Opinion · Supreme Court of the United States

Harrison v. Chamberlin

271 U.S. 191

Type
Opinion
Court
Supreme Court of the United States
Jurisdiction
Federal
Date
1926-05-03
Topic
general

How later courts describe this case

  • claim is "frivolous" only if "it is so unsubstantial and obviously insufficient ... as to be plainly without color of merit, and a mere pretense"
  • Plenary suit required where the adverse claim rested upon disputed facts —for which valid, conflicting evidence existed — and upon a dispute of law

Citator

UpLaw has not yet analyzed Harrison v. Chamberlin. The absence of a flag is not a finding that it is good law.

Cited by
278 opinions

Headnotes

  1. Bankruptcy Law — Jurisdiction A proceeding instituted by a trustee in bankruptcy within the bankruptcy suit to recover property in the possession of an adverse claimant is a controversy arising in a bankruptcy proceeding, as distinguished from an administrative proceeding in bankruptcy, and is reviewable by the Circuit Court of Appeals as to both fact and law on appeal under § 24a of the Bankruptcy Act. 271 U.S. at 193
  2. Bankruptcy Law — Jurisdiction A court of bankruptcy is without jurisdiction to adjudicate in a summary proceeding a controversy concerning property held adversely to the bankrupt estate without the consent of the adverse claimant; in such a case the trustee must resort to a plenary suit. 271 U.S. at 193
  3. Bankruptcy Law — Jurisdiction The bankruptcy court is not ousted of jurisdiction by the mere assertion of an adverse claim; it retains power in the first instance to determine its own jurisdiction and may conduct a preliminary inquiry into whether the adverse claim is real and substantial or merely colorable, proceeding summarily on the merits only if the claim is found merely colorable, and declining to determine the merits and dismissing the summary proceeding if the claim is found real and substantial. 271 U.S. at 193
  4. Bankruptcy Law — Claims An actual claim may be adverse and substantial even though it is in fact fraudulent and voidable; conversely, a claim is merely colorable if on its face it is made in bad faith and without any legal justification. 271 U.S. at 194
  5. Bankruptcy Law — Claims An adverse claim is deemed substantial when the claimant's contention discloses a contested matter of right involving some fair doubt and reasonable room for controversy, in matters either of fact or law, and is not to be held merely colorable unless the preliminary inquiry shows it to be so unsubstantial and obviously insufficient, either in fact or in law, as to be plainly without color of merit and a mere pretense. 271 U.S. at 195
HARRISONv. CHAMBERLIN,271 U.S. 191(1926)
46 S.Ct. 467
HARRISON, TRUSTEE,v. CHAMBERLIN.
CERTIORARI TO THE CIRCUIT COURT OF APPEALS FOR THE EIGHTH CIRCUIT.
No. 168.
Argued January 22, 1926.
Decided May 3, 1926.
1. A proceeding instituted by a trustee in bankruptcy, in the bankruptcy suit, to recover property in the possession of an adverse claimant, is a controversy in bankruptcy reviewable by the Circuit Court of Appeals, both as to fact and law, by an appeal taken under § 24a of the Bankruptcy Act. P. 193. 2. A court of bankruptcy is without jurisdiction to adjudicate in a summary proceeding a controversy over property held adversely to the bankruptcy estate, unless the adverse claimant consent, or the claim be merely colorable. P. 193. 3. An actual claim may be adverse and substantial even though in fact fraudulent and voidable. P. 194. 4. A claim is to be deemed substantial when the claimant's contention discloses a contested matter of right, involving some fair doubt and reasonable room for controversy, in matters either of fact or law; and is not to be held merely colorable unless the preliminary inquiry shows that it is so unsubstantial and obviously insufficient, either in fact or law, as to be plainly without color of merit, and a mere pretense. P. 195. 298 F. 926, affirmed.
CERTIORARI to a judgment of the Circuit Court of Appeals
reversing an order made by the District Court summarily in a
bankruptcy case, requiring the respondent Chamberlin to deliver
money, adversely claimed by her, to Harrison, the trustee in
bankruptcy.
Page 192
Mr. Philip Kates, with whomMr. S.A. Mitchellwas on the brief, for petitioner.Mr. Henry B. Martinfor respondent submitted.
MR. JUSTICE SANFORD delivered the opinion of the Court.
In the course of the administration of the estate of the bankrupt corporation in the District Court for Eastern Oklahoma, the petitioner Harrison, the trustee in bankruptcy, filed a petition for a summary order requiring Mrs. Chamberlin, the respondent, a stranger to the proceeding, to deliver to him certain money in her possession which, he alleged, was the property of the bankrupt, held by her fraudulently and without color or claim of title. She filed a demurrer for want of jurisdiction in the court to proceed summarily. This was overruled. She then answered, asserting that the money was her individual property, acquired and held by her in good faith; and renewing her jurisdictional objection. The matter was referred to the referee in bankruptcy to report his findings of fact and conclusions of law. He reported, upon the evidence, that the respondent's claim was based on fraud and merely colorable; and that the money was an asset of the estate and subject to the summary jurisdiction of the court. The District Judge confirmed this report and entered a decree finding that the money was an asset of the estate, held by the respondent without color of title and in fraud of the rights of the trustee; and ordering that she deliver it to him forthwith. She appealed from this order to the Circuit Court of Appeals, and also filed a petition for revision in matter of law. The Circuit Court of Appeals, being of opinion that, as questions of fact were involved in the hearing, the method of review was by appeal, dismissed the petition to revise. On the appeal, it held that the claim ofPage 193the respondent was adverse to the trustee and not merely colorable, and that the District Court was therefore without jurisdiction to proceed against the respondent summarily; and the order of the District Court was reversed, with instructions to dismiss the proceeding without prejudice to the institution of a plenary action by the trustee in any court of proper jurisdiction. 298 F. 926. This writ of certiorari was then granted.266 U.S. 598.

