Court Opinion

ID: 9650912
Source: CourtListenerOpinion
Date Created: 2023-08-23 15:55:36.241182+00
Date Added: 2024-06-11T18:12:27.223036
License: Public Domain

HUTCHESON, Circuit Judge
(dissenting).
The suit, filed on the law side of the docket, was for moneys appellee had collected and retained as due him out of various bankrupt estates administered by him as referee in bankruptcy from January 1, 1927, to January 1, 1932. The claim was that the amount sued for, $2,644.48, represented moneys appropriated by him personally in various estates in excess of fees, costs, charges, and commissions allowed him by law, the general orders in bankruptcy, and the rules of the District Court, and therefore moneys which were the properties of the various estates administered. In addition to his defenses on the merits, appellee, by demurrers and pleas in bar, raised three objections to the maintenance. of the action: (1) The petition showed no right in law in appellant to the moneys or to maintain the suit. (2) If in law appellant ever had a right to sue, that right was barred by the two years statute of limitations of Texas. (3) That the wrongful receipt and retention of moneys which the suit charged against appellee constituted breaches of appellee’s bond as referee. That action on that bond within the two years fixed by statute was the exclusive remedy for misapplication of bankruptcy funds, and more than two years having elapsed since the breaches complained of, no action could now be maintained on it.
The District Judge thought that the Texas statute of limitations of two years had barred the suit, and that the general demurrer was well taken. He sustained the demurrer and the plea of two years’ limitation, and plaintiff declining to amend, dismissed the suit.
Appellant insists that the demurrer was wrongly sustained. It urges upon us that its contingent interest in the ultimate depositing with it- under sections 851, 852, title 28 U.S.C.A., of moneys paid into United States courts and unclaimed for five years, and specifically its interest under section 106, title 11 U.S.C.A., in unclaimed dividends in bankruptcy, give it a sufficient proprietary interest in the funds to support its suit. It insists, further that, wholly apart from this interest, it has the right— as the sovereign interested in and responsible for, the faithful and just administration and accounting — by officers of its-courts of bankruptcy, to sue in the interest of those entitled to them for moneys wrongfully diverted and withheld by its officers from the persons and estates of right entitled to them.
To appellant’s claim of a contingent proprietary interest in the funds under section 1061 appellee replies that that section provides, not for depositing unclaimed dividends with the United States, but for distributing them to others the statute names.
To the same claim advanced under sections 851, 852, he replies that those statutes have to do with and provide specific treatment 'for funds in the registry; they do not deal with the situation presented here, of moneys never covered into it.
We have held, in United States v. Cochrane, 87 F.(2d) 3, that under those sections the United States has a standing with regard to registry funds to oppose their being paid out to persons not entitled to them. But I agree with the majority that this is a different case. There the action and proceedings were provided for by statute. Here the right if it exists must be sought in other sources. If, therefore, I could agree with the majority that these statutes were the only possible basis of the claim of the United States to sue, I could agree with it that appellee’s demurrer was properly sustained. I think it plain, however, that wholly apart from these statutes, the United States by its petition made a sufficient showing to entitle it to sue, not indeed at law for itself, but in equity, and for the use of those at interest in the estates in question, to compel the referee to *803account to each, estate as, to, and restore to it for administration there, all moneys he withdrew from it in excess of his rightful withdrawals. This action, in the nature of a bill of peace to settle in one suit controversies with the referee arising in various estates, was, I think, properly maintainable in equity by the United States for the use of those at interest in the various estates. United States v. Bell Telephone Co., 128 U.S. 315, 9 S.Ct. 90, 32 L. Ed. 450; Curtner v. United States, 149 U. S. 662, 13 S.Ct. 985, 1041, 37 L.Ed. 890; In re Debs, 158 U.S. 564, 15 S.Ct. 900, 39 L.Ed. 1092; United States v. Rickert, 188 U.S. 432, 23 S.Ct. 478, 47 L.Ed. 532; Heckman v. United States, 224 U.S. 413, 32 S. Ct. 424, 56 L.Ed. 820. Cf. In re Singer Furniture Corporation (D.C.) 47 F.(2d) 780, and cases cited.
