Opposition Brief — Benevolent & Protective Order of Elks v. Joslyn
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IN THE
Supreme Court of the United States
Ocroper Term, 1952.
No. 501
In THE Matter or GEORGE R. JOSLYN, Bankrupt.
NEW JERSEY EQUITIES COMPANY AND HORACE
A. YOUNG, AS TRUSTEE IN BANKRUPTCY,
Petitioners,
vs.
GEORGE R. JOSLYN, er at.,
Respondents.
BRIEF OF GEORGE R. JOSLYN IN OPPOSITION TO
PETITION OF NEW JERSEY EQUITIES COMPANY
AND HORACE A. YOUNG FOR CERTIORARI.
Atvin GLen Hussar,
Reese Hvupparp,
Dominick VaRRAVETO, JR.,
Counsel for Respondent,
George R. Joslyn.
INDEX.
| SERB RP EPPS Ee EEC OR EOP iP 1-8
Trustee Young Asserted in the District Court a
Purported Equitable Lien Claim Which Has
Been Adjudicated to be Fraudulent.......... 2-4
The Purported Claim of New Jersey Equities Was
Filed on the Day of the Final Hearing. No Men-
tion of It Was Made to the Court. The Pur-
ported Claim Shows Upon Its Face That Neither
New Jersey Equities nor Its Predecessor in In-
terest Ever Had a Legal Claim Against George
R. Joslyn. The Claim Indicates Upon Its Face
That the Predecessor in Interest Did Not Even
Have a Valid Claim Against the Bank...... 5-8
Note on the Five Affidavits of Bias and Prejudice
PR A ON POs bse sind ccabk ded ss wnelkecdvun eee 5-6
a gS RB ee mr rr eter eee Pry eee ae 9
After the Class Suit Was Filed and While It Was
Pending None of the Creditors of the Bank Could
Assert an Individual Claim in the Bankruptcy Pro-
ees cba ee Wa Od GENE LAR ESS ORS LED ESSE 10-11
ate ere a al ea awe ed 11
Petitioners Have Shown No Ground for the Is-
es er CE oe ee awe ax aaa cans 11
ii
TABLE or CASEs.
In re Joslyn’s Estate (1948, 7 Cir.), 171 F.2d 159.... 4
Joslyn, Fisher Assignee v. Joslyn (1949), 337 Ill. App.
443, 86 N. E. 2d 367, appeal denied 341 Ill. App.
Leonard v. Bye (1935), 361 Ill. 185; 197 N. E. 546... .9, 11
N. & G. Taylor Co. v. Anderson (1926, 7 Cir.), 14 F.
N. & G. Taylor Co. v. Anderson (1928), 275 U. S. 431,
es es Oe Ba Se oan cede pescuccsciaes 7
Zimmerman v. Ziemer (1936), 363 Ill. 220; 1 N. E. 2d
TEXTWRITERS AND STATUTES.
Ill. Civil Practice Act, Ill. R. S., Chap. 110, See. 146.. 7
ink cid’ o baracceieh s he Awe aaa owas Ue awe we 8
See. 25 b, U. S. C., Tit. 11, Chap. 4, See. 48........ 2
Tit. 11, U. S. C. A. 58, General Orders, 21..........
IN THE
Supreme Court of the United States
Ocroser Term, 1952.
No. 501.
In THE Matter or GEORGE R. JOSLYN, Bankrupt.
NEW JERSEY EQUITIES COMPANY AND HORACE
A. YOUNG, AS TRUSTEE IN BANKRUPTCY,
Petitioners,
vs.
GEORGE R. JOSLYN, er at.,
Respondents.
BRIEF OF GEORGE R. JOSLYN IN OPPOSITION TO
PETITION OF NEW JERSEY EQUITIES COMPANY
AND HORACE A. YOUNG FOR CERTIORARI.
To the Honorable Justices of the Supreme Court of the
- United States:
We respectfully refer the court to the Statement of Facts
and Propositions of Law in Joslyn’s brief No. 445. The
purported summary statement in the petition (Pet. 2-11) is
incorrect. We respectfully refer the court to the opinion
of the district judge (Tr. 365-371) to the Findings of Fact
(Tr. 371-381). The testimony is not in the printed record.
The findings of the referee (Tr. 127-183) were adopted by
the judge (Tr. 384).
2
Because of his position as bankruptcy trustee, Young
has a stay in the Court of Appeals. This stay under See.
25 b (U.S. C. Tit. 11, Chap. 4, See. 48) is without bond.
_ The opinion indicates that had the district judge sus-
pected that Young would contrive by appeals with the at-
torneys for the Elks to keep Joslyn’s affairs under the three
suits and the injunctions he would have passed upon an
application (Tr. 284-288) to remove Young:
‘‘Other matters, including a motion to remove the
Bankruptcy Trustee, were filed in this cause, which
need not be passed upon at the present time in order
to dispose of this bankruptcy case and the other litiga-
tion which has grown out of it.
‘‘There is no conceivable objection to the payment
in full of a bankrupt’s creditors.
‘The payment, satisfaction and release of the stock-
holder’s liability claim and the disclaimer of Marcellus
L. Joslyn and Dr. Ralph C. Hamill leave this court
with a bankruptcy case without creditors or claimants
and with no justifiable reason for holding open this
case except for the allowance and payment of claims
for fees and expenses.’’ (Tr. 368.)
Young Asserted in the District Court a Purported
Equitable Lien Claim.
Young, the trustee, contended in the district court that
the estate should be kept open in order that the attorneys
for the Elks could assert a lien on the bankruptcy estate
through two assignments of alimony and child support.