The contentions of the trustee are: (1) That the Circuit Court of Appeals had no jurisdiction to review the order of the District Court under the appeal; and (2) that, even if such jurisdiction existed, the decree reversing that order was erroneous.

1. It is clear that the proceeding instituted by the trustee for the recovery of property in the possession of the respondent, to which she asserted an adverse claim, presented "a controversy arising in a bankruptcy proceeding," — as distinguished from an administrative "proceeding" in bankruptcy — which might be reviewed by the Circuit Court of Appeals, both as to fact and law, by an appeal taken under § 24a of the Bankruptcy Act.Taylorv.Voss, ante, p. 176, and cases therein cited;Hindsv.Moore(C.C.A.), 134 F. 221, 223;Re Eilers MusicHouse(C.C.A.), 270 F. 915, 925.

2. It is well settled that a court of bankruptcy is without jurisdiction to adjudicate in a summary proceeding a controversy in reference to property held adversely to the bankrupt estate, without the consent of the adverse claimant; but resort must be had by the trustee to a plenary suit.Muellerv.Nugent,184 U.S. 1,15;Louisville Trust Co. v.Comingor,184 U.S. 18,24;Jaquithv.Rowley,188 U.S. 620,623;Schweerv.Brown,195 U.S. 171,172;Galbraithv.Vallely,256 U.S. 46,48;Taubel Co. v.Fox,264 U.S. 426,433;Mayv.Henderson,268 U.S. 111,115;Board of Educationv.Leary(C.C.A.), 236 F. 521, 524;Lynchv.Roberson(C.C.A.), 287 F. 433,Page 194435, 437. However, the court is not ousted of its jurisdiction by the mere assertion of an adverse claim; but, having the power in the first instance to determine whether it has jurisdiction to proceed, the court may enter upon a preliminary inquiry to determine whether the adverse claim is real and substantial or merely colorable. And if found to be merely colorable the court may then proceed to adjudicate the merits summarily; but if found to be real and substantial it must decline to determine the merits and dismiss the summary proceeding.Muellerv.Nugent, supra, 15;Louisville Trust.Co. v.Comingor, supra, 25;Taubel Co. v.Fox, supra, 433;Mayv.Henderson, supra, 16;Board of Educationv.Leary,supra, 525;Lynchv.Roberson, supra, 436.

In the present case the holding of the District Court that the adverse claim was merely colorable was evidently based upon its conclusion, upon the entire evidence, that the claim was fraudulent; and was, in effect, an adjudication upon the merits. And, on the other hand, the holding of the Circuit Court of Appeals that the claim was of such a substantial character as to require its determination in a plenary suit, was based upon the view "that a claim alleged to be adverse is only colorably so when, admitting facts to be as alleged by the claimant, there is, as matter of law, no adverseness in the claim." It is clear, however, that an actual claim may be adverse and substantial even though in fact "fraudulent and voidable."Muellerv.Nugent,supra, 15;Johnstonv.Spencer(C.C.A.), 195 F. 215, 220;Board of Educationv.Leary, supra, 525. And, on the other hand, a claim is merely colorable if "on its face made in bad faith and without any legal justification."Mayv.Henderson,supra, 109.

Without entering upon a discussion of various cases in the Circuit Courts of Appeals in which divergent views have been expressed as to the test to be applied in determiningPage 195whether an adverse claim is substantial or merely colorable, we are of opinion that it is to be deemed of a substantial character when the claimant's contention "discloses a contested matter of right, involving some fair doubt and reasonable room for controversy,"Board of Educationv.Leary, supra, 527, in matters either of fact or law; and is not to be held merely colorable unless the preliminary inquiry shows that it is so unsubstantial and obviously insufficient, either in fact or law, as to be plainly without color of merit, and a mere pretense. CompareBinderupv.Pathe Exchange,263 U.S. 291,295; andMoorev.New York Cotton Exchange,270 U.S. 593.

In the present case it clearly appears that the validity of the respondent's claim depended upon disputed facts, as to which there was a conflict of evidence, as well as a controversy in matter of law. Its determination involved "fair doubt and reasonable room for controversy" both as to fact and law. It was therefore substantial, and not merely colorable; and its merits could only be adjudged in a plenary suit.

As the respondent's objection to the summary jurisdiction of the bankruptcy court was well taken, and there was no waiver of her right in this respect,Galbraithv.Vallely, supra, 50, the decree of the Circuit Court of Appeals isAffirmed.