Court Opinion

ID: 8793196
Source: CourtListenerOpinion
Date Created: 2022-11-26 13:59:08.235272+00
Date Added: 2024-06-11T17:03:28.634739
License: Public Domain

REED, District Judge
(concurring). I concur in the foregoing opinion for the reason that, by the decision of the referee approved by the *847judge upon petition for review, it is held in effect that the referee had no jurisdiction to require the Robson-IIilliard Grocery Company to appear and show cause why it should not be required to deliver its mortgage to the trustee and cancel the same of record. That the referee had jurisdiction (the property covered by the mortgage of the grocery company having been reduced to possession by the trustee as alleged) to make such an order upon proper notice to it and proof of the facts alleged in the petition asking for the order, I have no doubt.
The grocery company appeared in response to the notice and objected to “the matters involved in the petition of the trustee being heard or determined in a summary manner by said referee, or by said court, on the ground that said court had no jurisdiction to determine the same,” and that it did not consent to have said matters so tried, heard or determined in a summary manner. The District Court filed no opinion and stated no reason for approving the order of the referee sustaining this objection. If it was sustained upon the ground that the referee had no jurisdiction or authority to require the grocery company to appear and show cause why it should not cancel and surrender its mortgage if the facts alleged in the petition were true, its ruling was error, for the referee had undoubted jurisdiction to require it to do so, if the facts alleged were true. If it was sustained upon the ground that the referee had no authority to hear and determine the alleged matter summarily, then it does not appear that the referee would have done so (admitting, for the present without deciding, that he could not rightly do so), and it should have been presumed that he would have heard and determined the matter in such manner as would accord to the parties the right to establish their respective claims in the usual course of equitable procedure, and his ruling was premature.
The grocery company should have been required, it seems to me, to answer or otherwise take issue upon the facts alleged in the petition of the trustee, and the issues so raised should have been heard and determined in such manner as would accord to the grocery company the right to show if it could do so that its mortgage, though made within the four months immediately preceding the bankruptcy, was not in fact a preference within the meaning of the bankruptcy act.
When a referee in bankruptcy may, and when lie may not, determine summarily questions in bankruptcy proceedings pending before him is determined by the Supreme Court in Mueller v. Nugent, 184 U. S. 1, 22 Sup. Ct. 269, 46 L. Ed. 405, Louisville Trust Co. v. Comingor, 184 U. S. 18, 22 Sup. Ct. 293, 46 L. Ed. 413, First National Bank v. Title & Trust Co., 198 U. S. 280, 25 Sup. Ct. 693, 49 L. Ed. 1051, and other cases; and the rule held in those cases has never been departed from, so far as I can discover, but has been consistently adhered to in later cases by that court. Sec Collier on Bankruptcy (10th Ed., 1914) 489 et seq. That a court of bankruptcy, having the rightful custody of the bankrupt estate, has exclusive jurisdiction to determine all claims of third parties to such properly is not doubted.
In Re McMahon, 147 Fed. 684, it is expressly held at page 687 of the opinion (as I read it) 77 C. C. A. 668, that the proceedings to which *848McMahon was made a party to have the trust deed of the bankrupt to him canceled and set aside was not in the strict sense a summary proceeding, but was in its essence a petition to bring in persons (under section 2 [7] of the bankruptcy act [Act July 1, 1898, c. 541, 30 Stat. 545 (U. S. Comp. St. 1901, p. 3421)]), asserting liens upon the property of the bankrupt, for the purpose of determining the rights of such persons in such property, and is in substance a plenary suit; and such in effect is the nature of the proceedings here under review.
The petition to revise should be sustained, and the cause remanded to the court of bankruptcy, with directions to require the Robson-Hil-liard Grocery Company to answer or otherwise take issue upon the petition of the trustee, and to proceed in such manner as will accord to the parties a full hearing and opportunity to show whether or not the mortgage of the grocery company is or is not a voidable preference under the bankruptcy act.