Court Opinion

ID: 8834028
Source: CourtListenerOpinion
Date Created: 2022-11-26 16:13:01.047768+00
Date Added: 2024-06-11T17:05:00.357129
License: Public Domain

On Rehearing.
The trustee in bankruptcy has moved for a rehearing and new trial upon the issues involved in its petition and order to show cause against the Ford Motor Company and in the counter' petition of the Ford Motor Company, as referred to and discussed in the opinion of this court already filed herein. It is alleged in the motion for a rehearing that the trustee— ,
“acquired possession of the property of the bankrupt not destroyed by fire, upon which tbe alleged lien of the Ford Motor Company existed, thereby vesting jurisdiction in this court to draw unto it all lien claimants holding liens upon such property, and to adjudicate their rights therein upon their liens in their entirety.”
The argument for the trustee runs as follows: It is said that two distinct issues were involved in this matter; that the first of such issues was the question as to the right of the trustee to obtain possession of the insurance policies involved and claimed to be held by the Ford Motor Company as an adverse claimant; that this question was disposed of by this court in its former opinion, the merits of which opinion counsel for the trustee disclaim any disposition to argue. It is, however, urged that the second issue involved was the question as to the jurisdiction of this court to compel the Ford Motor Company to litigate, in this court, the validity of its claim of lien under its chattel mortgage referred to in said opinion, and it is insisted that such opinion, in so far as it gives to the Ford Motor Company the right to join the trustee as a party to the suit commenced in the state court, should be amended so as to enable the trustee to litigate in the bankruptcy court the validity of said chattel mortgage. It is pointed out on behalf of the trustee that the tangible property of the bankrupt, covered by said alleged mortgage and not destroyed by the fire in question, came into the possession of the trustee. This possession by the bankruptcy court, through its trustee, of such tangible property, undoubtedly had the effect of conferring on said. court jurisdiction to determine, even in summary proceedings, the validity of said mortgage, at least as to such property so in the possession of' the bankruptcy court, and as to the proceeds of the bankruptcy sale of such property. The exercise, in a proper proceeding, of that jurisdiction, would necessarily require a decision as to the validity of such mortgage.^ Such jurisdiction, however, was not (and so far as this court is informed has not yet been) properly invoked by the trustee. The petition filed by the trustee with the referees for the summary order rendered thereon (which is the only petition of the trustee to which the attention of this court has been called) did not specify any grounds for its general allegation that the chattel mortgage in question was “invalid and void,” and the only prayer of such petition was for an order—
“directing said Ford Motor Company to forthwith deliver to petitioner, as trustee, said insurance policies hereinbefore enumerated, and that said Ford *345Motor Company file in this cause a petition setting forth their claim of lien to the moneys due under said insurance policies, to the end that the rights of the said Ford Motor Company to a lien upon the moneys due under said insurance policies, as against your trustee, may be determined by this court.”
The order here in question, after reciting that the trustee had filed a petition “praying that the Ford Motor Company,- a Delaware corporation, forthwith surrender to said trustee certain insurance policies in the possession of said Ford Motor Company, and further praying that the said Ford Motor Company file in this cause a petition setting forth its claim of lien to the moneys due under and by virtue of said insurance policies, to the end that its rights as such lien claimant should be determined by this court,” and after referring to the filing, by said Ford Motor Company, of a motion to dismiss said petition, concluded as follows:
“It is ordered that said motion to dismiss be, and tbe same is, hereby denied, and it is ordered, adjudged, and decreed that said Ford Motor Company do forthwith surrender to the trustee herein the insurance policies now in possession of the said Ford Motor Company, enumerated and set forth in the petition of the trustee herein; and it is further ordered, adjudged, and decreed that the said Ford Motor Company do, within 10 days from the entry of this order, file herein a petition setting forth its claim to ,a lien upon the moneys due the bankrupt herein under and by virtue of the terms of said insurance policies.”
That was the order whose correctness was challenged by the petition to review brotight before this court, and was the order which it was necessary to reverse for the reasons stated in the opinion of this court already filed in this cause.
It is contended on behalf of the trustee that the bankruptcy court acquires jurisdiction, and the trustee acquires title of all property and effects, of the bankrupt as of the date of the filing of the petition in bankruptcy, and that all proceedings bearing upon the validity of liens or the right to litigate the validity of liens from the date of adjudication must be in the District Court, except by consent of the trustee, and it is urged that, therefore, the order of the referee should be affirmed by this court. This contention overlooks the well-settled right of an adverse claimant of property in his possession to have his claim litigated in a plenary suit in any court of competent jurisdiction. There is nothing in the case cited by the trustee (In re Diamond’s Estate, 250 Fed. 70 [C. C. A. 6]), which is in conflict with such right or which supports the contention of the trustee in this connection. In that case the court pointed out that the question of ultimate importance, as to the proper remedy, was whether or not the petitioner, at the time bankruptcy intervened, was holding the funds there in question adversely to the bankrupts or their estate, in which event, it was remarked by the court, jurisdiction by summary proceedings would be lacking. The court, however, held:
That it was “well settled that the possession of an assignee for the benefit of creditors is not adverse to the bankrupt or his estate,” and that, as the possession of the petitioner (a receiver of a state court) in that cast; was essentially analogous to that of such an assignee, said receiver “was holding, not in his own right, but merely in an official capacity and as the hand of the court, and not adversely to the bankrupts or their estate, within the meaning of the law.”
*346In the case at bar the present record before this court indicates that the only effort thus far made by the trustee to have the validity of the chattél mortgage in question determined in this court has been the petition for the- summary order regarding the insurance policies mentioned, and the only order of the referee which this court has been called on to consider is the summary order in question, which was void because rendered without jurisdiction. This court has not, as the trustee seems to suppose, denied the right of such trustee to litigate in this court the validity of the chattel mortgage referred to, but its decision has necessarily been based upon, and limited to, the record presented.
The motion for a rehearing must be denied.