Knickerbocker Insurance Company v. Comstock

On motion to dismiss a writ of error to the Circuit Court for the Northern District of Illinois; the case being thus:

The Bankrupt Act of 1867, which by its terms applies to all moneyed, business, or commercial corporations as well as to individuals, gives to the District Courts of the United States original jurisdiction in all matters and proceedings in bankruptcy. It enacts by its—

'SECTION 2. That the several Circuit Courts of the United States within and for the districts where the proceedings in bankruptcy shall be pending, shall have a general superintendence and jurisdiction of all cases and questions arising under this act; and, except when special provision is otherwise made, may upon bill, petition, or other proper process, of any party aggrieved, hear and determine the case as in a court of equity.

'Said Circuit Courts shall also have concurrent jurisdiction with the District Courts of the same district, of all suits at law or in equity which may or shall be brought by the assignee in bankruptcy against any person claiming an adverse interest, or by such person against such assignee, touching any property or rights of property of said bankrupt transferable to or vested in such assignee.'

A subsequent section, the 41st, after referring to the return day of the summons to the alleged bankrupt, enacts:

'That on such return day or adjourned day. . . the court shall proceed summarily to hear the allegations of the petitioner and debtor, and may adjourn the proceedings from time to time on good cause shown; and shall, if the debtor on the same day so demand in writing, order a trial by jury at the first term of the court at which a jury shall be in attendance, to ascertain the facts of such alleged bankruptcy; and if upon such hearing or trial the debtor proves to the satisfaction of the court, or the jury (as the case may be), that the facts set forth in the petition are not true, or that the debtor has paid and satisfied all liens upon his property (in case the existence of such liens were the sole ground of the proceeding), the proceeding shall be dismissed and the respondent shall recover his costs.'

The act further provides, by sections 8 and 9, as follows:

'SECTION 8. That appeals may be taken from the District to the Circuit Courts in all cases in equity, and writs of error may be allowed to said Circuit Courts from said District Courts in cases at law under the jurisdiction created by this act, when the debt or damages claimed amount to more than $500; and any supposed creditor whose claim is wholly or in part rejected, or an assignee who is dissatisfied with the allowance of a claim may appeal from the decision of the District Court to the Circuit Court from the same district; but no appeal shall be allowed in any case from the District to the Circuit Court unless it is claimed and notice given thereof to the clerk of the District Court to be entered with the record of the proceedings, and also to the assignee or creditor, as the case may be, or to the defeated party in equity within ten days after the entry of the decree or decision appealed from.

'The appeal shall be entered at the term of the Circuit Court which shall be first held within and for the district next after the expiration of ten days from the time of claiming the same. But if the appellant in writing waives his appeal before any decision thereon, proceedings may be had in the District Court as if no appeal had been taken, and no appeal shall be allowed unless the appellant at the time of claiming the same shall give bond in the manner now required by law in cases of such appeals.

'No writ of error shall be allowed unless the party claiming it shall comply with the statutes regulating the granting of such writs.

'SECTION 9. In cases arising under this act no appeal or writ of error shall be allowed in any case from the Circuit Courts to the Supreme Court of the United States, unless the matter in dispute in such case shall exceed $2000.'

These enactments being in force, certain persons presented a petition in the District Court for the Northern District of Illinois, setting forth, in conformity with formal requirements of the act, that the Knickerbocker Insurance Company of Chicago owed debts to an amount exceeding $300, and that their espective demands exceeded $250, and had made fraudulent preferences. Among these persons were Allen & Mackey, who set forth that the company was indebted to them in the sum of $2500 under a policy of insurance and had made fraudulent preferences. They prayed, along with other creditors, that the company might be decreed bankrupt.

The company denied the allegations both of debt and acts of bankruptcy, and demanded in writing a trial by jury. On the trial, which was had in regular common-law way of a trial by jury, the company excepted to the admission of several items of evidence which the court, against its objection, had received, and also to the charge of the court. Verdict and judgment having been given against the company, the cause was removed by writ of error to the Circuit Court for the district. The company assigned errors there in a formal way, but when the case came on to be heard, the Circuit Court, without any consideration or examination of the exceptions taken or errors assigned, dismissed it for want of jurisdiction. Thereupon the company took a writ of error to this court.

Mr. Thomas Dent, in support of the motion to dismiss the writ of error:

The only jurisdiction which the Circuit Court could have had in the case arose under the 2d section of the Bankrupt Act. That section provides abundantly for the case under consideration, not by allowing a writ of error, but by giving the Circuit Court a final superintendence. The insurance company should have sought relief under that section. The proceeding by writ of error was improper, and was rightly dismissed by the court below for want of jurisdiction. But if it were not so, no appeal or writ of error lies to this court from the action of the Circuit Court.

