Chamberlin v. Harrison , 298 F. 926 ( 1924 )

STONE, Circuit Judge.

These are a petition to revise and an appeal from an order of the bankruptcy court in a summary proceeding requiring petitioner (appellant) to turn over certain money to the trustee as property of the bankrupt.

• [ 1] Petitioner (appellant) was made an additional party in the bankruptcy proceeding and served with a writ to show cause why she should not turn over property in her possession because the same was part of the bankrupt estate. From the first, and all through the-proceeding, petitioner (appellant) has challenged the jurisdiction of the bankruptcy court to hear and determine this matter in a summary proceeding, claiming that it can only be examined in a plenary action. The bases upon which the referee and court below retained jurisdiction and upon which respondent (appellee) hopes to sustain the jurisdiction here is that the contention of petitioner (appellant) that its claim is adverse is merely colorable within the meaning of Mueller v. Nugent, 184 U. S. 1, 22 Sup. Ct. 269, 46 L. Ed. 405, and other similar cases. We think the Mueller Case and quite a few other cases before the various Courts of Appeals have established the doctrine that where the claim alleged to be adverse is not really so, but only colorably such, that the bankruptcy court has jurisdiction to determine the character of the claim in that respect and, if it is colorable only, to adjudicate the merits of the matter in a summary manner. The application of this rule involves a definition of what is meant by colorable. In our judgment, the meaning of that word as used in this connection is that a. claim alleged to be adverse is only colorably so when, admitting the facts to be as alleged by the claimant, there is, as matter of law,, no adverseness in the claim.

[2, 3] Measured by the above standard, we cannot say that this claim is merely colorable. The claim here is, as shown by the testimony, that a Mrs. Gessel, who was a stockholder in a corporation which was the immediate predecessor of the bankrupt, was given money from the assets of that company, with the permission of the only other stockholder with herself in that company, at a time when such company was entirely solvent; the sums taken might have been declared as dividends; that this money was given to her mother, the petitioner (appellant) in payment of indebtedness due petitioner (appellant) from Mrs. Gessel. However improbable or even fraudulent this claim may be, yet that matter has no bearing upon determination of jurisdiction, but is pertinent only on the merits in the court properly having jurisdiction of the controversy. For the purposes of determining whether this claim is merely colorable, we think we must take it that the above circumstances would be shown and might be found to be true. In that view of the matter, we cannot say as matter of law, that there is no merit to the claim.

[4] As matter of fact is involved in the hearing in this court, the proper method of review is by appeal. Therefore the petition to revise will be dismissed. As the judgment below was wrong, the appeal will be sustained and the order of the bankruptcy court reversed with instruction to dismiss the proceeding without prejudice to the institution of a plenary action by the trustee in any court of proper jurisdiction.