Maggio v. Zeitz

Mr. Justice Frankfurter,

dissenting.

This is one of those rare cases where I find myself in substantial agreement with the direction and main views of an opinion, but am thereby led to a different conclusion. Too often we are called upon to disentangle a snarled skein of facts into a thread of legal principles. In this case, the Court’s opinion seems to me to snarl a straight thread of facts into a confusing skein of legal principles. It was the record in a prior case involving the same litigants that invited correction of a rule of bankruptcy administration in the Second Circuit. We denied review. 1 *82 The record in this case precludes such correction, but the Court’s opinion is an effort to whip the devil round the stump.

The precise question before us may be simply stated. The District Court ordered the bankrupt to turn over goods withheld by him from the trustee. On the basis of two prior cases, 2 the Circuit Court of Appeals affirmed this order, per curiam. 145 F. 2d 241 . These earlier cases in turn relied on a previous case. 3 All three enforced a rule of the Second Circuit that goods in the possession of a bankrupt on the day of bankruptcy are presumed to continue in his possession regardless of the time that may have elapsed. In all three cases, the Circuit Court of Appeals had affirmed the turnover orders although it was maintained that the bankrupts could not obey them. 4 Likewise, in all three cases, that court had declared its impotence to change what it regarded as an untenable rule of bankruptcy administration, although fashioned by it and not by this Court. 5 In almost imprecating language review and reversal by this Court in these cases were invited. 6 In one of these cases, the bankrupt filed a petition *83 for certiorari, which this Court denied. 7 Then came the prior case involving the litigants now before us, with this Court’s refusal to review the turnover order. To be sure, the denial of a petition for certiorari carries no substantive implications. Reference to it here is relevant as proof of the finality with which the turnover order, as affirmed by the Circuit Court of Appeals, was invested.

In Oriel v. Russell, 278 U. S. 358 , a unanimous bench, including in its membership judges of wide experience with bankruptcy law, 8 held that upon a citation for contempt to compel obedience of a turnover order the issues adjudicated by that order could not be relitigated. That case decided nothing if it did not decide that what the turnover order adjudicated- — -that the bankrupt withheld certain property from the bankrupt estate and was still in control of this property on the day he was ordered to turn it over — is the definitive starting point for contempt proceedings to exact obedience to the turnover order. In short, the contempt proceedings must proceed from the turnover order and cannot go behind it. We should not ignore this relevant sentence in Oriel v. Russell : “Thereafter on the motion for commitment the only evidence that can be considered is the evidence of something that has happened since the turnover order was made showing that since that time there has newly arisen an inability on the part of the bankrupt to comply with the turnover order.” 9

*84 The Court today reaffirms Oriel v. Russell . At the same time it makes inroad on the practical application of Oriel v. Russell . On virtually an identical record 10 it reverses where Oriel v. Russell affirmed. The nature and scope of the inroad are uncertain because the Court’s opinion, to the best of my understanding, leaves undefined how the District Court is to respect both Oriel v. Russell and today’s decision.

About some aspects of our problem there ought to be no dispute. We are all agreed that while the bankrupt cannot relitigate the determination of a turnover order that he had such and such goods on the day of the order, he can avoid the duty of obedience to that order if he “can show a change of situation after the turnover order relieving him from compliance.” 11 The right to be relieved from obeying the turnover order by sustaining the burden of inability to perform, on proof of circumstances not questioning the turnover order, has never been disputed. Again, if a judgment of civil contempt is rendered and the bankrupt is sent to jail until he chooses to obey the court’s command, he will not be kept there when keeping him no longer gives promise of performance. Oriel v. Russell so pronounced. 12

And so, since the fact that the bankrupt had possession of the goods on the day of the turnover order is a fact *85 that cannot be controverted or relitigated because his possession of the goods on that day was the very thing adjudicated, the case reduces itself to this simple question: Where, on failure to obey the turnover order, the bankrupt stands mute, offers no evidence as to a change of circumstances since the order or offers evidence of a kind which the District Court may justifiably disbelieve, has he met his burden of proof so as to preclude the District Court from enforcing obedience by commitment for civil contempt?