This claim had been adjudicated to be part of a scheme to
extort and to blackmail by the Illinois courts of last resort
(Joslyn, Fisher Assignee v. Joslyn, 337 Ill. App. 443, 86
N. E. 2d 367, appeal denied 341 Ill. App. XIV).
The judge in his opinion both discussed and decided the
merits of this alleged claim:
‘It is suggested by the Bankruptcy Trustee that an
3
equitable lien claim might be filed on behalf of Thomas
Hart Fisher, but I fail to see how such a claim could
possibly affect a settlement of this proceeding. Obvi-
ously, the alleged claim of Fisher arose long subse-
quent to the date of the original bankruptcy to which
this entire proceeding relates. Furthermore, it is
clear that Fisher’s lien claim has been asserted exclu-
sive of the jurisdiction of this Court; and there appears
to be no occasion for litigating or re-litigating this
same matter in this cause, or preventing settlement of
this proceeding on the basis of such alleged claim to an
equitable lien. In this connection, this Court’s atten-
tion has been called to the case of Joslyn v. Joslyn, 337
Ill. App. 443, where the basis for Fisher’s alleged lien
claim was shown to consist of two assignments of
alimony from his client, Charlotte C. Joslyn, the former
wife of the bankrupt, said assignments being dated
August 12, 1940 and April 8, 1941, respectively.
‘‘Fisher’s claim for attorney’s fees, which the Bank-
ruptey Trustee states may be filed in this cause, was
adjudicated adversely to Fisher in the Illinois Appel-
late Court case, and there has been no reversal of that
ruling. It was there held, at page 477:
‘This case presents flagrant abuses by Fisher of
court processes, primarily in his own interest. He
has been fully reimbursed for expenses and suit
money. In the light of his conduct, he should not
be awarded any fees.’ ’’ (Tr. 370.)
We have pointed out (Joslyn’s brief No. 445, pp. 4-5)
that the trustee Young asserted this so-called equitable lien
before the referee. The referee found that the attorneys
for the Elks had planned to assert a lien upon any funds
which would be paid to Young (Tr. 154).
The Honorable Elwyn R. Shaw in an opinion filed Febru-
ary 9, 1945, in this case found that the reopening was for
the purpose of blackmail:
“‘The next move in this court came eight years after
the alleged bankrupt had been discharged, and was
obviously engineered by Thomas Hart Fisher as a
4
sort of a legal blackmail in an effort to extort enormous
fees from George R. Joslyn in connection with the old
divorce case.’’ (Rec. 4-7.)
While the Court of Appeals reversed Judge Shaw’s
order dismissing the entire reopening proceeding In re
Joslyn’s Estate, 171 F. 2d 159, the above-quoted finding
has neither been rescinded nor set aside.
Note: Judge Shaw’s opinion was in the record before
the Court of Appeals but has not been printed. The above
quotation, however, is also in Joslyn, Fisher Assignee v.
Joslyn, 337 Ill. App. 443 at 464, 86 N. E. 2d 367 at 377,
appeal denied 341 Ill. App. XIV. Judge Igoe quoted from
this opinion (Tr. 370). The Court of Appeals also referred
to said opinion for a statement of the facts:
‘‘They (the facts herein) are also succinctly stated
in the opinion of the Illinois Appellate Court in a
matter which that court considered to be inseparably
connected with the bankruptcy proceeding. See Jesiyn
v. Joslyn, 337 Til. App.: 443, 449, 457, appeal denied,
341 Ill. App. xiv.’’ (Tr. 423-424.)
The Illinois Appellate Court on the same page with the
above statement of Judge Shaw quoted the Honorable John
P. Barnes upon one of the hearings in this case. Judge
Barnes told Thomas H. Fisher that Fisher’s purpose was
to blackmail:
‘*T haven’t any doubt that for four or five long years
it has been your purpose to blackmail and extort from
them (the Joslyn family) money by means of this bank-
ruptey. I haven’t the slightest doubt of it’’ and in
another instance, ‘‘It now seems to me that you have
been using the processes of this court in order to black-
mail and extort. That is the way it looks to me.”
(Joslyn, Fisher Assignee v. Joslyn, 337 Ill. App. 443
xiv) 86 N. E. 2d 367, appeal denied 341 Ill. App.
5
The Purported Claim of New Jersey Equities.
On September 13, 1951 (Tr. 294), John S. Miller, Thomas
H. Fisher, and Norman Crawford presented the Elks’ peti-
tion to the Superior Court to vacate the decree of July 12,
1951 (Tr. 295-309). The court denied leave to file on
September 20, 1951 (Tr. 294). New Jersey Equities’ pur-
ported claim with a power of attorney to Norman Crawford
and Thomas H. Fisher was executed ten. days later—
October 1, 1951 (Tr. 335-336). The final hearing in this
ease was held October 15, 1951 (Tr. 1, 3). This purported
claim was withheld from record until October 15, 1951 (Tr.
334-335)—the day of the final hearing (Tr. 1, 3). Norman
Crawford on October 11, 1951, served notice that he would
present the fourth affidavit of bias and prejudice on Octo-
ber 15, 1951 (Tr. 337).
Note: The first affidavit of bias and prejudice was
filed March 12, 1947, against the Honorable John P.
Barnes by Thomas H. Fisher as attorney for the Elks
(Tr. 15-25). The court granted the motion (Tr. 27).
The second affidavit of bias and prejudice was filed
February 11, 1949, by Horace Young against the Hon-
orable Elwyn R. Shaw (Tr. 40). Judge Shaw refused
to recuse himself. The third affidavit of bias and
prejudice was filed May 3, 1950 by Horace Young (Tr.
48-54). Judge Shaw granted the motion (Tr. 65). The
fifth affidavit of bias an prejudice was filed November
13, 1951, five days after the final decrees were entered
on November 8, 1951 by Thomas H. Fisher, Norman
Crawford, and John S. Miller, asking the court to
vacate his ruling upon the fourth affidavit of bias and
prejudice (Tr. 387). On the day of the filing of the
fifth affidavit of bias and prejudice Young and Craw-
ford without notice appeared before Judge Igoe. They
asked Judge Igoe for a stay (Tr. 398-399). Although
both counsel appeared before Judge Igoe on the day
of filing the fifth affidavit attaching him, neither men-
tioned this affidavit (Tr. 398-399). The dates on the
two affidavits attached to this fifth affidavit of bias
4
6
and prejudice are, respectively, November 9, 1951 (Tr.
397), one day after Judge Igoe had entered the final
decrees and the other October 18, 1951 (Tr. 395). This
affidavit was filed without leave.
The transcript shows the exhibits offered October 15,
1951 (Tr. 347-364).
