Court Opinion

ID: 9419813
Source: CourtListenerOpinion
Date Created: 2023-08-02 22:51:35.845844+00
Date Added: 2024-06-11T17:22:20.746416
License: Public Domain

Me. Justice Rutledge..
I concur in the result. In my judgment it is necessary, in this case, to do no more than to rule that equitable principles, applicable in bankruptcy in accordance with *741Pepper v. Litton, 308 U. S. 295, and prior decisions, do not require reexamination by the bankruptcy court, in the circumstances now presented, of the foundations of the judgment which is the basis of the claim in issue. If, as the Court declared in Pepper v. Litton, the bankruptcy court has power to reject claims, even when previously allowed, “in whole or in part ‘according to the equities of the case/ ” 308 U. S. at 304/ see 11 U. S. C. § 93 (k), I find no reason for qualifying that rule in this case. It necessarily comprehends that the bankruptcy court in the allowance or rejection and ordering of claims shall not be bound by any broad or rigid rule of res judicata. That, I think, is the essential ruling of the Pepper case.1 2
On the other hand, prior adjudication of the very grounds alleged for disallowing or subordinating a judg*742naent claim, cannot be irrelevant to what equitable principles may require the bankruptcy court to do in disposing of the claim. And the same may be true also of prior failure to secure such an adjudication when adequate opportunity is afforded by proceedings instituted to set aside or modify the judgment. Cf. Handlan v. Walker, 200 F. 566. Sound policies of judicial administration, affecting both the bankruptcy court and the court rendering the judgment, may have a similar bearing.
In this case the two separate proceedings had in the District Court for the Southern District of California afforded perhaps more than adequate opportunity for adjudication of the issues now raised in the bankruptcy court, once to the bankrupt, once to his trustee. These proceedings were allowed to be terminated adversely in the one case without appeal, in the other after adverse decision on appeal and without application for certiorari. Jackson v. Heiser, 111 F. 2d 310. I do not think equity requires a third opportunity to be afforded by the bankruptcy court. On this ground I agree that the judgment should be reversed.

 “Allowance and disallowance are judicial acts. ... In passing on an allowance of claims the court sits as a court of equity, which gives it far-reaching powers ‘to sift the circumstances surrounding any claim to see that injustice or unfairness is not done in administration of the bankrupt estate.’ [Pepper v. Litton, 308 U. S. 295, 308.] Mere reasons of equity may sometimes require that accreditor’s claim be either totally disallowed or subordinated to the claims of all or of certain other general creditors .... Equities to be weighed in connection with the allowance of a claim may vary.in importance. They may in extreme cases be strong enough to warrant disallowance absolutely and entirely. In other cases equity may be satisfied with a mere ‘subordination’ or postponement of a claim, and its relegation to a rank inferior to that of all general creditors or of a particular group.” 3 Collier, Bankruptcy (14th ed.) 185-186. See also 3 id. at 1800-1801.
11 U. S. C. § 93 (a) provides: “A proof of claim shall consist of a statement under oath, in writing and signed by a creditor, setting forth the claim; the consideration therefor; whether any and, if so, what securities are held therefor; and whether any and, if so, what payments have been made thereon; and that the claim is justly owing from the bankrupt to the creditor.” (Emphasis added.)

 The case has been so read. Citing it, 3 Collier, Bankruptcy (14th ed.) 1800, says: “The doctrine of res judicata, as applied to the bankruptcy court in deciding whether a claim should be allowed, disallowed or subordinated, is subject to the paramount equitable powers of bankruptcy courts to prevent the perpetration of fraud and collusion.”