Simonson v. Sinsheimer , 100 F. 426 ( 1900 )

TAFT, Circuit Judge,

after stating the facts as above, delivered the opinion of the court.

We are met at the outset of this appeal by the contention on the part of the appellees that, as the defendants were entitled to the trial by jury on the issue made by the petition and answer, the method of procedure in the court of appeals in reviewing the action of the court below should be in accordance with the rules which obtain in respect of the hearing of writs of error to judgments of law in cases where a jury is waived by stipulation in writing under a statute. The provisions of the bankrupt act relating to this subject are as follows:

Section 18d of the bankrupt act provides:

“If the bankrupt or any of his creditors shall appear within the time limited, and controvert the facts, alleged in the petition, the judge shall determine, as soon as may be, the issues presented by the pleadings, without the intervention of a jury, except in eases where a jury trial is given by this act, and make the adjudication or dismiss the petition.”

Section 19a provides:

“A person against whom an involuntary petition has been filed shall be entitled to have a trial by jury, in respect to the question of his insolvency, except as herein otherwise provided, and any act of bankruptcy alleged in such petition to have been committed, upon filing a written application therefor at or before the time within which an answer may be filed. If such application is not filed within such time, a trial by jury shall be deemed to have been waived.”

Section 25a provides:

’ “That appeals, as in equity cases, may be taken in bankruptcy proceedings from the courts of bankruptcy to the circuit court of appeals of the United States, and to the supreme court of the territories, in the following cases, to wit: (1) From a judgment adjudging or refusing to adjudge the defendant a bankrupt. * * * Such appeal shall be taken within ten days after the judgment appealed from lias been rendered, and may be beard and determined by tiie appellate court in term or vacation, as the case may be.”

The right of a trial by jury in bankruptcy proceedings is limited to the question of the insolvency of the defendant, and, as no such issue was made on this hearing by the petition and answer, there was no right to a trial by jury". It has been held by the supreme court of the United States in the case of West Co. v. Lea, 174 U. S. 590, 19 Sup. Ct. 836, 43 L. Ed. 1098, that, in a petition of involuntary bankruptcy founded on an assignment for the benefit of creditors, an averment of insolvency of the defendants raises an immaterial issue. Hence it cannot be that, under the petition and answer in this case, there was any right of trial by jury on either side. There is no difficulty in such a case, therefore, in following the section 25a, quoted above, and in treating this appeal as an appeal in equity would be treated. An appeal as in equity cases necessarily involves the idea of a re-examination by the appellate court of both the facts and the law of the case. Egan v. Hart, 165 U. S. 188, 17 Sup. Ct. 300, 41 L. Ed. 680; Dower v. Richards, 151 U. S. 663, 14 Sup. Ct. 452, 38 L. Ed. 305; In re Neagle, 135 U. S. 142, 10 Sup. Ct. 658, 34 L. Ed. 55. Hence it becomes our duty in this case to reexamine the evidence. After doing so, we concur with the district court in finding that the petitioning creditors did not become parties to the proceedings in the state court to settle the estate of the defendants under the deed of assignment, that they did not file their claims in that proceeding, and that they did not file their claims with the assignee before that proceeding was begun. The assignee wrote and asked from them statements of account, which they gave. It was not filed with the assignee for the purpose of becoming a party to the assignment, but was a mere answer to the inquiry. It may be that in Kentucky the mere fact that the claims filed with the assignee are not properly verified, as required by statute; does not render such claims null and void, but it certainly must appear that claims were in fact filed as such. A mere statement of account, not filed for the purpose of making the claim, cannot be treated as such.

Further, we are satisfied, from an examination of the evidence, that the reason why the petition in bankruptcy was not filed until February, 1899, though prepared shortly after the deed of assignment, ivas the promise of a speedy settlement and composition of the claims by the defendants, which might make unnecessary all the proceedings in bankruptcy. As the delay was due to the solicitation of the defendants, it could not have misled them into a change of any position. We further find that the indorsement of the order of sale in the state court, which was made in initials by one of the counsel for the petitioning creditors, was not made on behalf of those creditors, but was made on behalf of one of the bankrupts, not a party to this appeal, who desired, through the counsel, to learn what was being done in the state court. It was not binding upon the petitioning creditors, and was not intended to be.

The sale by the petitioners of two small bills of goods to the as-signee, and the receipt of the money for the same, was not an act which, was calculated to mislead any one into the belief that petitioners affirmed the validity of the assignment, and did not intend to impeach it. Haydock v. Coope, 53 N. Y. 68, is closely analogous upon this point, and supports our 'view. Under these circumstances,, we do not think that the petitioning creditors, by their delay, misled the defendants or others to beliei'e that they were not intending to file a petition in bankruptcy within the required four months. The averments of the answer upon which the other case turned have not been proven. The chief of them has been withdrawn.

If it is material, we cannot find from the evidence that these proceedings are not being prosecuted in good faith. They were projected soon after the assignment, and were withheld only for a composition which failed. The result is that the action of the district court iri adjudging the defendants to be bankrupt was correct. The order appealed from is affirmed.