This purported claim of New Jersey Equities was never
mentioned upon any hearing before the court. No notice
of its filing was ever given.
The findings named the bank creditors whose claims had
been filed. New Jersey Equities’ claim is not among them
(Tr. 382).
New Jersey Equities alleges:
‘*2. That George R. Joslyn, * * * was at and
before the filing by him of the petition * * * and
still is justly and truly indebted to said corporation
through its predecessor in interest, New Jersey Fidelity
& Plate Glass Ins. Co., in the sum of $2,828.89.
‘<3. That the consideration of said debt is as fol-
lows: Said bankrupt owed a stockholder’s liability of
$57,100 on 1,142 shares of the capital stock of Chicago
Bank of Commerce, * * * and claimant’s prede-
cessor in interest, New Jersey Fidelity and Plate Glass
Insurance Company, was a depositor in said bank in
said sum.
‘‘4. That no part of said debt has been paid, and
no claim on account thereof was filed with the State
Court Receiver of said bank and no dividend on account
thereof paid by him.
* * * * *
“*7, That the instrument upon which said debt is
founded is attached hereto.
**8. That the said debt was due on June 25, 1932,
when said bank closed; * * * and that no judg-
ment has been rendered thereon, except for proceedings
in stockholders’ liability case.’’ (Tr. 335.)
, ——— . :
RIES LANES CARIN eae CIRCE a ten ants es acces
—
7
The alleged instrument on which the debt is stated to be
founded in the above paragraph 7 was not attached (Tr.
335-336).
No affidavit by the assignor was attached as required by
General Order 21:
Tit. 11, U.S. C. A. 53:
‘General Orders, 21.—Proof's of Claim.
“*(3) If a claim has been assigned after the com-
mencement of the proceedings but before proof of
claim has been filed, the proof of claim there-
for shall be supported by an affidavit of the owner
at the time of the commencement of proceedings,
setting forth the true consideration for the debt, what
payments have been made thereon, and that it is en-
tirely unsecured, or if secured, the security as is re-
quired in proving secured claims.”’
The purported proof of claim shows no attempt to set out
how and when the alleged assignee obtained title as re-
quired by Illinois statute:
“Til. Civil Practice Act, Ill. R. S., Chap. 110, See.
146:
“146. See. 22. (Who may be plaintiff.) The as-
signee and owner of a nonnegotiable chose in action
may sue thereon in his own name, and he shall in his
pleading on oath, allege that he is the actual bona fide
owner thereof, and set forth how and when he acquired
title.’’
“N. & G. Taylor Co. v. Anderson (1928), 275 U. 8.
431, 48 S. Ct. 144, 72 L. Ed. 354.
N. € G. Taylor Co. v. Anderson (1926, 7 Cir.), 14
F. 3a 353.°°
The alleged indebtedness against the bank admittedly did
not accrue during the: 44 months—February 10 to June 25,
1932—George R. Joslyn was a stockholder. Under no
8
theory could New Jersey Equities Co. have any claim.
Under Illinois law only creditors whose claims against the
bank accrued while Joslyn was a stockholder have any inter-
est in the fund arising from Joslyn’s stock liability. (See
findings and analysis by referee, Tr. 170-174.)
The two statements, one in paragraph 4, that no part of
said debt had been paid and the other in paragraph 8 that
judgment had been rendered thereon in the stockholders’
liability case indicate the supposed claim of the predecessor
in interest against the bank was invalid. The Illinois re-
ceiver appointed by the Auditor of Public Accounts had a
statutory duty to prove all unproved claims appearing upon
the bank’s books:
‘‘The receiver of such bank shall, after the expira-
tion of said twelve weeks, file with the Auditor and
with the clerk of such court as may have charge of the
liquidation, a correct list of all creditors of said bank,
as shown by its books, who have not presented their
claims and the amounts of their respective claims after
allowing all just credits, deductions and set-offs as
shown by the books of said bank. Such claims so filed
shall be deemed proven, unless objections are filed
thereto by some party or parties interested therein
within such time as shall be fixed by the auditor or by
such court as may have charge of the liquidation.’’
(Emphasis ours.)
Chap. 163, Sec. 11, 1949 Ill. Rev. Stat. Laws 1929,
P. 174, #1.
No attempt is made by this purported claimant to ex-
plain how or why the receiver failed to do his statutory
duty to prove this purported claim if such claim ever
existed.
PROPOSITION OF LAW.
If One Assume Contrary to the Pleadings and Proofs in
This Case, That the Elks and the New Jersey Equities
Owned an Indebtedness Which Accrued Against the
Bank During the Four and a Half Months George R.
Joslyn Was a Stockholder, February 10 to June 25, 1932,
Still Under the Illinois Law, Such Creditors Would Not
Have Any Standing to Prove a Claim in the Bankruptcy.
Zimmerman vy. Zeimer (1936), 363 Ill. 220; 1 N. E.
(2d) 854.
Leonard v. Bye (1935), 361 Ill. 185; 197 N. E. 546.
10
ARGUMENT.
If One Assume Contrary to the Pleadings and Proofs in
This Case, That the Elks and the New Jersey Equities
Owned an Indebtedness Which Accrued Against the
Bank During the Four and a Half Months George R.
Joslyn Was a Stockholder, February 10 to June 25, 1932,
Still Under the Illinois Law, Such Creditors Would Not
Have Any Standing to Prove a Claim in the Bankruptcy.
Hillmer, et al. v. Chicago Bank of Commerce, Superior
Court No. 560305, on behalf of all creditors, was instituted
on June 25, 1932. The court restrained all of the creditors
from instituting any other suits. It appointed a receiver
to receive payments from stockholders. George R. Joslyn
was made a party defendant and served with process long
before the bankruptcy (Tr. 272-273). Under Illinois law, a
creditor whose indebtedness against the bank accrued dur-
ing the four and a half months George R. Joslyn owned
the stock had no standing in any court to institute a suit
against George R. Joslyn.
This question was passed upon squarely by the Supreme
Court of Illinois in Zimmerman v. Zeimer (1936), 363 Ill.
