Louisville Trust Co. v. Comingor, 184 U.S. 18 (1902)

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Louisville Trust Company v. Comingor

No. 309

Submitted April 29, 1901
Decided January 27, 1902
184 U.S. 18

CERTIORARI TO THE CIRCUIT COURT

OF APPEALS FOR THE SIXTH CIRCUIT

Syllabus

A general assignment for the benefit of creditors had been made under the statutes of Kentucky in that behalf and a suit involving the administration and settlement of the assigned estate was pending in the state Circuit Court, when a petition in bankruptcy was filed against the assignors, to which the assignee was made defendant, although no special relief was prayed for as against him, but an injunction was granted restraining all the defendants from taking any steps affecting the estate, and especially in the suit pending in the state court. The assignee had paid into court in that suit a considerable amount of money which, on the trustee in bankruptcy’s becoming a party to the suit, had been paid over to him by order of the state court.

Rules were laid on the assignee by the referee in the bankruptcy proceedings to show cause why he should not pay over the sums of $3398.90 and of $3,200, alleged to belong to the bankrupts’ estate, in response to which the assignee showed as cause that he had paid the $3,200 to counsel for services rendered to him as assignee, and had retained and expended the $3,398.90 as his own commissions as such, all before the petition was filed, and he also, prior to the final order of the district court, objected before the referee, and before the district court, that he could not be proceeded against by summary process for want of jurisdiction. The rules were made absolute by the referee and the assignee ordered to pay over the two sums in question, and that action was affirmed by the district court. Held: (1) That as to these sums, the assignee asserted adverse claims existing at the time the petition was filed, which could not be disposed of on summary proceeding. (2) That the bare fact that the assignee was named as one of the defendants to the petition in bankruptcy did not make him a party to the bankruptcy proceedings for all purposes. (3) That, in responding to the rules laid on him, the assignee did not voluntarily consent that he might be proceeded against in that manner, and that jurisdiction to do so could not be maintained.

December 5, 1898, Simonson, Whiteson & Company, the firm consisting of three partners, made an assignment to Leonard Comingor for the benefit of their creditors under the statutes of Kentucky in that behalf, and a few days thereafter, Comingor brought suit involving the administration and settlement of the estate in the Circuit Court of Jefferson County.

The state statute provided, among other things, that the assignee should give bond with good security to be approved by the county judge, conditioned for the faithful discharge of his duties as assignee, and to be recorded in the county clerk’s office; that the assignee should be at all times subject to the orders and supervision of the county court, or the judge thereof in vacation, except as thereinafter provided; for the final discharge of the assignee on due notice, and that the assignee or any creditor or creditors representing one-fourth of the liabilities might bring suit in the circuit court for the settlement of the estate, whereupon the jurisdiction of the county court should cease, and the circuit court should have all the power and authority to administer and settle up the assigned estate conferred on the county court, in addition to its power and authority as a chancery court. Kentucky Statutes, 1899, p. 202, c. 7.

Certain creditors filed a petition in the Circuit Court of the United States for the District of Kentucky in bankruptcy, on February 14, 1899, against the firm, to which its members tendered a plea and answer. The ground on which the petition was based was that Simonson, Whiteson & Company had, within four months of the filing of the petition, made a general assignment under the statutes of Kentucky for the benefit of creditors to Comingor. The court adjudicated them bankrupts, 92 F. 904, and one of them prosecuted an appeal to the Circuit Court of Appeals for the Sixth Circuit, which, July 5, 1899, reversed the judgment, with directions to take further proceedings. 95 F. 948.

On September 20, 1899, adjudication was again awarded, and on a second appeal was affirmed February 12, 1900. 100 F. 426.

Comingor was made a defendant to the petition in bankruptcy as assignee, but no relief was prayed as against him, and he moved the court to dismiss the petition as to him for want of jurisdiction, and also, without waiving the motion, tendered an answer, but the motion was not acted on, nor was his answer filed.

April 1, 1899, an injunction was granted against Simonson, Whiteson & Company and Comingor from taking any steps affecting the bankrupts’ estate, and especially in the action in the Jefferson Circuit Court.

May 17, 1900, the case was referred to a referee, who, on May 28, without notice, entered an order that Comingor file with him an itemized and detailed statement showing his receipts and disbursements of the money and other assets belonging to the estates of Simonson, Whiteson & Company and its members. This Comingor did, the statement showing that he had received $92,865.77; that he had disbursed $19,876.73; that he had paid his counsel $3,200; that he had drawn as commissions $3,300; that he had paid over to the receiver of the state court $59,623.61, and that he had on hand $6,766.53. This sum of $6,766.53 was subsequently paid the trustee in bankruptcy.

