Katchen v. Landy, 382 U.S. 323 (1966)

Katchen v. Landy

No. 28

Argued November 8, 1965
Decided January 17, 1966
382 U.S. 323

CERTIORARI TO THE UNITED STATES COURT OF APPEALS

FOR THE TENTH CIRCUIT

Syllabus

Petitioner, a corporate officer, was an accommodation maker on notes of the corporation to two banks. After the corporation suffered a serious fire, its funds and collections were placed in a trust account under petitioner’s control. Petitioner made payments on the notes from this account within four months of the bankruptcy of the corporation. Two claims were filed by petitioner in the bankruptcy proceeding, one for rent due him and one for a payment on one of the notes from his personal funds. The trustee asserted that the payments from the trust fund to the banks were voidable preferences and demanded judgment for the amount of the preferences. The referee overruled petitioner’s objection to his summary jurisdiction and rendered judgment for the trustee on the preferences. The District Court sustained the referee, and the Court of Appeals affirmed the judgment for the amount of the preferences.

Held: A bankruptcy court has summary jurisdiction to order the surrender of voidable preferences asserted and proved by the trustee in response to a claim filed by the creditor who received the preferences. Pp. 327-340.

(a) While the Bankruptcy Act does not expressly confer summary jurisdiction to order claimants to surrender preferences, the scope of summary proceedings is determined by consideration of the structure and purpose of the Act as a whole and the particular provisions of the Act in question. P. 328.

(b) Summary disposition is one of the means chosen by the Congress to effectuate its purpose of securing prompt settlement of bankrupt estates. Pp. 328-329.

(c) The basically important power granted by § 2a(2) of the Act to "allow," "disallow" and "reconsider" claims is to be exercised in summary proceedings and not by the slower and more expensive process of a plenary suit. Pp. 329-330.

(d) The trustee’s objections under § 57g of the Act, which forbids allowance of a claim to a creditor who has received preferences "void or voidable under this title" without surrender of the preferences, is part of the allowance process, and is subject to summary adjudication by a bankruptcy court. Pp. 330-331.

(e) Section 60 of the Act, which deals with preferences and their voidability and confers concurrent jurisdiction on state courts and federal bankruptcy courts to entertain plenary suits to recover preferences, applies only "where plenary suits are necessary," and thus contemplates nonplenary recovery proceedings. P. 331.

(f) Since summary jurisdiction is available to determine the issue of preference absent a demand for surrender of the preference, it is also available to order return of the preference. This follows because a bankruptcy court, in passing on a trustee’s § 57g objection, must determine the amount of preference, if any, so as to ascertain whether the claimant, should he return the preference, has satisfied the condition imposed by § 57g on allowance of the claim. Pp. 333-334.

(g) When a bankruptcy court has dealt with the preference issue under its equity power, nothing remains for adjudication in a plenary suit, as the normal rules of res judicata and collateral estoppel apply. P. 334

(h) Although petitioner might be entitled to a jury trial on the preference issue if he presented no claim in the bankruptcy proceeding and awaited plenary suit by the trustee, he is not so entitled when the issue arises as part of the processing of claims in bankruptcy proceedings, triable in equity. Pp. 336-337.

(i) The doctrine of Beacon Theatres v. Westover, 359 U.S. 500, and Dairy Queen v. Wood, 369 U.S. 469, that

where both legal and equitable issues are presented in a single case, "only under the most imperative circumstances . . . can the right to a jury trial of legal issues be lost through prior determination of equitable claims,"

is not applicable here where there is a specific statutory scheme providing for the prompt trial of disputed claims without a jury. Pp. 338-340.

336 F. 2d 535, affirmed.