220; 1 N. E. (2d) 854. Zimmerman whose indebtedness
against the savings bank accrued while Zeimer was a stock-
holder instituted the suit. The court held that the Superior
Court could not entertain the proceeding. The court said:
‘‘To give the constitutional provision any other in-
terpretation would afford individual creditors an un-
due and unfair advantage over those creditors who
present their claims in the representative proceeding
in equity. It would furnish opportunity for a stock-
holder to prefer one creditor over creditors generally,
it would positively prevent the creation of a fund to be
ORES RE SEE ELLE ION OLE IT BERG LE LIN EA NE AE RRA Si MINN 9 PPR
11
distributed ratably among all creditors, as the consti-
tution contemplates, and would result in serious con-
fusion in the liquidation of insolvent banks. Such a
condition was not intended by the framers of the con-
stitution.’’
Zimmerman v. Zeimer, 363 Til. 220 at 221-222, 1
N. E. (2d) 854.
In Leonard v. Bye (1935), 361 Ill. 185; 197 N. E. 546, the
stockholder moved to dismiss the depositor’s action on
the ground that a class suit had been previously filed.
Leonard, the creditor contended in the Supreme Court that
he was not bound by the gratuitous acts of complainants in
the representative suit. Holding that Leonard had no
standing to institute any suit, the court said:
“‘There can be no doubt that circuit courts have
jurisdiction over representative suits. In such suits
the remedy is furnished to a class of individuals who
have common rights, who need protection, and in pur-
suit of that remedy individuals have the right to repre-
sent the class to which they belong. The complainants
in the suit purported to represent the appellant, who
would be bound by the results in the case until the de-
cree rendered there is reversed on appeal.’’
Leonard v. Bye, 361 Ill. 185 at 190; 197 N. E. 546.
Conclusion.
Petitioners have shown no ground for issuance of the
writ of certiorari. The constitutional provision imposing
liability upon bank stockholders has been repealed. All the
claims have been paid. Any questions which at one time
existed have become moot. We respectfully submit that
the Petitions for Certiorari should be denied.
Auyvin GLen Hvussarp,
Reese Hvusparp,
Dominick Varraveto, JR.,
Counsel for Respondent,
George R. Joslyn.
IN THE (
Supreme Court of the United States
Octoser Term, 1952.
No. 501
In THe Matter or GEORGE R. JOSLYN, Bankrupt.
NEW JERSEY EQUITIES COMPANY anp HORACE A.
YOUNG, as Trustee 1n Bankruptcy,
Petitioners,
vs.
GEORGE R. JOSLYN, er at.,
Respondents.
ON PETITION OF NEW JERSEY EQUITIES COMPANY AND HORACE A,
YOUNG, AS TRUSTEE IN BANKRUPTCY, FOR WRIT OF CERTIORARI
TO THE UNITED STATES COURT OF APPEALS FOr THE SEVENTH
CIRCUIT, ¢.
BRIEF OF WADE FETZER, JR., ET AL., IN
OPPOSITION.
Epwarp J. Merzporr,
231 South La Salle Street,
Chicago 4, Illinois,
Pro Se and as Attorney
for Wade Fetzer, Jr.,
et al.
PAGE
a ee rey ee eee oe ee 1
WOMMNOME 6. ccc ccc c cscs cena rcsenscesseetseseses 2
1. All creditors of the Chicago Bank of Com-
merce participated in the stockholders’ liabil-
PP IE a x bn od oick wed noes cee ccara boseen des 2
2. The New Jersey Equities Company does not
have an appealable interest ..............-. 2
3. The claim of the New Jersey Equities Com-
ge te a err ee err errs ae ee 3
4. All creditors of the Chicago Bank of Com-
merce, including the New Jersey Equities
Company, are bound by the class proceeding
Re, rr rer ry tee eee Tee ie 3
5. The trustee in bankruptcy elected not to ap-
pear in the stockholders’ liability case and
was, therefore, not entitled to notice of pro-
Perr eee eee 4
6. The bankrupt waived his personal defense of
discharge in bankruptcy ..........-.-..+-- 5
7. The Superior Court decree of July 18, 1951,
was an adjudication of the stockholder’s lia-
bility of the bankrupt..................-4-. 5
8. The Superior Court had jurisdiction to enter
the decree of July TB, 1951................. 6
9. Ne good purpose would be served by continu-
inst the plenary actions .................65- 7
10. The decree below was not based on Brown v.
ii
11. The basis of the decision of the court below
was that the court had the power to approve
what it could initially authorize ............ 8
12. The theory adopted by the court below and
the theory advanced by respondents Wade
Fetzer, Jr., et al., in support of the decision
are different but both are applicable and lead
Pe Se ee US ceo ks bie a hae vee enuencae 10
Conclusion
iii
CITATIONS.
Cases.
Babka Plastering Co. v. City State Bank, 264 Ill. App.
SE Visa vhs kek baad REGREWEROSOTT LES aha ek ae 4
Bakersfield Abstract Co. v. Buckley (CCA 9), 100 F.
RE AD KEK US KAS oD Reese De eR ESESaT ET 2
Brown v. O’Keefe, 300 U. S. 598. ..........ccccecees 7
Dimock v. Revere Copper Company, 117 U.S. 559.... 5,6
In re Granada Apartments (CCA 7), 104 F. (2d) 970.. = 3
Groves v. Farmers State Bank, 368 Ill. 35, 12 N. E.
EE ME, GEOL CEC ID Ngee RESSRNED TEES PEROT A Chae 4
Holderman v. Moore State Bank, 383 Ill. 534, 50 N. E.
te RMR, er gene Spee ee geet ara ng vey 3, 4,8
In re Innis (CCA 7), 140 F. (2d) 479................ 5, 6
Ge SON iy BTA Os TON BOON 6 oho yoke Shas ccdusae cus 4
Joslyn v. Joslyn, 337 Ill. App. 443, 86 N. E. (2d) 367.. 7
Kape v. Home Bank and Trust Co., 370 Ill. 170, 18
ee eer TT Ter re errr mee 5
In re Milwaukee and Sawyer Building Corporation
A Soy OO Ws COD GBS hee c vache idle keepeins 3
Nathan v. Labor Board, 344 U. S. 25................ 8
St. Louis B. & S. Ry. Co. v. Gray, 100 Ill. App. 538.... 6
Supreme Tribe of Ben-Hur v. Cauble, 255 U.S. 356.. 4
Statutes. 3
Oe ee te Ch. A, OG, Be TRIUGOE BE k os sas'scscdeacnan's 3
IN THE
Supreme Court of the United States
Octoser Term, 1952,
No. 501.
