SAMEL et al. v. DODD, 142 F. 68

MAXEY, District Judge, áfter stating the facts, delivered the opinion of the court. The following propositions seem to be settled law:

(1) In proceedings like the present the Court of Appeals may superintend and revise the action of the District Court only in matters of law. Bankr. Act July 1, 1898, c. 541, § 24b, 30 Stat. 553 [U. S. Comp. St. 1901, p. 3432]; Bank v. Title & Trust Co., 198 U. S. 280, 25 Sup. Ct. 693, 49 L. Ed. 1051; Mueller v. Nugent, 184 U. S. 1, 22 Sup. Ct. 269, 46 L. Ed. 405; In re Purvine (5th Circuit) 96 Fed. 192, 37 C. C. A. 446; In re Rosser (8th Circuit) 101 Fed. 562, 41 C. C. A. 497; Printing Company v. Brewing Company (6th Circuit) 101 Fed. 699, 41 C. C. A. 614; In re Richards (7th Circuit) 96 Fed. 935, 37 C. C.

A. 634; In re Taft (6th Circuit) 133 Fed. 511, 66 C. C. A. 385; In re Pettingill & Co. (C. C. A. 1st Circuit) 137 Fed. 840; In re O’Connell (C. C. A. 1st Circuit) 137 Fed. 838. It was further held, in the case of In re Pettingill & Co., supra, that the opinion of the trial court may be looked to for the purpose of determining in a general way the propositions on which the case has been disposed of, and especially the questions of law which were passed on.

(2) Jurisdiction exists in courts of bankruptcy to require, in a

summary manner, the bankrupt to pay over money, or to surrender other property in his possession and undér his control belonging to his estate. And for disobedience of such order the court has the power, by attachment for contempt, to enforce compliance. Mueller v. Nugent, supra; Trust Co. v. Wallis (3d Circuit) 126 Fed. 464, 61 C. C. A. 342; In re Purvine, supra; Boyd v. Clucklich (8th Circuit) 116 Fed. 131, 53 C. C. A. 451; In re Rosser, supra.

(3) The order to pay over money, or to surrender other property as the case may be, in the possession of the bankrupt and forming part of his estate, is not an order for the payment of a debt, but an order for the surrender of assets of the bankrupt placed in custodia legis by the adjudication; and his commitment upon refusing to comply with the order is not imprisonment for debt. Mueller v. Nugent, supra; In re Purvine, supra; In re Rosser, supra.

Tested by the principles of law above announced, and taking the facts as they are embodied in the opinion of the trial court, the question arises: Was the order, requiring the petitioners to pay over to the trustee the sum of $2,417.83 a valid order? The trial court found, as matters of fact, that a large amount of goods, not specifically described, was withdrawn by the bankrupts from their stock; that such goods were held by them in some way in fraud of their creditors; and that it was within the power of the bankrupts to produce the same and turn them over to the trustee.

The bankrupts, by the terms of the order, were adjudged guilty of contempt “in failing and refusing to turn over to the trustee assets belonging to the bankrupts’ estate, in violation of law.” And it was further ordered and adjudged, following the language of the order, “that said named parties pay over to Harry Dodd, the trustee in bankruptcy, the sum of $2,417.83,” and upon failure to make such payment they were ordered committed to jail.

It is thus observed that the court found goods, wares, and merchandise to be in possession of the bankrupts, and, in effect, rendered judgment for their valué, and ordered the commitment of the bankrupts until the amount should be paid. We are of the opinion that the order cannot be sustained. If the bankrupts had in their possession merchandise, which should have been delivered to the trustee, the appropriate order would have been for the delivery of merchandise. If they had money, which formed part of their estate, they should have been required to pay over money.

It should be borne in mind that the proceeding before us is not a plenary suit in equity, in which the court “may adapt its decrees to all the varieties of circumstances which may arise, and may vary, qualify, restrain, and model the remedy so as to suit it to mutual and adverse claims, controlling equities, and the real and substantial rights of all the parties.” 5 Enc. PL & Pr. 958. Nor is it such a suit at law in which the parties may, by appropriate action, recover specific property or its value. But the present proceeding is one of a

summary nature, and is invoked for the purpose of bringing within the reach and control of the bankruptcy court specific property found to be in the possession of the bankrupt and by him unlawfully withheld. The order should describe the property with reasonable certainty in order to assure its identity, and the command of the court to the bankrupt should be to surrender the very property sought to be recovered.