On the record and the findings of the District Court this is the precise question now presented. There is nothing else in the record, except Judge Frank’s statement below that the bankrupt was ordered to perform although the court knew that it was impossible for him to perform. 13 But this assertion of “impossibility” was not derived from the record in these contempt proceedings. It derives from Judge Frank’s familiar hostility to what he deems the unfairness of his court’s rule of presumption in ordering turnover. 14 Judge Frank here merely repeats his conviction that a turnover order like that rendered against Maggio is an order to turn over goods which could not be *86 turned over. But that was water over the dam in the contempt proceeding. To give it legal significance when enforcement of the turnover order is in issue is to utter contradictory things from the two corners of the mouth. It is saying that the turnover order cannot be relitigated— that we cannot go back on the adjudication that the bankrupt had the goods at the time he was ordered to turn them over — but we know he did not have the goods, so we contradict the turnover order and do not respect it as res judicata.

I cannot reconcile myself to saying that we adhere to Oriel v. Russell and yet reject its only meaning, namely, that we cannot go behind the judicial determination made by the turnover order that the bankrupt on such and such a day had the enumerated goods. Moreover, the authorities relied upon in Chief Justice Taft’s opinion 15 make it clear that his decision did contemplate that a coercive contempt order should issue when it appears that the bankrupt has introduced no evidence or, what is the same, evidence that may properly not satisfy the District Court by establishing incapacity to comply since the turnover order. 16 In this case, the District Court was *87 entirely warranted in finding that the bankrupt had produced no evidence to contradict the adjudication of the turnover order that he had the goods when he was told to *88 turn them over, unless, in place of what is usually deemed evidence, an infirmity has been found to seep, by a process of osmosis, into the turnover order respect for which in its entirety is the starting point of our problem.

The time to have acted on the inference of impossibility of performance of the turnover order, or to have taken notice of the imprisoning rule of the Second Circuit as to the presumption of continued possession of a bankrupt’s withheld goods, was when we were asked to review the Circuit Court of Appeals’ denigrating affirmance of the turnover order. 17 When we declined to review that turn *89 over order, it became a final and binding adjudication. Neither court below was under a misapprehension as to the applicable law in the instant contempt proceeding. The District Court relied on In re Siegler, 31 F. 2d 972 . But surely reliance on a case that was correctly decided is hardly an indication of misapprehension of law. If the Siegler decision had preceded instead of followed 18 Oriel v. Russell , it might well have been one of the authorities relied upon in Chief Justice Taft’s opinion. 19 Nor do we have to speculate as to whether Judge Frank’s conclusion that Maggio was unable to comply was based on evidence in this record or on doubt as to the propriety of the turnover order. We have the same printed record before us that he had and it is barren of such evidence. Presum *90 ably Judge Frank did not travel outside this record and act on undisclosed private knowledge. The whole course of this issue in the Second Circuit in recent years makes it obvious that his observation was merely another animadversion on that Circuit’s practice in issuing turnover orders. The Circuit Court of Appeals did not purport to make an independent evaluation of Maggio’s evidence bearing on his incapacity to obey the turnover order. It was beyond its power to do so. The Circuit Court was not at large. Its power was limited to a consideration of the justifiability of the District Court’s findings on the basis of the record before that court.