1. The adjudication by the District Court did not determine that a debt of $2500, or, in other words, a debt of more than $500 was due the creditor. A proceeding in bankruptcy is not a proceeding to determine the amount of any particular debt or claim, but is a proceeding taken by some one who has a demand provable under the act to the amount of $250; and the three inquiries presented to the court under such a petition are:

1st. Whether the petitioner has a claim to the amount of $250, provable under the act.

2d. Whether the debtor owes debts provable under the act exceeding $300; and, finally,

3d. Whether the alleged act or acts of bankruptcy have been committed by the debtor.

The chief one of these inquiries is almost always that last named. The adjudication finally made does not determine that there is a debt to the amount of $500. The amount of $500 cannot be said to be directly involved. The claim of Allen & Mackey was not fixed by the decree of the District Court. It was thus not a final judgment. All know that claims against a bankrupt's estate are (under the 22d section of the act) proved before the register and are then forwarded to the assignee, who then compares the proofs with what the bankrupt's books disclose. The court may, however, reexamine them. Hence it would be a misnomer to characterize the petition for involuntary bankruptcy as 'a case at law. . . wherein the debt or damages claimed amount to more than $500.' It bears no resemblance at all, in form, to such a proceeding; and not much to one in equity. The words, then, of the 8th section do not sanction a writ of error in this case.

The cases in which provision is made by the 8th section of the Bankrupt Act for writs of error, are the cases at law referred to in what is given above as the second clause of the 2d section.

Messrs. Story and Roby, contra:

Section 9 of the Bankrupt Act provides:

'That in cases arising under this act, no appeal or writ of error shall be allowed in any case from the Circuit Courts to the Supreme Court of the United States, unless the matter in dispute in such case shall exceed $2000.'Though negatively stated in the act, this is a solemn legislative affirmation, that an appeal or writ of error shall be allowed in all cases where the amount in controversy exceeds the sum named.

The supervisory jurisdiction of the circuit judge, under the second section, only exists 'in cases where special provision is not otherwise made,' in the Bankrupt Act. Now, this court has said that special provision is otherwise made, within the meaning of that exception, when the case is tried by a jury at a stated term of the District Court, under the provisions of the 41st section. And Miller, J., of this court, sitting as presiding judge of the Circuit Court, entertained jurisdiction of a case removed from the District Court by writ of error sued out by the petitioning creditors, and reversed the judgment of the District Court, dismissing the petition with costs.

It is proper to observe that there are only two cases provided for in the Bankrupt Act, where a jury trial may be had:

1st. Under the 41st section, where a party resists the proceeding to have him adjudged a bankrupt, and demands a jury trial, in writing, when the court is required 'to order a trial by jury at the first term of the court at which a jury shall be in attendance.'

2d. Under section 31st, when creditors oppose the discharge, in which case the court may 'order any question of fact so presented to be tried at a stated session of the District Court.'

Congress has thus carefully provided, in every case where a jury trial is allowed, that it shall be had at a stated term of the court, where it must be conducted according to the due course of the common law. All such decisions are reviewable by writ of error.

The judgment of the District Court was a judgment for $2500, and it was a final judgment.

It is averred in the petition of Allen & Mackey, under which the trial was had in the District Court, that the company was indebted to them in the sum of $2500 upon a policy of insurance for that sum. The existence and validity of this claim, was specially denied by plaintiff in error, was one of the principal questions at issue on the trial, and the verdict of the jury found this issue against the company.

On this trial the petitioners could have proved no other debt, no other act of bankruptcy, than the one alleged; nor could the jury have found any verdict except it was responsive to both these issues. When both found for petitioners, they establish the existence and validity of this debt of $2500, as well as the acts of bankruptcy alleged.

This judgment when rendered is final and conclusive upon all parties until reversed.

It was held by this court at an early day, that the finding and judgment declaring a defendant bankrupt is final and conclusive as to the petitioner's claim, and cannot be collaterally attacked, even by other creditors. All parties are bound by it as by a decree in rem.

The judgment in question is, therefore, as much a judgment against the company for $2500 as if rendered in an ordinary action upon the policy, and is clearly reviewable under the general appellate jurisdiction vested in this court, independent of the provisions of the Bankrupt Act.

Mr. Justice CLIFFORD delivered the opinion of the court.