In such cases the order to deliver should be based upon clear and convincing proof that the party charged has possession and control of the property, since the penalty of disobedience is imprisonment for contempt. The order operates in personam, upon the person of the offender, by requiring him to do the thing commanded upon pain of punishment for refusal; and such an order is erroneous, as matter of law, unless it plainly and affirmatively appear from the record that he has the power to comply with its requirements.

If, having the property, he fail to surrender it in obedience to the order of the court, he voluntarily submits himself to the consequences. But it is not within the power of the court, in such a proceeding, to render judgment for the value of property ascertained to be in the possession of, and contumaciously withheld by, a bankrupt, and attach him for contempt upon his refusal to pay. Such procedure would approach dangerously near the line, if it did not overstep it, of imprisonment for debt.

While bankruptcy courts are invested with power, as we have already shown, to require bankrupts to surrender their property and to enforce obedience to the order by attachment for contempt, yet the power is “far-reaching and drastic and should be exercised with cautious discretion.” Indeed, it may be said that it should never be exercised, except in a plain case, and always with due regard to the constitutional rights of the citizen. In this immediate connection the apt words of Mr.

Justice Bradley may be appropriately employed: “It is the duty of courts to be watchful for the constitutional rights of the citizen, and against any stealthy encroachments thereon. Their motto should be, ‘Obsta principiis. ” Boyd v. United States, 116 U. S. 635, 6 Sup. Ct. 535, 29 L. Ed. 746. It is objected, however, that the failure of courts to exercise with a firm hand the power to punish, by contempt proceedings, designing and unscrupulous bankrupts, would practically deprive the law of its efficacy and convert it into a mere shield for the protection of dishonest debtors.

In doubtful cases the power should not be exerted; and, in •view of the stringent provisions of law punishing fraudulent conduct and other forms of dishonesty on the part of the bankrupt, the objection is untenable. The original act not only contains ample provisions for the punishment of the bankrupt, in the regular mode of trial by jury, for false swearing and for the fraudulent disposition of assets (section 29, 30 Stat. 554 [U. S. Comp. St. 1901, p. 3433]), but

section 14 (30 Stat. 550 [U. S. Comp. St. 1901, p. 3427]), as amended by the act of February 5, 1903 (32 Stat. 797, c. 487 [U. S. Comp. St. Supp. 1905, p. 684]), renders it extremely difficult, if not impossible, for the contumacious or dishonest bankrupt to secure a discharge from his indebtedness. “It will thus be seen,” said Judge Caldwell, speaking for the court in Boyd v. Glucklich, 116 Fed. 139, 140, 53 C. C. A. 459, 460, “that the act makes the amplest provision for punishing fraudulent conduct and false oaths on the part of the bankrupt.

The fraudulent bankrupt gains nothing by being adjudged a bankrupt, but is punished criminally and denied a discharge. And his creditors lose none of their rights, for they may resort to all the remedies known to the law for the collection of their debts against the bankrupt, the same as though he had never been adjudged a bankrupt.

There is therefore no occasion for the exercise by the court of bankruptcy of any doubtful power of jurisdiction, either for the purpose of punishing the bankrupt or protecting his creditors.” There appears in the record a brief statement filed by the court, in which the judge expressed the belief that the rule should not be enforced against Springer.

This statement then proceeds: “It may be that Springer was a party to this fraudulent withdrawal of goods, but the other parties to the transaction have, as I believe, for reasons of their own, refused to allow Springer to participate further in the proceeds of this fraudulent transaction, and he has no further control of the goods so withdrawn.” Counsel in the case have treated the statement of the judge as an order of court relieving Springer of the duty of complying with-the order of March 21, 1905. We do not so consider it. The statement does not purport to be an order, and it cannot be so construed.

It merely expresses belief that the rule should not be enforced against Springer without supplementing the expression of such belief with an appropriate order of the court. It may be that it was the purpose of the court to dismiss the proceeding as to Springer. If so, the purpose should be evidenced by a proper order. In the consideration of this case we have confined our attention to those points which we deemed it our duty to consider, and have refrained from discussing other questions suggested by counsel, for the reason that they do not properly arise upon a petition for revision.

The court is of the opinion that the order sought to be revised should be reversed, and the cause remanded for further proceedings not inconsistent with the views above expressed. And it is so ordered.