Statement of the Case.

J. B. ORCUTT COMPANY v. GREEN.

204 U.S.

CERTIORARI TO THE CIRCUIT COURT OF APPEALS FOR THE SECOND CIRCUIT.

No. 116. Argued December 6, 1906.- Decided January 7, 1907.

Presentation and delivery to the trustee, within a year after the adjudication, for filing with the referee, of proof of claim is a filing within § 57 of the Bankruptcy Act as construed in connection with General Order in Bankruptcy, No. 21.

The neglect of a trustee in bankruptcy to deliver to the referee claims left with him for filing is the neglect of an officer of the court and not the failure of the creditor to file his claim.

A trustee in bankruptcy cannot file with himself proof of his own claim against the bankrupt, nor can the delivery of such proof to his own attorney for filing with the referee stand, in case of failure of his attorney so to do, in place of delivery to the referee.

THIS case comes here upon return to a writ of certiorari, issued by this court to the Circuit Court of Appeals of the Second Circuit. It is a proceeding in bankruptcy, and the question involved is one in regard to the sufficiency of the filing of certain proofs of claims against the bankrupts' estate.

The facts are these: Messrs. Ingalls Brothers were adjudicated bankrupts in proceedings in the District Court of the United States for the Northern District of New York on the third day of December, 1902. Soon thereafter one Charles Duncan was appointed trustee, and on the ninteenth day of December, 1902, he duly verified a proof of claim in his own behalf for $4,171, admitting an offset of $327. On the first of April, 1903, the J. B. Orcutt Company duly verified a proof of claim against the bankrupts' estate for $893.68, and in a short time delivered it to the trustee. At the first meeting of creditors Charles H. Dauchy Company presented to the referee a defective proof of claim against said bankrupts for $3,335.67, which was returned by the referee to said company

for correction. Prior to January 23, 1903, the Dauchy Company duly verified another proof of claim in the same amount, prepared by Henry W. Smith, the attorney for the trustee, who had volunteered to prepare the same so as to comply with the rules, and on or about March 15, 1903, the Dauchy Company delivered this proof of claim to the trustee. Prior to June 1, 1903, the trustee delivered all three claims to said Henry W. Smith, with directions to file the same with the referee, which the attorney promised to do. In this he failed. When the attorney Smith received these claims from the trustee he handed them to a clerk in his office, directing him to put them with the papers in this proceeding, and shortly after told the clerk to file the proofs of the claim with the referee. The clerk neglected to do so, and some time afterwards, upon being asked in regard to it, said that he would do so immediately. This was before the expiration of the year after the adjudication. But he again failed to make the filing. The Dauchy proof, which had been left with the attorney, is lost and cannot be found, after diligent search made by the attorney for it in his office. The other two claims, the Orcutt Company's and Duncan's own claim were found in a package of papers relating to another bankruptcy proceeding. Another proof of claim, for the same amount, was made by the Dauchy Company April 2, 1904, and, with the Duncan and Orcutt proofs, was presented to the referee for filing, each proof being accompanied by a petition, dated April 2, 1904, for leave to file each of said claims nunc pro tunc as of a date prior to December 3, 1903, or for such other or further relief as might be just and proper. Smith was not the attorney for any of the claimants, and his failure to file with the referee was not by virtue of any instructions to withhold such claims from filing, nor was it known on the part of any of the claimants that he had failed to file them until more than a year after the adjudication.

Upon the presentation of these claims with the petition, other creditors of the bankrupts objected to the granting of the relief asked in the petition, upon the ground that the claims VOL. CCIV-7

had not been seasonably presented to the court, and were barred under the provisions of section 57n of the Bankruptcy Act.

Upon the hearing of the petition for leave to file these proofs of claim, the referee, to whom the case had been referred, denied the petition, under the objection of other creditors, on the ground that one year having expired subsequent to the adjudication of bankruptcy and prior to the filing of the several petitions and the presentation thereof to the referee, the referee had no power to permit the filing of said proofs of claims, and that neither the referee nor the court had any discretionary power to permit either of said proofs of claims to be filed, either nunc pro tunc or otherwise. An order denying the relief asked was duly entered.

The referee then certified for review by the District Court the question, whether his decision was correct in refusing the relief stated by the claimants.

