Gray v. Grand Forks Mercantile Co.

VAN DEVANTER, Circuit Judge, after stating the case as 'above, delivered the opinion of the court. The principle that a court cannot directly adjudicate the rights of a person who is not before it is fundamental (Gregory v. Stetson, 133 U. S. 579, 10 Sup. Ct. 422, 33 L. Ed. 792), and is as applicable to courts exercising appellate jurisdiction as to those whose jurisdiction is'original (Terry v. Abraham, 93 U. S. 38, 23 L. Ed. 794; Davis v. Mercantile Co., 152 U. S. 590, 14 Sup. Ct. 693, 38 L. Ed. 563; Dodson v. Fletcher, 24 C. C. A. 69, 78 Fed. 214; American Loan & Trust Co. v. Clark, 27 C. C. A. 522, 83 Fed. 230; Grand Island & W. C. R. Co. v. Sweeney, 43 C. C. A. 255, 103 Fed. 342; Marshall, Field & Co. v. Wolf Bro. Dry Goods Co., 57 C. C. A. 326, 120 Fed. 815). But one may be before a court so as to enable it to adjudicate his rights, and yet not be an actual party to the proceeding; as when he is represented by a receiver or trustee who is an actual party, and whose duty it is to protect his interests. He is then what is termed a quasi party, and is bound by the judgment or decree, unless there be fraud or collusion between his representative and the adverse party. Kerrison, Assignee, v. Stewart, 93 U. S. 155, 23 L. Ed. 843; Atlantic Trust Co. v. Dana, 62 C. C. A. 657, 670, 128 Fed. 209, 222; Chatfield v. O’Dwyer, 42 C. C. A. 30, 101 Fed. 797; In re Utt, 45 C. C. A. 32, 105 Fed. 754; Foreman v. Burleigh, 48 C. [346] C. A. 376, 109 Fed. 313; In re Lewensohn, 57 C. C. A. 600, 121 Fed. 538. By the decree challenged by this appeal it was adjudged that the claims of Murphy, McNamara, Blair, and Lynch represent legitimate expenses and costs of administration; that the claim of Carroll, while not of this character, is yet a lawful one, and entitled to priority; and that each of these claims is properly payable out of the bankrupt’s estate. The question whether the decree shall stand or be reversed is obviously of direct interest to the claimants whose claims are sustained by it, and because of this interest the question cannot be determined without affording these claimants an opportunity to be heard in defense of the decree. That this is so is made plain in Terry v. Abraham, supra, where the court, while doubting the existence of any good reason for the decree challenged by the appeal in that case, said: “But there may have been a good reason for it; and, if the creditors who shared in the distribution were here as parties, they might be able to sustain the action of the court below. At all events, as no order on the subject could now be made without disturbing their rights under the decree, and as appellant has not thought proper to bring them here, the decree cannot be changed on that subject.” The only parties respondent to this appeal are two general creditors. The citation is directed to them only. The reason for their presence lies in the fact that it was upon their objections that the claims of Porter and the trustee were partially disallowed. Murphy, McNamara, Blair, Lynch, and Carroll are not before this court as actual parties, and are not represented by any one who is. an actual .party. The trustee is not their representative. He is seeking to strike down the allowance of their claims, and in this is the representative of the general creditors of the estate. Chatfield v. O’Dwyer, supra. Of course he cannot represent or speak for both sides to the controversy. In this situation no change can be made in the decree-that will disturb the rights of Murphy, McNamara, Blair, Lynch, or Carrol thereunder. As the appeal was seasonably taken, and was seasonably docketed here, it would have been within the power of this court to direct the issuance of an alias citation to the omitted parties, and to have allowed time for its service, had application therefor been made before the expiration of the first term at which the case could have been heard. Lockman v. Lang, 65 C. C. A. 621, 132 Fed. 1. Such an application was not made, although the necessity therefor appears to have been brought to the attention of the appellant’s counsel in ample time. Two full terms have now elapsed, and the appeal has become inoperative in so far as it challenges the claims of those who have not been brought into this court. Jacobs v. George, 150 U. S. 415, 14 Sup. Ct. 159, 37 L. Ed. 1127; Altenberg v. Grant, 28 C. C. A. 244, 83 Fed. 980; Railroad Equipment Co. v. Southern Ry. Co., 34 C. C. A. 519, 92 Fed. 541. But, apart from the presence or absence of necessary parties, this court is without authority upon this appeal to review the action of the court below in allowing the claims last mentioned, or in partially rejecting the claims of Porter and the trustee. Bankr. Act July 1, 1898, c. 541, § 25a (30 Staff [347] 553 [U. S. Comp. St. 1901, p. 3432]), declares “that appeals, as in equity cases, may be taken in bankruptcy proceedings from the-courts of bankruptcy to the Circuit Court of Appeals * * * from a judgment allowing or rejecting a debt or claim of five hundred dollars or over.” The decree complained of does not allow or reject a debt or claim of $500 or over. Only one debt or claim of that amount was acted upon. It was partially allowed and partially rejected, but neither the allowance nor the rejection reaches the prescribed amount. The appeal does not put in controversy the entire claim, but only what was rejected. The partial allowance will stand, even if the appeal is not successful. It is not easily believable that the Congress would grant a right of appeal to one whose claim for $500 or over is rejected to the extent of $425, the balance being allowed, and would at the same time deny a right of appeal to one whose claim for $425 is rejected in its entirety. The amount put in controversy by the appeal would be the same in either instance. So, also, the injury to the claimant would be the same in either case if the rejection were wrongful. The purpose of the Congress in restricting the right of appeal was evidently to avoid inconvenience, delay, and expense to claimants and bankrupt estates which would be disproportionate to the amount in controversy. When read with due regard to this purpose, the restriction plainly has reference, not to the amount of the original claim, but to the amount of the allowance or rejection; that is, to the amount which will be put in controversy by the appeal. Hilton v. Dickinson, 108 U. S. 165, 2 Sup. Ct. 424, 27 L. Ed. 688; Dows v. Johnson, 110 U. S. 223, 3 Sup. Ct. 640, 28 L. Ed. 128. As the decree below did not allow or reject any debt or claim of $500 or over, there was no right of appeal therefrom. Counsel have proceeded upon the assumption that a claim which represents expenses or costs of administration is a “debt or claim” within the meaning of the provision before quoted granting and restricting the right of appeal. The assumption appears to be sustained by the bankruptcy act, notably by section 64b; but, if it were not, that would be another reason why there would be no right of appeal from the allowance or rejection of any of the claims other than that of Carroll, which is not of that character. To avoid any misunderstanding- as to what is here decided, it may be well to observe that this case is clearly distinguishable from one where the trustee is given or refused credit for different payments aggregating $500 or over, claimed to have been actually made by him in the due administration of the estate. In such a case he would be the creditor or claimant, and the different payments would be only items of a single debt or claim. As there is no authority of law for this appeal, it is dismissed.