It is settled law that the United States may maintain a suit of this general nature on bonds of its court officers. United States v. Abeel (C.C.A.) 174 F. 12; United States v. Ward (C.C.A.) 257 F. 372. It is settled, too, generally, that suits brought by the United States as use plaintiff binds those for whom it sues. Heckman v. United States, 224 U.S. 413, 32 S.Ct. 424, 56 L. Ed. 820.
In my opinion neither any particular creditor interested in any of the estates, nor all of the creditors together, nor the United States could sue at law. The suit would have to be in equity for the use of the estates for a discovery of and accounting to them of moneys wrongfully withheld, with a reopening of the estates for a distribution of any moneys recovered as unadministered assets. In this view the limitation defenses appellee sets up will not avail him, for the suit being in equity to recover assets, and for an accounting, the statutes of limitation appellee invokes will not apply, while for the reopening of estates to recover, and administer undistributed assets, no limitation is' provided.
In this view the conclusion of the District Judge that appellant’s suit was at law in right of creditors having causes of action for debt against the referee, and since their actions, if so brought, would have been barred by the Texas statute of limitations of two years, appellant’s action would be also, will not do. In this view the conclusion of the majority that the United States cannot sue in equity will not do either.
The District Judge did not pass upon appellee’s third defense, that the action the statute gave on the referee’s bond was exclusive, and precluded the United States from bringing any other action to recover misappropriated funds, but the majority does. This defense, in my opinion, is no better than the other two. Nothing in the statute, requiring the referee to furnish a bond and giving an action on it, in terms makes that action exclusive. No reason suggests itself why it should be regarded so. It is only where the action provided by statute is a special one, given to enforce a right the statute itself creates, Globe Newspaper Co. v. Walker, 210 U.S. 356, 28 S.Ct. 726, 52 L.Ed. 1096; Mingus v. Wadley, 115 Tex. 551, 285 S.W. 1084; Progressive Miners, etc., v. Peabody C. Co. (D.C.) 7- F.Supp. 340, or there is something in the terms of the statute, or in its necessary effect, which takes away an action already existing at law or in equity, that a statutory action can be deemed an exclusive one. In a situation of the kind presented here, every reasonable presumption should be against, rather than for, the view that the statutory action on the referee’s bond was intended to be exclusive so as to forbid or prevent the maintenance by the United States of an equitable action, existing under general principles of law, to recover property diverted by him. United States v. Whited & Wheless, 246 U.S. 552, 38 S.Ct. 367, 62 L.Ed. 875; Cf. Dismuke v. United States, 297 U.S. 167, 172, 56 S.Ct. 400, 403, 80 L.Ed. 561; Shriver v. Woodbine Bank, 285 U.S. 467, 478, 52 S.Ct. 430, 434, 76 L.Ed. 884.
The fact that the suit was erroneously docketed and treated by the parties as on the law side of the court, while misleading, should not have been determinative of the case; for under the Judicial Code, § 274a, section 397, title 28 U.S.C.A.2 the District Judge, the case having gone no further than a hearing on the demurrer, should have directed such amendment of the pleadings, if any, as was found necessary, and should have proceeded with the *804cause as one in equity, to determine the questions arising on the merits of the action. Liberty Oil Co. v. Condon Nat. Bank, 260 U.S. 235, 43 S.Ct. 118, 67 L.Ed. 232; Schoenthal v. Irving Trust Co., 287 U.S. 92, 53 S.Ct. 50, 77 L.Ed. 185; Cf. Wood v. Phillips (C.C.A.) 50 F.(2d) 714, at page 719; American Falls Milling Co. v. Standard B. & D. Co. (C.C.A.) 248 F. 487; Equitable Trust Co. v. Denver & R. G. R. Co. (C.C.A.) 250 F. 327; Central Florida Lumber Co. v. Taylor-Moore Syndicate (C.C.A.) 51 F.(2d) 1; Diamond Alkali Co. v. P. C. Tomson & Co. (C.C.A.) 35 F.(2d) 117; Clarksburg Trust Co. v. Commercial Casualty Ins. Co. (C.C.A.) 40 F.(2d) 626; Cf. Irons v. Smith (C.C.A.) 62 F. (2d) 644.
I respectfully dissent.

 “§ 106. Unclaimed dividends. (a) Dividends which remain unclaimed for six months after the final dividend has been declared shall be. paid by the trustee into court.
“(b) Dividends remaining unclaimed for one year shall, under the direction of the court, be distributed to the creditors whose claims have been allowed but not paid in full, and after such claims have been paid in full the balance shall be paid to the bankrupt. In case unclaimed dividends belong to minors such minors may have one year after arriving at majority to claim such dividends.”

 That section provides that “In case any United States court shall find that a suit at law should have been brought in equity * * * the court shall order any amendments to the pleadings which may he necessary to conform them to the proper practice. * * * The cause shall proceed and be determined upon siieh amended pleadings.”