Metz v. Knobel , 21 F.2d 317 ( 1927 )

21 F.2d 317 (1927)

METZ
v.
KNOBEL et al.

No. 363.

Circuit Court of Appeals, Second Circuit.

July 26, 1927.

Eugene S. Bibb, of New York City, and Allen & Fletcher, of Minneapolis, Minn. (John Marx, of New York City, of counsel), for appellant.

Levy & Levy, of New York City (Ellis V. Levy, of New York City, of counsel), for appellees.

Before MANTON, SWAN, and AUGUSTUS N. HAND, Circuit Judges.

SWAN, Circuit Judge (after stating the facts as above).

The judgment should have been brought up for review by writ of error rather than appeal. However, such errors of form may be ignored. Brown v. Leo, 12 F. (2d) 350 (C. C. A. 2).

The appellant, who will be referred to hereinafter as the plaintiff, states that the theory of his suit is recovery upon the decree entered by the referee in bankruptcy. His complaint is drawn on this theory. He pleads the proceedings in the bankruptcy court as he would plead a complete and final judgment for a sum of money, and he bases federal jurisdiction upon diversity of citizenship. Unfortunately for the plaintiff, he has misconceived the nature of the order made by the Minnesota referee. That order does not direct the defendants to turn over property or pay money to the plaintiff. It directs that the defendants' claim be disallowed, as was proper in view of the finding that they had received a voidable preference. It continues with a direction that their claim shall be allowed if they return within the time specified "said merchandise" transferred to them as a preference. Such an order the referee has jurisdiction to make upon hearing objections to a claim. See Lincoln v. People's Nat. Bank (D. C.) 260 F. 422; Woods v. Rapoport, 128 Wash. 140, 222 P. 220; Remington, Bankruptcy, § 942. But he would have had no jurisdiction to order a return of property held adversely or the payment of money in lieu thereof. See In re Bacon, 210 F. 129 (C. C. A. 2); Spears v. Frenchton, etc., Co., 213 F. 784 (C. C. A. 4); Remington, op. cit. § 647. The defendants' submission of their claim for allowance carries no consent to the referee's adjudicating any matter not pertinent to the allowance or disallowance of the claim. He may determine that a voidable preference has been received, which renders the claim disallowable under section 57g of the Bankruptcy Act (11 USCA § 93; Comp. St. § 9641). In re Dernburg, 5 F.(2d) 37 (C. C. A. 2). But he may not go further and order the return of the property or payment of its value. Fitch v. Richardson, 147 F. 197 (C. C. A. 1); In re Continental Producing Co. (D. C.) 261 F. 627; In re Patterson (D. C.) 284 F. 281. And his order did not attempt to do so.

The judgment must therefore be affirmed. We would not, however, be understood as agreeing with all of the statements in the opinion of the learned District Judge regarding the formal requirements of objections to allowance of a claim on the ground of preference. Nor does affirmance of the judgment mean that we consider the plaintiff precluded from instituting a proper suit to recover the property transferred as a preference. The learned District Judge intimated that in such a suit the bankruptcy proceedings, if valid, could be received as conclusive evidence of the issues properly before the referee. With this we agree; but it is unnecessary at this time to consider the objections raised by the defendants to the validity of the bankruptcy proceedings, nor the precise issues as to which the referee's order would be res adjudicata. See Ullman, Stern & Krausse v. Coppard, 246 F. 124 (C. C. A. 5); Woods v. Rapoport, supra; McCulloch v. Davenport Bank (D. C.) 226 F. 309; Lincoln v. People's Nat. Bank, supra.

The judgment is affirmed, with costs.