In tHE Matrer or GEORGE R. JOSLYN, Bankrupt.
____
NEW JERSEY EQUITIES COMPAN Y anp HORACE A.
YOUNG, as Trustee rn Bankruptcy,
Petitioners,
vs.
GEORGE R. JOSLYN, er AL.,
Respondents.
ON PETITION OF NEW JERSEY EQUITIES COMPANY AND HORACE A.
YOUNG, AS TRUSTEE IN BANKRUPTCY, FOR WRIT OF CERTIORARI
TO THE UNITED STATES COURT OF APPEALS FOR THE SEVENTH
CIRCUIT,
BRIEF OF WADE FETZER, JR., ET AL., IN
OPPOSITION.
The petitioners, New J ersey Equities Company and
Horace A. Young, as Trustee in bankruptcy, have adopted
the brief and argument in support of the petition of the
Benevolent and Protective Order of Elks of the United
States of America for writ of certiorari, pending as Docket
No. 445. On December 15, 1952, respondents Wade Fetzer, Jr.,
et al., filed a brief in opposition to the Elks’ petition. No
2
new question is presented by the joint petition of the New
Jersey Equities Company and Horace A. Young, as Trus-
tee in Bankruptcy, or by their supporting brief. It seems
appropriate, therefore, that the brief in opposition of re-
spondents Wade Fetzer, Jr., et al., should take the form of
a memorandum with respect to the variant statement of
facts and argument in the joint petition.
1. Petitioners assert that the creditors of the bankrupt
fall into two categories—those who ‘‘participated’’ in the
funds distributed in the state court proceedings and those
who did not or will not participate, and that the New Jersey
Equities Company ‘‘speaks”’ for the latter group. No such
finding was made by either of the courts below nor by the
referee. The court of appeals below noted that the peti-
tioners made such assertion (Tr. 425), but nothing in the
opinion indicates that the court agreed with this contention.
The only support in the record for the statement that there
are two groups of creditors of the Chicago Bank of Com-
merce and that one group did not or will not participate in
the distribution effected in the state court is the Trustee’s
petition for injunctive relief (Tr. 268-279). This petition
(Tr. 275-6) has no probative value. The answer of the
respondents Wade Fetzer, Jr., et al., to this petition specifi-
cally denied all such allegations (paragraphs 11 (e), (f),
(g)), in the Trustee’s petition (Tr. 312). No offer of proof
was made by the Trustee in support of the allegation that
there were two separate groups of creditors of the bank
and that one group did not participate in the liquidating
dividend. The controverted allegations of the Trustee’s
petition cannot be taken as proof (Bakersfield Abstract Co.
v. Buckley (C. C. A. 9), 100 F. (2d) 530, 532).
2. The New Jersey Equities Company does not have
an appealable interest. Its claim was filed without leave of
court and without notice to anyone. The claim was not
proved nor allowed for any purpose. It was filed on the
3
day that the District Court heard all of the pending matters
and took the cause under advisement. None of the respond-
ents ever learned of its existence until it was designated by
petitioner as part of the record on appeal. The New J ersey
Equities Company does not, therefore, have such an interest
as entitles it to request a review of the action of the lower
courts (In re Milwaukee and Sawyer Building Corporation
(C. C. A. 7), 79 F. (2d) 478, 479; In re Granada A part-
ments (C. C. A. 7), 104 F. (2d) 970, 973, cert. denied 308
U. S. 607).
3. The New Jersey Equities Company was neither a
creditor of the bankrupt nor a creditor of the Chicago Bank
of Commerce. It claims as assignee of the New Jersey
Fidelity and Plate Glass Insurance Company (Tr. 335-336).
The claim does not show when the New J ersey Fidelity and
Plate Glass Insurance Company assigned its claim against
the Chicago Bank of Commerce to the New J ersey Equities
Company. If the claim was assigned after the bankruptcy
of Joslyn, the claim was required to be supported by an
affidavit of an officer of the New Jersey Fidelity and Plate
Glass Insurance Company, setting forth the true considera-
tion for the assignment and whether or not it was secured
(General Order XXI (3)). The claim of the New Jersey
Equities Company is, therefore, a nullity.
4. Under the Illinois law a stockholder of an Illinois
bank is liable only to the extent of the par value of his
shares for the unsatisfied debts of the bank accruing during
his period of stock ownership, and he is discharged by pay-
ment to the receiver in the representative suit of an amount
equal to those debts by stockholders during that period
(Holderman v. Moore State Bank, 383 Tll. 534, 542, 50 N. KE.
(2d) 741). The creditors in the stockholder liability case
may for practical reasons consent to make distribution
through the receiver appointed at the request of the Auditor
of Public Accounts to liquidate the bank. It then becomes
4
such receiver’s duty to distribute such funds ratably among
the creditors of the bank (Holderman v. Moore State Bank,
383 Ill. 534, 543, 50 N. E. (2d) 741). The consent of Hill-
mer, et al., on behalf of all of the creditors of the Chicago
Bank of Commerce to distribute funds collected in the
stockholder liability case in such manner is binding upon
all such creditors, including the New Jersey Equities Com-
pany (Supreme Tribe of Ben-Hur v. Cauble, 255 U.S. 356,
363-4; Babka Plastering Co. v. City State Bank, 264 Ill.
App. 142, cert. denied, 266 Ill. App. XV; Groves v. Farmers
State Bank, 368 Ill. 35, 48, 12 N. E. (2d) 618); The New
Jersey Equities Company, as well as the Elks and all other
creditors of the Chicago Bank of Commerce, participated
in the state court proceedings through their class repre-
sentatives, Hillmer, et al.
5. It is true that the trustee in bankruptcy, Horace A.
Young, did not participate in the state court proceeding.
