In re Lemmon & Gale Co.

DAY, Circuit Judge, after making the foregoing statement of facts, delivered the opinion of the court. In the disposition of this case we on}y find it necessary to notice one of the assignments of error, which concerns the force and ef-rect to be given the order and decree of the court in dismissing the petition in the first case tried and determined upon petition and answer. The record discloses that, after his qualification as trustee, Chase filed his petition to enjoin the seizure and sale of the stock of goods which the bankrupt, J. W. Williams, had scheduled in the proceedings, and which the referee had found had been turned over to the referee to hold until the selection of a trustee. This property was, consequently, in the possession of the court when undertaken to be levied upon by the sheriff executing process issued upon the judgments rendered in the state court. In view of this situation the bankruptcy court undoubtedly had jurisdiction to determine the rights of others asserting a lien upon or interest in the property, and the property could not be taken from the control of the bankruptcy court by the process of the state court. White v. Schloerb, 178 U. S. 542, 20 Sup. Ct. 1007, 44 L. Ed. 1183. The United States court, having lawful possession of the res, might retain it until it had disposed of the property. Chase, as trustee of J. W. William^, filed his petition, claiming the rightful ownership of the property. Lemmon & Gale took issue upon this allegation, and claimed to have caused the same to be levied upon as the property of Nannie S. Williams. It is true they denied the jurisdiction of the bankruptcy court, but for the reasons stated that court had jurisdiction. Upon this petition and answer the court made the entry dismissing the cause and dissolving the injunction theretofore granted. There was no reservation of any further1' right of action in the entry, and no suggestion that the order was without prejudice. The court entertained jurisdiction, and upon hearing dismissed the petition upon its merits. Such an entry admits of no other construction in the absence of qualifying words. Durant v. Essex Co., 7 Wall. 107, 19 L. Ed. 134. It is equally well settled that a judgment in a court of competent jurisdiction, upon matters essential to the determination of the issue, until set aside in some proper way, forever settles the controversy between the parties. The rule is thus stated by the supreme court of the United States: “A right, question, or fact distinctly put in issue, and directly determined by a court of competent jurisdiction, as a ground of recovery, cannot be disputed in a subsequent suit between the same parties; and even if the second suit is for a different cause of action, the right, question, or fact once so determined! must, as between the same parties or their privies, be taken as conclusively established, so long as the judgment in the first suit remains unmodified.” Southern Pac. R. Co. v. U. S., 168 U. S. 1, 18 Sup. Ct. 18, 42 L. Ed. 855. In the present case, the issue was directly made as to the right of the trustee of J. W. Williams to the property in question as [300] ágainst- thé defendant. If the allegations of his petition were sustained, the property had belonged to the bankrupt, and had properly come' under the jurisdiction of' the. court in the hands of the trustee. The court dismissed this petition upon its merits. It must therefore have decided that the property did not, as between the parties at issue, , belong to the bankrupt’s estate. This right cannot again be litigated, except by some proper manner of review or direct attack upon the judgment. It is urged that this order comes within those made in the course of proceedings in bankruptcy, which are always op'en to review until the proceeding is closed. In Sandusky v. Bank, 23 Wall. 289, 23 L. Ed., 155, the supreme court, speaking by Mr. Chief Justice Waite, said: “A proceeding in bankruptcy, from the time of its commencement by the filing of a petition to obtain the benefit of the act until the final settlement of the estate of the bankrupt, is but one suit. The district court, for all purposes of its' bankruptcy jurisdiction, is always open. It has no separate term. Its proceedings in any pending suit are, therefore, at all times open for-re'-examination upon application therefor in an appropriate form. Any ordpr.-.made in the progress of the case may be subsequently set aside and vacated upon proper showing, provided rights have not become vested under it which will be disturbed by its vacation. Applications for such re-examinations may be made by motion or petition, according to the circumstances of the case. Such a motion or petition will not have tlie effect of a new suit, but of a proceeding in an old one.” Pages 292, 293, 23 Wall., and page 156, 23 L. Ed. ■ ’ This language seems equally applicable to the present bankruptcy act.. Coll. Bankr. (3d Ed.) p. 16. If it could be conceded, which we do not find it necessary now to decide, that the order or decree made upon the first petition and answer could be subsequently set aside, pending the bankruptcy proceedings, within the rule above laid down by the supreme court, that could only be accomplished by some proper proceeding having that end in view. In the present -case the former order was in full force, its validity had never been attacked., nor any form of procedure instituted to affect its validity, in any way. The order now under review entirely ignores the force and validity of the former determination, and upon a petition of Nannie S. Williams’ trustee, filed in her bankruptcy proceeding, to which the trustee of J. W. Williams is not a party, and in which his bankruptcy case is not in review, the order, in full force, is ignored, and an opposite conclusion reached as to the ownership of the property. In thus ordering the property to be turned over to Chase, as trustee of J. W. Williams, we think the court erred. ■ -The order complained of will be reversed, and the cause remanded for-further proceedings.