The District Court directed that the claims of the petitioning creditors should be filed as of the date when delivered to the trustee.

Charles H. Green, one of the creditors of the bankrupts, thereupon appealed from the order of the District Court reversing the determination made by the referee, to the United States Circuit Court of Appeals for the Second Circuit, and in his appeal, in view of the position of the trustee and his refusal himself to act in the matter, Green asked that he might be permitted to prosecute the appeal for himself and the other creditors. The District Court thereupon allowed the appeal and cited the respondents to appear in the Circuit Court of Appeals. That court, having heard the case argued, reversed the decision of the District Court, and affirmed that of the referee. A brief memorandum was filed by the court, in which it was stated that the referee had given a very full examination of the question of law involved, and that the court concurred in his interpretation of the statute, and that his opinion might be printed as a supplement to the memorandum of the court.

204 U.S.

Argument for Respondents.

Mr. Charles Cowles Tucker and Mr. Reginald S. Huidekoper, with whom Mr. J. Miller Kenyon was on the brief, for petitioners:

There is no provision in the Bankruptcy Act which fixes the time within which proofs of claim must be filed. In re Hernstein, 10 Am. B. R. 308-320; Hutchinson v. Otis, 190 U. S. 552. The language of the Bankruptcy Act should not be altered by construction so as to work a forfeiture of the rights of these creditors. Forfeitures are not favored in law. Marshall v. Vicksburg, 15 Wall. 146; Vattel, 29th Rule of Construction; Farmers' & Mechanics' Bank v. Dearing, 91 U. S. 29.

The purpose of the Bankruptcy Act is to provide for equality in distribution among creditors and not to enforce forfeitures as against particular creditors. By placing the narrow construction upon § 57n contended for by the respondents, a forfeiture of the rights of certain creditors will be enforced. 26 Am. & Eng. Ency. of Law, 661.

Granted that the act limits the time within which proofs must be presented to one year after adjudication, it is sufficient if they be presented within that time to the trustee.

The trustee, being an officer of the court, his acts may well be said to be the acts of the court itself, and by filing a claim with him, it can very properly be said that the claim is filed in the court where the proceedings are pending as required by 57c of the act.

Even assuming that the Supreme Court has mistaken the limitation of its power, and that the last sentence of General Order XXI (1) is invalid, upon general principles of equity the order of the District Judge should be sustained.

Mr. Herbert D. Bailey, with whom Mr. Frank H. Deal was on the brief, for respondents:

The word "proved," as used in 57n, contemplates and includes filing. General Order XXI (1) speaks of a deposition to prove claims, etc. This deposition is used as synonymous with proof of debt. That deposition becomes proof when it

comes regularly before the proper tribunal. Before a claim is proved, it must have come before the referee.

The trustee has no duty to perform in respect to the filing of claims. There is no provision anywhere in the act for filing claim with anyone save the referee, in referred cases. In so far as General Order XXI (1) seems to contemplate a "filing" with the trustee, it is confessedly at variance with the act. The act must prevail and where at variance therewith the General Orders are not to be considered. Collier, 4th ed. 286; West v. Lea, 2 Am. B. R. 463.

MR. JUSTICE PECKHAM, after making the foregoing statement, delivered the opinion of the court.

The question in this case resolves itself into one of the sufficiency of the presentation of proofs of claims of the creditors named in the foregoing statement. They were, in reality, presented and delivered to the trustee in bankruptcy before the expiration of one year after adjudication, but there was no actual filing of the claims with the referee until after the expiration of that time, when the attempt to file them with the petition was made as above stated.

The question turns upon the construction of some of the subdivisions of the fifty-seventh section of the Bankruptcy Act, together with the twenty-first General Order in Bankruptcy, the last part of which reads: "Proofs of debt received by any trustee shall be delivered to the referee to whom the case is referred."

Sub-section a of section 57 provides that "Proofs of claims shall consist of a statement under oath, in writing, signed by a creditor setting forth the claim, the consideration therefor, and whether any, and, if so what, securities are held therefor; and whether any, and, if so what, payments have been made thereon, and that the sum claimed is justly owing from the bankrupt to the creditor."

Sub-section c provides that "Claims after being proved may,