It is not true that he never had any actual knowledge of
the state court proceedings. On March 31, 1949, respond-
ents Wade Fetzer, Jr., et al., sought to intervene in the
bankruptcy proceeding and by their notice and petition
apprised the Trustee in bankruptcy of the stockholder lia-
bility suit and respondents’ claim for reimbursement (Tr.
41-46). Actually, the Trustee was apprised of the stock-
holder liability case when he was appointed Trustee, for at
that time Hillmer, et al., had filed a claim on behalf of all
of the creditors of the Chicago Bank of Commerce in the
bankruptcy proceeding. The district court on June 1, 1948,
dismissed the reopened bankruptcy proceeding because the
court was of the opinion that the remedy of the Elks was
in the stockholders’ liability case. It was from this order
that Horace A. Young, as Trustee, prosecuted the appeal
which was decided in In re Joslyn, 171 F. (2d) 159, 160,
166. It is true, as petitioners assert, that no order was
entered in the bankruptcy proceeding authorizing or di-
7
ae SMEARS IRN RIE
5
recting the Trustee in bankruptey to participate in the
state court proceeding. The reason no such order was
entered is that the Trustee in bankruptcy never made appli-
cation for any such order. If the Trustee did not wish to
intervene in the state court proceeding which had jurisdic-
tion of the subject matter of the stockholder’s liability of
George R. Joslyn, and of George R. Joslyn personally (sub-
ject to Joslyn’s personal defense of a discharge in bank-
ruptey), the Trustee in bankruptcy cannot complain that
orders were entered in the state court proceeding without
notice to him. Notice of the presentation of the settlement
petition praying for the entry of the Superior Court order
of July 18, 1951, was given to all persons entitled thereto
as appears from the findings of the Superior Court order
(Tr. 348). Petitioners’ statement that the state court judge
clearly stated that he would not have entered the decree of
July 18, 1951, if he had not been under the erroneous im-
pression that all the attorneys interested in the matter were
before him is plainly untrue. The stoekholders’ liability
case was a class action. Notice to the plaintiffs in the stock-
holders’ liability case was notice to all creditors of the
Chicago Bank of Commerce (K ape v. Home Bank and
Trust Co., 370 Ill. 170, 172, 18 N. E. (2d) 170).
6. Petitioners argue that at the time of the entry of
the order of July 18, 1951, the bankrupt had not withdrawn
his defense of discharge in bankruptcy. As pointed out
in our reply to the Elks’ petition for certiorari, the intent
of the bankrupt to waive his discharge in bankruptey or
to renew his debt by a new promise was inferable by his
silence when his attorney presented his father’s petition
offering to pay the liability of the bankrupt if it were
promptly adjudicated (Dimock v. Revere Copper Company,
7 U. S. 559, 566; In re Innis (C. C. A. 7), 140 F. (2d)
479, 481, cert. denied, 322 U. S. 736).
7. It is argued by petitioners that the order of July 18,
6
1951, was not a judicial decree but merely an agreement of
the consenting parties judicially recorded. The mere fact
that the order was okayed by the counsel for all of the
parties did not alter the fact that it was an adjudication
(St. Louis B. é S. Ry. Co. v. Gray, 100 Til. App. 538, 539).
The Superior Court trial judge actually made an independ-
ent examination of the authorities to determine whether
interest was collectible and concluded that interest was
not collectible (Tr. 390).
8. The reason relied upon by petitioners for the allow-
ance of a writ of certiorari is that the decision of the court
below was a relinquishment of its exclusive control of the
administration of the bankrupt estate. This argument
assumes fhat the state court did not have jurisdiction to
adjudicate the liability of Joslyn as a stockholder of the
Chicago Bank of Commerce. As we pointed out in our brief
in opposition to the Elks’ petition for the allowance of a
writ, the Superior Court had jurisdiction to adjudicate the
liability of the stockholders of the Chicago Bank of Com-
merce to the creditors of that bank in a class action brought
by Hillmer, et al., and the state court also had jurisdiction
of the person of George R. Joslyn by reason of his appear-
ance and answer in that case (Tr. 186, 354-356). The juris-
diction of the state court was not divested by the subse-
quent bankruptcy proceeding (Dimock v. Revere Copper
Company, 117 U. S. 559, 564-6). The bankrupt’s defense
of his discharge in bankruptcy was a personal one which he
could waive. And he did waive his defense by his silence
when his own attorney presenied the father’s petition offer-
ing to settle the bankrupt’s stockholders’ liability if it were
promptly adjudicated (In re Innis (C. C. A. 7), 140 F. (2d)
479, 481, cert. denied, 322 U. S. 736). The subsequent ad-
judication by the state court merged the stockholder’s lia-
bility of the bankrupt in the Superior Court decree of
July 18, 1951. When the decree was satisfied in open
7
court the decretal liability was extinguished. When the
liability was extinguished it no longer afforded a basis
for a claim against the bankrupt estate.
9. The extinguishment of the claim of the creditors of
the Chicago Bank of Commerce to enforce the stockholder’s
liability of Joslyn left the bankruptcy estate without any
ereditors (Tr. 380). The decree of the district court pro-
vided for a fund of $50,000.00 to take care of the fees of the
Trustee and the attorneys. Neither the Trustee nor the
other petitioners claim that $50,000.00 is insufficient for
such purpose. What good purpose could be fulfilled by con-
tinuing the three plenary actions to collect administrable
assets totaling $500,000.00 is difficult to perceive. The
court will not be oblivious to the realities. The contention
of petitioners that the release of such assets permanently
harms the bankruptcy administration is difficult to take
seriously, particularly in view of the factual background set
forth in Joslyn v. Joslyn, 337 Ill. App. 443, 457, 464, 86
N. EK. 2nd, 367, 374, to which attention was called by the
court below (Tr. 424). The exercise of the court’s dis-
cretionary power to terminate a bankruptcy proceeding
when the bankruptcy estate ‘‘is without creditors or claim-
ants’’ (Tr. 368, 383) does not limit or restrict the para-
mount and exclusive jurisdiction of the bankruptcy court
over bankruptcy matters. To do what is obviously to the
best interest of the bankrupt’s estate under such cireum-
stances is an exercise of such jurisdiction.