The cure for this procedural situation, if cure is called for, is correction of the rule of the Second Circuit regarding presumptions in turnover orders. 20 It ought not to be dealt with indirectly and at the cost of beclouding the doctrine of res judicata in proceedings for civil contempt. If Maggio has become the unhappy victim of the procedural snarl into which the Circuit Court of Appeals for the Second Circuit has involved itself by its decisions on the appeals of turnover orders and by this Court’s refusal to review such adjudications, the law is not without ample remedies. The District Court has power to discharge a contemnor when confinement has become futile, or release may be had through use of habeas corpus, which, in the now classic language of Mr. Justice Holmes, “cuts through all forms and goes to the very tissue of the structure. It comes in from the outside, not in subordination to the proceedings .'. . .” Frank v. Mangum, 237 U. S. 309, 346 . These are means available to correct whatever specific hardship this case may present without generating cloudiness indeterminate in range upon a legal principle of such social significance as that of res judicata and upon *91 a remedy so vital as civil contempt for the sturdy administration of justice.

How is the conscientious District Court to carry out the directions conveyed by the Court’s opinion? If the District Court gives unquestioned respect, as it is told to do, to the turnover order of August 9, 1943, it will start with the fact that on August 9, 1943, the bankrupt was able to comply with that order. With that as a starting-point, will the District Court not be entitled to find again, as it has already found, 21 that nothing presented by the bankrupt in exculpation for not complying with the turnover order disproves that he continued to have the property, which he was found to have had as of August 9, 1943? If the District Court should so find, would not the Circuit Court of Appeals and this Court, if the case came here for review, be duty bound to hold that, on the basis of the situation as adjudicated by the turnover order, the District Court could reasonably make such a finding? Or is the District Court to infer that in view of the snarl into which these proceedings have got by reason of the failure to upset the turnover order when directly under review, this Court was indulging in benign judicial winking — that while the fact of the possession of the property had been adjudicated by the turnover order and could not verbally be questioned, the District Court need not accept the determination of that order as facts? But if the District *92 Court may so drain the adjudication of the turnover order of its only legal significance, why assert that Oriel v. Bussell is left without a scratch? Why reaffirm that an adjudication sustaining a turnover order may not be re-, litigated when obedience is sought to such turnover order? These are questions which will confront not merely the district judge to whom this case will be remanded. After all, we are concerned with the practical administration of the Bankruptcy Act by district judges all over the United States.

By abstaining from expressing views regarding the requisites of a turnover order, I mean neither to agree nor disagree with observations made by the Court. There has been opportunity in the past for adjudication of that matter, and there may be such an opportunity in the future. This case does not present it. Erom all of which I conclude that the judgment below should be affirmed, leaving for another day, when the occasion makes it appropriate, to consider directly and explicitly the principle that should govern the issue of turnover orders by bankruptcy courts. 22

*93

324 U. S. 841 .

Robbins v. Gottbetter, 134 F. 2d 843 , and Cohen v. Jeskowitz, 144 F. 2d 39 .

Seligson v. Goldsmith, 128 F. 2d 977 .

Seligson v. Goldsmith, 128 F. 2d 977, 978-79 ; Robbins v. Gott-better, 134 F. 2d 843, 844 ; Cohen v. Jeskowitz, 144 F. 2d 39, 41 (concurring opinion of Frank, J.).

Presumably, this avowed inability of the Circuit Court of Appeals for the Second Circuit to free itself from its own prior decision in this situation is not the reflection of a principle similar to that which binds the House of Lords to its past precedents. It must be attributable to the fact that the Second Circuit has six circuit judges who never sit en banc and that presumably they deem it undesirable for the majority of one panel to have a different view from that of a majority of another panel.

128 F. 2d at 979 ; 134 F. 2d at 844 ; 144 F. 2d at 40-41 .

In the first two of these cases, the bankrupt did not seek review in this Court; in the Jeskowitz case, the bankrupt took the hint, but this Court denied certiorari. 323 U. S. 787 .

Judge A. N. Hand’s observation concurring, in the Robbins case, 134 F. 2d at 845 , is also pertinent: “. . . all the justices of a court of which those exceptionally alert guardians of civil rights, Justices Holmes, Brandéis and Stone, were members, unanimously concurred in the opinion of Chief Justice Taft . . . .”

278 U. S. at 363 .

See Appendix.

