U.S. Supreme Court
Bryan v. Bernheimer, 181 U.S. 188 (1901)
Bryan v. Bernheimer
Submitted October 31, 1900
Decided April 15, 1901
181 U.S. 188
A bankrupt, nine days before the filing of a petition in bankruptcy against him, made a general assignment for the benefit of his creditors which was an act of bankruptcy. After the filing of the petition in bankruptcy, the assignee sold the property. After the adjudication in bankruptcy, and before the appointment of a trustee, the petitioning creditors applied to the district court for an order to the marshal to take possession of the property, alleging that this was necessary for the interest pf the bankrupt's creditors. The court ordered that the marshal take possession, and that notice be given to the purchaser to appear in ten days and propound his claim to the property, or, failing to do so, be decreed to have no right in it. The purchaser came in, and propounded a claim, stating that be bought the property for cash in good faith of the assignee, submitted his claim to the court, asked for such orders as might be necessary for his protection, and prayed that the creditors be remitted to their claim against the assignee for the price, or the price be ordered to be paid by the assignee into court and paid over to the purchaser, who thereupon offered to rescind the purchase and waive all further claim to the property. Held that the purchaser had no title in the property superior to the bankrupt's estate, and that the equities between him and the creditors should be determined by the district court, bringing in the assignee if necessary.
This was a summary petition to the District Court of the United States for the Middle District of Alabama, sitting in bankruptcy, for an order to Bryan, the marshal of the district, to take immediate possession of property of David Abraham, a bankrupt, in the hands of Louis Bernheimer. The material facts, as appearing by the record, were as follows:
On October 29, 1898, Abraham made a general assignment of all his property, consisting of his stock of goods and book accounts, in a storehouse numbered 106, Dexter Avenue, in Montgomery, Alabama, for the equal benefit of all his creditors, to one H. C. Davidson, who had the assignment recorded, and caused to be filed an inventory, and an appraisement of the chanroblesvirtualawlibrary
property at the sum of $7,900, in a court of Alabama, according to the laws of the state (Civil Code of Alabama of 1896, c. 113), and forthwith took possession of the property.
On November 7, 1898, certain creditors of Abraham filed in the district court of the United States, sitting in bankruptcy, a petition alleging that said assignment was an act of bankruptcy, and praying that he might be adjudged a bankrupt.
On December 12, 1898, Abraham, after due notice to him, was adjudged a bankrupt. On the same day, the petitioning creditors presented to the district court a petition alleging the assignment to Davidson and the adjudication in bankruptcy, and that, upon the filing of the petition for that adjudication, the court obtained jurisdiction over Abraham's estate, and it was the duty of Davidson, as his assignee, to hold all his property subject to the orders of the court; but that Davidson, disregarding the authority and jurisdiction of the court, had sold and disposed of the property at much less than the aforesaid appraisement, and the purchasers had been in possession of the property for several days, selling and disposing thereof at retail and at bankrupt prices, and that, unless the court made an order requiring the property to be taken immediate possession of, the petitioners and all other creditors of Abraham would be greatly damaged and their dividends out of the estate greatly lessened, and praying for an order to the marshal of the district to take possession of, and to hold until further order of the court, all the property owned by Abraham at the time of his assignment to Davidson, wherever the same might be found, and all property sold by Davidson to Louis Bernheimer or to anyone else, and being in the storehouse numbered 106, Dexter Avenue, in Montgomery, and to hold it until the further order of the court. On the filing of this petition, the district court made the order therein prayed for, reciting,
"It further appearing from said petition that it is necessary to the interest of the creditors of the said Abraham that this Court take possession of all the property and effects of said Abraham."
And on the same day, the marshal, pursuant to that order, seized the stock of goods in Bernheimer's possession.
On December 13, 1898, the district court, on a petition of chanroblesvirtualawlibrary
the marshal for instructions concerning the goods seized by him, ordered that notice be given to Bernheimer to appear in ten days, and to propound any claim that he had to the goods so seized, or, on failing to do so, be decreed to have no claim or right to them, and directed the marshal to retain possession of the goods until the further order of the court.
On December 17, 1898, the petitioning creditors presented another petition to the district court, further alleging that, on or about November 17, 1898, after the filing of the petition in bankruptcy against Abraham, and in disregard of the proceedings thereon pending, Davidson turned over and delivered to Bernheimer the whole stock of goods, then worth about $10,000, and Bernheimer, with knowledge of the pending proceedings in bankruptcy, took possession of the goods, sold large quantities thereof, and received large sums of money therefor, before the rest was taken by order of the court into the hands of the marshal, and praying for an order that Bernheimer file with the referee in bankruptcy an account of the moneys so received by him.