10. Petitioners devote much attention to Brown vy.
O’Keefe, 300 U. S. 598. That case was not the basis for
the decision of the court below. The case was merely
referred to by the court below in a discussion of its previ-
ous rulings. The court observed in effect that the claim of
a receiver of a national bank is similar to the claim of a
representative of all the creditors of an Illinois state bank
and that the receiver appointed by the Comptroller in the
| es
8
Brown case and the receiver appointed by the Superior
Court in the present case are comparable in the sense that
they are the only persons to whom payment can be made
to discharge the liability of the stockholders.
11. The opinion of the court below upheld the district
court on the theory that the district court was vested with
and exercised the discretion of a chancellor in approving
the final settlement of the bankrupt’s stockholders’ liability
in the state court and in terminating the bankruptcy pro-
ceeding on the basis of that settlement (Tr. 424). The
district court had the power and discretion to order the
parties to proceed in the Superior Court stockholders’ lia-
bility case to establish by a decree in that case the bank-
rupt’s liability on his stock of the Chicago Bank of Com-
merce as recommended by the Referee (Tr. 176-7) (Nathan
vy. Labor Board, 344 U. S. 25, 30). If the district court
could permit such remission initially it could subsequently
accommodate itself to the adjudication by ratification. Con-
trary to the repeated contentions of petitioners, the bank-
rupt’s liability as a stockholder was not liquidated prior
to the Superior Court decree of July 18, 1951. Under the
Illinois law the bankrupt was liable only for the debts of
the Chicago Bank of Commerce which accrued while he
was a stockholder and onlt; to the creditors whose claims
accrued in that period. In Holderman v. Moore State Bank,
383 Ill. 534, 540, 50 N. E. (2d) 741, 745, the Illinois Supreme
Court said:
The correct rule of liability is set out in Golden v.
Cervenka, Sanders v. Merchants’ State Bank and
Burket v. Reliance Bank & Trust Co. With this meas-
ure of liability thoroughly established it would be in-
accurate to say a stockholder is liable to any other
creditor of the bank than one whose debt accrued while
he is a stockholder, and to say that such stockholder
is liable to all of the creditors of the bank would render
him responsible to creditors who existed both before
and after the time he was a stockholder, which is
Sue BS MOPED AQP BUST NEL LEN INIA TIO SPST TO Oa
_—
9
directly contrary to the established rule of a stock-
holder’s liability.
The Referee found that no proof had been made in the
bankruptcy proceeding that either the Elks or any other
claimant had claims against the Chicago Bank of Com-
merce which accrued while the bankrupt was a stockholder
and that to hear the evidence on the question ef which of
the bank’s creditors are also creditors of the bankrupt and
how much of the bank’s debts accrued during the period
Josiyn was a stockholder and remained unpaid when the
bank closed would mean hearing and determining virtually
all the issues which had already been tried in the repre-
sentative creditors suit in the state court (Tr. 175). If
Joslyn’s father had not presented his settlement petition
in the Superior Court and the district court had acted
upon the Referee’s recommendation and remitted the issues
on the stockholders’ liability to the Superior Court for
adjudication in the stockholders’ liability case the Superior
Court would have entered a decree against the bankrupt
in precisely the same amount and directing payment to
the receiver in the stockholders’ liability case. The $57,-
100.00 recovered by the receiver under such a decree would
eo instante have been impressed with the trust created by
the prior Superior Court decree of February 14, 1950 (Tr.
187-211) which provided that the receiver should hold any
and all money thereafter received by him in trust for the
use and benefit of Wade Fetzer, Jr. and the other stock-
holders who had overpaid their liabilities as stockholders
until their overpayments were repaid in full (Tr. 205).
The court of appeals below obviously concluded that the
district court had a discretionary power to remit the issues
pertaining to the stockholder’s liability of the bankrupt
to the Superior Court and that, therefore, there could be
no abuse of its discretionary powers in chancery to approve
the method of such adjudication which it had the right to
initiate and which, as the referee had pointed out (Tr.
10
175-7), had the compelling utility of providing for a just
and equitable result.
12. The theory adopted by the court of appeals below
iu sustaining the decree of the district court is different
from the one advanced by respondents Wade Fetzer, Jr., et
al., previously outlined and set forth more at length in our
reply to the petition of the Elks. Both theories are ap-
plicable. Both produce the same result. The state court
had jurisdiction to enter the decree of July 18, 1951, and
the district court did not relinquish its exclusive jurisdic-
tion over bankruptcy matters in entering its decree of
November 8, 1951.
13. This memorandum has been confined to considera-
tion of whether the court below reached the correct result.
While the answer to that question is not normally disposi-
tive of tire question now before this Court, the inquiry in
this case is of more than usual relevancy. So far as we
have been able to determine the only ground on which the
petitioners are seeking a review is that the decision of the
court of appeals below is erroneous. No conflict of deci-
sion has been presented. Nor does it appear that the case
is of a peculiar gravity or of general importance. Peti- |
tioners state that the decision below is in conflict with the
clear language of the Bankruptcy Act and the numerous
decisions of this Court. But so far as we can ascertain
they have no other than a woman’s reason: They think it
is so because they think it is so.
For the foregoing reasons the petition of the New Jersey
Equities Company and Horace A. Young, as Trustee in
Bankruptcy, for a writ of certiorari should be denied.
Respectfully submitted,
Epwarp J. Merzporr,
Pro se and as counsel for
Wade Fetzer, Jr., et al.
January, 1953.
IN THE
Supreme Court of the United States
Ocroser Term, 1952.
No. 501
In THE Matter or GEORGE R. JOSLYN, Banxrvpt.
NEW JERSEY EQUITIES COMPANY anp HORACE A.
YOUNG, as Trustee 1n Bankruptcy,
Petitioners,
vs.
GEORGE R. JOSLYN, er at.,
Respondents.
BRIEF OF ARMIN F. HILLMER IN OPPOSITION
TO PETITION FOR CERTIORARI.
