Emerson v. Castor

236 F. 29, 149 C.C.A. 239, 1916 U.S. App. LEXIS 2242
CourtCourt of Appeals for the Sixth Circuit
DecidedOctober 12, 1916
DocketNo. 2829
StatusPublished
Cited by11 cases

This text of 236 F. 29 (Emerson v. Castor) is published on Counsel Stack Legal Research, covering Court of Appeals for the Sixth Circuit primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Emerson v. Castor, 236 F. 29, 149 C.C.A. 239, 1916 U.S. App. LEXIS 2242 (6th Cir. 1916).

Opinion

WARRINGTON, Circuit Judge

(after stating the facts as above). The ultimate question concerns the distribution of the fund pointed out in the statement. The appellants contend that the fund should be turned over to the court of primary jurisdiction, the District Court of Rhode Island, sitting in bankruptcy, for purposes of distribution among all the creditors of the bankrupt estate. The appellees, who are the nine labor claimants, insist that tire court below, sitting in bankruptcy and as the ancillary tribunal, is empowered to pass upon the questions of priority and to provide for applying the fund accordingly.

[ 1 ] Before the issue thus made can be considered, it will be necessary to pass upon a preliminary matter. The appellees have presented a motion to dismiss the appeal. The grounds of the motion in substance are: (a) Thaf “no claim allowed or judgment or decree rendered” exceeds $300, and so the appeal cannot be sustained under section 25a, cl. 3, of the Bankruptcy Act; and (b) that such a case as this is not open to appeal under any other provision of that act. The theory of the first ground is that the final action of the court below was the rendition of “a judgment allowing * * * a debt or claim” in favor of the claimants, respectively, for sums less than “five hundred dollars,” and that since the claims as allowed are separate and [33]*33distinct in ownership, the appeal must fail for lack of the requisite amount in any of them. This is a misconception of the case. Neither the fact that, the appellees severally rendered the services as to which priority was determined, nor the value of such services, is in any instance in dispute. The testimony taken before the special master shpws that the value of the services rendered, respectively, by two of the appellees was in excess of the minimum sum, $500, named in clause 3 of section 25a; and those two amounts were each reduced to $300, because of the limitation contained in section 11138, Ohio Gen. Code, on which the appellees mainly rely. The positions taken by the appellees were that under that section of the Ohio statute each was entitled to receive out of the bankrupt fund in preference to other creditors “the full amount of wages due for” his “labor, not exceeding three hundred dollars”; in other words, they sought to have the fund distributed and applied in payment of acknowledged claims, at least in sums not exceeding in any instance the amount prescribed by the state statute. It is, moreover, to be observed that when the bankruptcy proceedings were commenced against the Cataract Company and the adjudication took place in the District Court of Rhode Island, possession of the property which is represented by the fund in question was in the receiver appointed in the common pleas court of Wayne county, Ohio; that this receivership was created at the suit of one of the present appellees for the benefit of himself and the other creditors of the Cataract Company; that it became necessary to institute a proceeding in the court below, .as an ancillary tribunal, to gain possession of this property and ultimately of the fund; and consequently that neither the property nor the fund ever passed into the hands of Emerson as trustee in bankruptcy in virtue alone of the adjudication. The practical effect, then, of the action taken by the present appellees in the court below was to assert priorities, indeed liens, against the fund. Plainly, the action was not to secure a judgment allowing a debt or claim within the meaning of clause 3, § 25a; and hence the motion to dismiss must depend upon the other ground offered in its support.

[2, 3] Section 24a invests the Circuit Courts of Appeals with “appellate jurisdiction of controversies arising in bankruptcy proceedings from the courts of bankruptcy from which they have appellate jurisdiction in other cases.” The jurisdiction so given is not in terms affected by the amount involved. In re Rouse, Hazard & Co., 91 Fed. 96, 98, 33 C. C. A. 356 (C. C. A. 7). It is to be inferred from the record that the action taken by the appellees in the court below was, in practical intent and purpose, an intervention in bankruptcy proceedings which gave rise to a controversy within the meaning of section 24a. There were nine claimants asserting priorities, or, in effect, as we have seen, liens, against a particular fund which, we repeat, was not derived through direct, operation of the adjudication in bankruptcy. Such action naturally invoked the equity jurisdiction of the court; and the court below, sitting in bankruptcy, ordered the fund to be applied in partial satisfaction of these admittedly earned labor claims. No formal pleadings, it is true, were presented by either side [34]*34to show the theory of the parties, either as respects recovery or defense. It is to be presumed that the appellees initiated their action by orally calling attention to the facts concerning services they had rendered to the bankrupt; for, as we have shown in tire statement, an order was entered January 20, 1915, reciting that “it being made to appear to the court that residents” of the district “hold labor claims against the bankrupt herein, and that there is doubt as to whether or not said claims are a lien upon'the property of said bankrupt,” whereupon the special master was appointed to take testimony, as stated. The nature of this action is further shown by the report and findings of the special master, who appears to have treated the earnings as constituting liens upon the fund; and also by the exceptions reserved below and the assignments made here by the appellants, in which it is stated, among other things, that the title to the fund had passed directly from the state receiver to Emerson, as trustee in bankruptcy and not as ancillary receiver, and, consequently, that the fund was not within the jurisdiction of the court below, but was within that of the court of primary jurisdiction. The method thus adopted of introducing and conducting the controversy was certainly informal, to say the least, and yet the method discloses an assertion and denial of liens against the fund, also a dispute as to where the title to the fund as well as its control lay. The method further discloses an alignment of parties similar to that involved in a plenary action. Surely these features ought not to be ignored at the instance of any of the .parties themselves. It has been aptly said that “the Bankruptcy Act is remedial and should be interpreted reasonably and according to the fair import of its terms, with a view to effect its objects and to. promote justice” (Botts v. Hammond, 99 Fed. 916, 920, 40 C. C. A. 179 [C. C. A. 4]); and, in working out these ends, the bankruptcy courts have not indulged in technicalities wherever a liberal procedure was consistent with the substantial rights of the parties in interest; and one of the clear objects of the Bankruptcy Act is to secure speedy and economical, though just, adjudication of controversies arising in bankruptcy proceedings. These considerations lead us to believe that the action taken below in respect of these labor claims fairly involved a controversy under section 24a, and so justified the appeal. Rode & Horn v. Phipps, 195 Fed. 414, 418, 115 C. C. A. 316, and citations (C. C. A. 6); Bell v. Arledge, 192 Fed. 837, 839, 113 C. C. A. 161 (C. C. A. 5); In re Breyer Printing Co., 216 Fed. 878, 881, 133 C. C. A. 82 (C. C. A. 7); Southern Cotton Oil Co. v. Elliotte, 218 Fed. 567, 568, 134 C. C. A. 295 (C. C. A. 6); In re Martin, 201 Fed. 31, 33, tit. “Jurisdiction,” to 37 (119 C. C. A. 363); s. c., sub nom. Globe Bank v. Martin, 236 U. S. 288, 295, 296, 35 Sup. Ct. 377, 59 F. Ed. 501; In re Hartzell, 209 Fed. 775, 776, 778, 126 C. C. A. 499 (C.

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Bluebook (online)
236 F. 29, 149 C.C.A. 239, 1916 U.S. App. LEXIS 2242, Counsel Stack Legal Research, https://law.counselstack.com/opinion/emerson-v-castor-ca6-1916.