On December 22, 1898, Bernheimer, in obedience to the order of December 13, came into the district court and propounded a claim to the stock of goods. The claim stated the assignment to Davidson and the petition for an adjudication of bankruptcy, and that the petitioning creditors afterwards filed a petition in the court of bankruptcy, praying that Davidson be required to appear and show cause why he should not be restrained from selling the goods so assigned to him; that, in obedience to a rule issued on that petition, Davidson appeared and showed cause satisfactory to the court, and that the court, on the ground that the petition was not sworn to nor any bond given, discharged the rule against him, declined to grant the restraining order, and dismissed the petition without prejudice. The claim further stated that Davidson thereupon proceeded to sell the goods by public auction, and the claimant, acting in good faith and under the advice of counsel, bought the goods from Davidson at the sale by public auction for the sum of $3,500, which was a fair and reasonable price, and paid the price in cash to Davidson, and took and kept possession of the goods chanroblesvirtualawlibrary
until deprived thereof by the marshal; that the claimant never intended to interfere in any way with the process of the court, or with any property of the bankrupt; that, if he was deprived of these goods, and Davidson was allowed to keep the money paid him by the claimant as their price, the claimant's position would be one of great hardship and loss; that Davidson, under the terms of the assignment to him, would be compelled to pay that money to Abraham's creditors, and the ghardship and loss; that Davidson, under the terms of the assignment to him, would be compelled to pay that money to Abraham's creditors, and the ghardship and loss; that Davidson, under the terms of the assignment to him, would be compelled to pay that money to Abraham's creditors, and the goods purchased in good faith by the claimant would also be held and sold again for the benefit of those creditors. Bernheimer's claim concluded as follows:
"Claimant respectfully submits to the court his claim in this behalf. He asks the court's protection in the premises, and that it will issue such rules and orders in the premises as may be necessary to such protection. He further asks that the creditors of said bankrupt estate be remitted to the fund derived by said Davidson from claim for the purchase price of said goods. Claimant prays also that, in default of such order, or if he is mistaken in the relief prayed for, your honorable court will issue a rule that the said Davidson be ordered to pay into this Court the full amount derived by him from claimant, as purchase money of said goods, and that same be paid over to claimant, who thereupon offers to rescind said purchase and to waive all further claim to said goods."
On December 24, Bernheimer, in answer to the petition of December 17, filed an account as therein requested, showing that he had received from sales of the goods sums amounting to $2,768.40; that, at the time of his purchase from Davidson, he also bought the exemptions allowed to the bankrupt under the laws of Alabama and the Bankrupt Act of 1898, amounting to the sum of $1,000, and that, deducting that sum and necessary expenses, he had a net balance in his hands of $1,434.80.
On the same 24th of December, the petitioning creditors demurred to the claim of Bernheimer because it showed no title in Bernheimer good as against their rights; because the alleged sale by Davidson to Bernheimer was made with knowledge by both of the filing of the petition in bankruptcy, and after the court of bankruptcy had acquired jurisdiction of the property; because the deed of assignment to Davidson was an act of bankruptcy, chanroblesvirtualawlibrary
void as against the petitioning creditors, and because Bernheimer asked the court to settle and decide questions between him and Davidson which it had no jurisdiction to try and determine.
On the same day, the district court sustained the demurrer, and, Bernheimer declining to plead further, adjudged and decreed
"that the said Louis Bernheimer acquired no title to the said goods or to the proceeds of the sales thereof made by him, under the purchase of said goods from H. C. Davidson as assignee of said bankrupt, superior to the title of said bankrupt estate,"
and that Bernheimer pay over to the marshal, to await the further order of the court, all the proceeds, to be ascertained by a referee in bankruptcy, of the sales made by him of those goods.
Bernheimer appealed to the circuit court of appeals, which, considering the case as if before it on a petition for revision of the decree of the district court, reversed that decree and ordered the cause to be remanded to that court with instructions to dismiss the petition against Bernheimer, to vacate all orders made thereon, and to restore to him the goods taken from his possession, and further ordered that all costs, counsel fees, expenses, and damages occasioned to him by the marshal's seizure and detention of the property be fixed and allowed by the court of bankruptcy, and paid by the petitioning creditors. 93 F.7d 7.
The marshal, in behalf of the petitioning creditors, thereupon obtained a writ of certiorari from this Court. 175 U. S. 724.