June 20, 1900, the referee, on his own motion, entered an order appointing the Louisville Trust Company receiver, and directing it to apply to the Jefferson Circuit Court for an order directing the receiver of that court to pay over the entire fund in court, in Comingor’s action there, but providing that the trust company should not appear in the Jefferson Circuit Court as a party to that action, nor receive any less sum than the whole fund in that court. Application was accordingly made by the trust company, but the Jefferson Circuit Court declined to entertain the motion to withdraw the funds, because the trust company was not a party to the action and had no standing in court, but the circuit judge suggested that, when the trust company filed its petition asserting its claim to the fund, as provided by section 29 of the Code of Kentucky, the court would then be authorized to entertain such motions and make such orders in its behalf as might be necessary and proper.

The trust company appears to have been appointed trustee by the referee June 30, 1900, its bond as such trustee being then approved.

On the same day, the referee entered an order that the trust company file a petition to be made a party to the suit in the Jefferson Circuit Court, and thereupon such petition was filed by it as trustee, stating, among other things, that the officers of the court had been paid in full and had no claims on the fund in court, and that the fund, to-wit, $46,305.03, belonged to the creditors of the bankrupt concern, and that nobody else had any interest therein, neither officers, attorneys, nor anybody else, and praying that the court be directed to make the trust company a defendant, and that its petition be taken as an answer, and that the receiver of the said circuit court pay to petitioner the said sum of $46,305.03, and "for all further and proper relief." The Jefferson Circuit Court thereupon entered an order making the trust company a party defendant and directing that it be allowed to withdraw from the fund in court the sum of $46,305.03.

June 20, the referee, on his own motion, entered an order requiring Comingor and his counsel to appear and show cause three days thereafter why they should not pay over to the receiver the amount of the commissions and fees.

June 23, Comingor responded as to the sum of $3,398.90 that he had retained the same on account of his commissions as assignee before any bankruptcy proceedings were had, and that he relied on the fact that he would be entitled to more than that sum on the final settlement; that for services rendered to the estate he believed this Court would allow at least said amount; that he was a person of no means, and had used said money from time to time, relying on the fact that it belonged to him, and had none of it left, and that he was unable to pay said money into court, as he had no money or property of any kind.

The referee held the response insufficient, and made the rule absolute. The order to show cause made on the attorneys does not appear to have been pursued, but June 28, 1900, another order was made on Comingor to show cause why he should not be required to pay to the receiver the sums of money paid to them, amounting to $3,200 in all.

June 30, 1900, Comingor responded that he had paid the $3,200 to his attorneys for services rendered him as his counsel while acting as the assignee before any proceedings in bankruptcy were taken. He further alleged that he had no money or means of any kind with which to pay, and referred to his former response and made it a part thereof, and insisted that he ought not to be compelled to pay the amount claimed.

The referee adjudged this response insufficient, and made the rule absolute.

Comingor then prayed for a review by the district court in bankruptcy of the orders adjudging his responses insufficient, and ordering him to pay to the receiver the sums of $3,398.90 and $3,200 respectively.

The referee reported his findings to be that Comingor was entitled to no compensation whatever, and that he had no legal right to pay attorneys’ fees when no allowance had been made by the state court therefor, and that, in contemplation of law, he must be deemed to have the funds in his possession.

The district judge referred the matter back to the referee July 16, 1900, to take testimony as to the character and value of Comingor’s services and those of his counsel. The referee proceeded to do this, pending which, on November 10, Comingor tendered an amended response before the referee, setting forth that as was shown by the pleadings, records, and evidence in the case, and the entire proceedings had, neither that court nor the referee in bankruptcy had any jurisdiction, either of the respondent or the matter involved, to make any such orders or require respondent to answer thereto, because the records showed that all the transactions in reference to the two sums of money took place before the petition in bankruptcy was filed, and that neither that court nor the referee in bankruptcy could proceed against respondent as attempted by order or rule to pay over or by summary process. He prayed that the rule be discharged and the orders to pay be set aside. This amended response the referee declined to entertain, and it was again tendered in the district court on the filing of the referee’s report.

December 11, 1900, the referee reported the evidence and his conclusions thereon that neither Comingor nor his attorneys had rendered any services of value to the estate, and that their services had in fact been injurious to the creditors, but that the fees paid to the attorneys were usual and reasonable according to the scale of compensation allowed for such services by the state court in Louisville.

The district judge confirmed the report of the referee, and as to the objection of want of jurisdiction, held that it could not be entertained by the court for the reason that, by long acquiescence in that mode of procedure, respondent must be regarded as having consented thereto. Thereupon an order was entered dismissing the petition for review, and adjudging that Comingor pay to the trust company, as trustee, the said sum of $3,398.90 and $3,200, on or before February 16, 1901, to all of which Comingor excepted, and filed his petition for review in the Circuit Court of Appeals for the Sixth Circuit. That court entered an order staying proceedings in the district court, and thereafter on hearing reversed the decree of the district court affirming the orders of the referee requiring Comingor to pay to the trustee the sums aforesaid, with directions to set aside its order and decree, and the orders of the referee directing Comingor to pay the trustee in bankruptcy the moneys mentioned in said orders. 107 F. 898.

Certiorari from this Court was then granted. 181 U.S. 620.