hear and decide the case upon its merits, and that upon such decision the court take such further proceedings as are just and equitable.