278 U. S. at 364 .

“ 'I have known a brief confinement to produce the money promptly, thus justifying the court’s incredulity, and I have also known it to fail. Where it has failed, and where a reasonable interval of time has supplied the previous defect in the evidence, and has made sufficiently certain what was doubtful before, namely, the bankrupt’s inability to obey the order, he has always been released, and I need hardly say that he would always have the right to be released, as soon as the fact becomes clear that he can not obey.’ ” 278 U. S. at 366 , quoting from Judge McPherson’s opinion in In re Epstein, 206 F. 568, 570 .

“Although we know that Maggio cannot comply with the order, we must keep a straight face and pretend that he can, and must thus affirm orders which first direct Maggio ‘to do an impossibility, and then punish him for refusal to perform it.’ ” 157 F. 2d at 955 (italics supplied). Judge Frank made this statement concerning the presumption of continued possession in turnover order proceedings, and was not addressing his remarks to the record before him in the contempt proceeding. The dictum began with this sentence: “Were this a case of first impression involving the validity of a turnover order, we would not accept such reasoning.” 157 F. 2d 951, 953 . The “thus” in his statement indicates hostility to the basis of the turnover order because of a virus which the lower court feels unable to extract but which automatically infects the contempt proceedings.

“With the turnover order once sustained, the contempt order necessarily followed.” Id. at 954 .

278 U. S. 358,364 .

The Chief Justice said “. . . the following seem to us to lay down more nearly the correct view,” and cited Toplitz v. Walser, 27 F. 2d 196 , a Third Circuit contempt case in which it is said (at p. 197) “It therefore devolves upon the bankrupt in the latter [contempt] proceeding to show how and when the property previously adjudged in his possession or control had passed out of his possession or control .... The trouble with the evidence in the contempt proceeding, the only evidence properly here for review, is that it is directed to the issue of the bankrupt’s possession and control of property at the date of bankruptcy raised and definitely decided against her in the turnover proceeding .... Though not in form this is in substance a collateral attack upon the now finally established turnover order, which of course is not permissible.”; Epstein v. Steinfeld, 210 F. 236 , a turnover proceeding, in which the Third Circuit delineated its procedure, different from that followed in the Second Circuit, *87 whereby if the referee found a shortage at the time of bankruptcy the turnover order was automatically entered, and the question of present possession or ability to comply with that order was left open for possible contempt proceedings, the presumption of continued possession being applied in such proceedings since the bankrupt had to show that by reason of events occurring since the bankruptcy he was unable to comply (cf. In re Eisenberg, 130 F. 2d 160 ) (this distinction has no real bearing on the instant issue as to either collateral attack or the presumption of continued possession); Schmid v. Rosenthal, 230 F. 818 , a Third Circuit turnover case, citing Epstein v. Steinfeld, supra; Frederick v. Silverman, 250 F. 75 , a Third Circuit contempt case citing Epstein v. Steinfeld, supra; Reardon v. Pensoneau, 18 F. 2d 244 , an Eighth Circuit contempt case, holding that the bankrupt had not met his burden of establishing present inability to comply, in which it is said (at pp. 245-46) “They [turnover orders] establish the bankrupt’s possession and control on the day the referee’s order was made. The burden was on him to show what disposition had been made of the $6,900. Until that showing is made relieving him of an intentional loss of its possession and control, it must be presumed that he still has it. ... a bankrupt cannot escape an order for the surrender of property belonging to his estate ‘by simply denying under oath that he has it.’ ”; United States ex rel. Paleais v. Moore, 294 F. 852 , a Second Circuit habeas corpus case following a commitment for contempt, stating (at p. 857) “If, at the time the turn-over order was made, the books and papers were in the bankrupt’s hands, the presumption is that they continued to be in his possession or under his control until he has satisfactorily accounted to the court of bankruptcy for their subsequent disposition or disappearance. The burden is upon him satisfactorily to so account for them. He cannot escape an order for their surrender by simply denying under oath that he no longer has them.”; In re Frankel, 184 F. 539 , a contempt case in which L. Hand, then a District Judge, refused to commit for contempt because he did not deem the turnover order binding as res judicata, but on rehearing reversed himself, holding that the bankrupt could not show present inability by evidence constituting an indirect attack on the turnover order, stating (at p. 542) “Therefore, in so far as the [turnover] order directs anyone to do anything, *88 he may not in the contempt proceeding question the propriety of the direction; and in so far as the order determines an existing fact, which is necessary in law to the validity of the direction, he may not question its truth. To question such a fact is to question the validity of the direction which depends upon it, and is only an indirect way of reviewing the order. Therefore now to deny the fact that the bankrupt had the money in his possession is in this case to assert that the order directing him to pay it over was erroneous. On this account, therefore, that fact is concluded, once it be granted that it was necessary to the validity of the order, which I have shown. Quite reluctantly, therefore, I can only conclude that I was wrong originally to inquire into the merits, and that a committal must issue.” The cumulative effect of these authorities is that a bankrupt’s denial of present possession, standing alone, is not sufficient to establish his inability to produce the property or its proceeds, and that the bankruptcy court will not permit the bankrupt to prove present inability to comply with the turnover order by evidence which indirectly constitutes a collateral attack on that order.

For almost forty years, the Second Circuit has tenaciously abided by the presumption of continued possession. While this presumption was previously sub dlentio utilized (e. g., In re Schlesinger, 102 F. 117 , affirming 97 F. 930 ), In re Stavrahn in 1909, 174 F. 330 , appears to have been the Second Circuit’s case of first impression, and the decision that sired the presumption. There the court stated that the bankrupt could not defend against a contempt citation following a turnover order on the assertion that he had *89 never taken the assets in question, but had to come forward with some reasonable explanation as to what had become of the assets since the turnover order. In 1912, the Second Circuit reiterated the reasoning of its earlier decision in In re Weber Co., 200 F. 404 . The presumption had been somewhat inarticulately phrased in the earlier opinion, and the court in this case commended the District Judge for aptly carrying out the mandate of the Stavrahn decision. The cases up to 1925 and before the Oriel case are listed and discussed at length in In re H. Magen Co., 10 F. 2d 91 , in which the court observed that “The law relating to turn-over orders is pretty well established in this circuit.” 10 F. 2d at 93 . In re Siegler, note 18 supra, was decided three months after this Court’s decision in the Oriel case. Then came: Danish v. Sofranski, 93 F. 2d 424 ; In re Pinsky-Lapin & Co., 98 F. 2d 776 ; Seligson v. Goldsmith , note 3 supra; Robbins v. Gottbetter , note 2 supra; Cohen v. Jeskowitz , note 2 supra; and the per curiam affirmance of the turnover order in the instant bankruptcy proceedings.

“Any difference of opinion respecting the force and effect of a turnover order, which may have prevailed before the decision of the Supreme Court, in Prela v. Hubshman [companion case to Oriel v. Russell] ... is now out of place in any discussion of the subject.” 31 F.2d at 973 .

Cf. In re Frankel, note 16 supra.

Cf. Brune v. Fraidin, 149 F. 2d 325 .

In the opinion dated April 18, 1945, holding petitioner in contempt of court, the District Court stated that: “Respondent [petitioner here] has not sustained his burden of satisfactorily accounting for the disposition of the assets by his mere denial of possession under oath.” And that court’s fourth finding of fact was as follows: “The respondent, Joseph F. Maggio, has wholly failed to comply with said turnover order, and he has failed to explain to the satisfaction of this court his failure to comply.”

“The proceedings in these two cases have been so long drawn out by efforts on the part of the bankrupts to retry the issue presented on the motion to turn over as to be, of themselves, convincing argument that if the bankruptcy statute is not to be frittered away in constant delays and failures of enforcement of lawful orders, the rule we have laid down is the proper one.” 278 U. S. at 363 .