Karu Epwin Seyrartu,
208 South La Salle Street,
Chicago 4, Illinois,
Counsel for Respondent,
Armin F. Hillmer.
SUBJECT INDEX.
PAGE
NE TUUEOE in ea he cases notin atu die ns ed dannbas 1
Correction of Summary Statement of Additional Mat-
aR Rar Aa rmite ay ed waa Cais t eehe Sh ES pyc 1
Gh. SONNE ia.) cnc adeaeenbeb hess aesivdeen 6
No Grounds Exist for Allowance of Certiorari...... 6
OO 5 vis ina wes speeds bh ee ks <4 ks 7
I. The State Court Had Jurisdiction to Adjudi-
cate and Satisfy the Stockholder’s Liability
WE Or Tt POM 505 ok ee ee heees 8
A. A class suit in the Superior Court of Cook
County was the proper method of enfore-
ing the stockholder’s liability of George
We Eo Fa bahia cds Veeenenna cies 8
B. Prior to the bankruptcy herein the Su-
perior Court of Cook County acquired and
retained jurisdiction over the person of
George R. Joslyn and the subject matter
of his stockholder’s liability ............ 9
C. Neither of the petitioners herein took any
action to stay the stockholders’ liability
oust Im Ue WUbte GOEL... 6 ccncnescdaraes 10
II. The Action Sought to Be Reviewed Herein
Is a Proper Exercise of the Discretion of the
OE CO isin on cc ekeh ned renee 11
SO ROORIRRR Bnet BEES VENI A See np eit Ness 27
ne eater
A. Bankruptcy courts are inherently courts
of equity and, as such, are vested with
discretionary powers ..............e06. 11
ii
B. The Bankruptey Act does not limit the
discretionary power of the bankruptcy
court in the situation presented by this
NN Soca CEe eke ss bbers vieserw sas 12
C. The concept of ‘‘paramount and exclu-
sive jurisdiction’’ is not inconsistent with
the exercise of ‘‘discretionary power’’ by
the bankruptcy court .................. 12
III. Relevant Authorities Support the Action of
the Lower Courts Herein ................ 14
A. Dimock v. Revere Copper Co., 117 U. S.
559, is decisive of the issues herein.... 14
B. Cases cited by petitioners are inappli-
cable and irrelevant herein ............ 14
ne inde eee vids Wale es bas ens 17
iii
Cases CrTep.
Babka Plastering Co. v. City State Bank, 264 Ill. App.
MNT AD are tik b « MG Eh e's Gia ve MAS UROIEN A WEN soew RRR 0 8
Brown v. O'Keefe, 300 U. 8. 508... 2... cece 16
Callaway v. Benton, 336 U. S. 132................6. 11, 12
Sees TW, We eeet, SOE ©, We Bin cc ices acaceecens 9
Dimock v. Revere Copper Co., 117 U. 8. 559.......... 9, 14
Elkin v. Diversey Tr. & Svgs. Bank, 363 Ill. 160..... 8
Hamilton-Brown Shoe Co. v. Wolf Brothers & Co.,
NE hi ck Ck Wea AA kis bak Kas oo 7
Meee v. Dewon, 363 TM. 367 oo ci icc cc cccccasass 8
Hillmer v. Chicago Bank of Commerce, 375 Ill. 266... 9
Magnum Import Co. v. DeSpoturno Coty, 262 U. S.
er ewes hbk NR kee DROS awa ap ee KK eS ab wo 17
Nathanson v. N.L.R.B., 344 U.S. 25 ............. 12, 13, 15
New York v. Irving Trust Co., 288 U.S. 329.......... 15
mortem ¥. weer, FS U.S. BGG... 2. ccscccwevecens 9
Pepeer ©. Laren, 6 USB. 200. oo... occ cccscccccvcce 15
RFC v. Central Republic Trust Co., 11 F. Supp. 976.. 9
Thompson v. Magnolia Petroleum Co., 309 U. S. 478 .12, 13
Ua We om ¥. Pay, Boo U. B. BOB... ccccases 14-15
U.S. National Bank v. Chase National Bank, 331 U. S.
idles Meee pisch awhe awe odd Kone s eee heal 11
Young v. Joslyn, et al., 171 F. (2d) 159 ........... 3, 10, 16
CoNnsTITUTION AND STATUTES.
Banking Act of Illinois.
EAU Bic a ac ooh bpd ank Unehpaneeenkane 8
Ne gle i inte 5 a 6) d-ecbhgrnbs Wo Ls deware a auhce we 8
Bankruptcy Act.
ee ie ee be tcp kde babaN ae oes 11
EE Riv inc kkcun seb axvastYRa eas daeks 12
NN AT RR STE ne 12
eM as ale bag ik ania glk Nem 12, 16
Constitution of Illinois.
es om reer err Keane eee 8
IN THE
Supreme Court of the United States
Octroser Term, 1952.
No. 501.
In tHe Matrer or GEORGE R. JOSLYN, Bankrupt. |
NEW JERSEY EQUITIES COMPANY anp HORACE A.
YOUNG, as Trustee 1n Bankruptcy,
Petitioners,
vs.
GEORGE R. JOSLYN, er at.,
Respondents.
BRIEF OF ARMIN F. HILLMER IN OPPOSITION TO
PETITION FOR CERTIORARI.
To the Honorable Chief Justice and Associate Justices of
the Supreme Court of the United States:
Opinions Below.
The opinions of the lower courts are reported in 198 F.
(2d) 673 and 102 F. Supp. 521. They also appear in the
Transcript of Record at pages 422-26, 511-12 and 365-71.
Correction of Summary Statement of Additional Matters.
Although the petition of the New Jersey Equities Com-
pany and the Trustee in Bankruptcy adopts ‘‘in all re-
spects '’ the petition of the Benevolent and Protective Order
of Elks of the United States of America, docketed as #445,
and purports to state only ‘‘certain additional facts and
certain additional argument”’ (p. 2), said petition covers
much the same ground as the prior petition of the Elks.
The principal new matters referred to in the Summary
Statement of Additional Matters relate to (1) a description
of the New Jersey Equities Company as a creditor of the
bankrupt, and (2) the classification of the creditors of the
Chicago Bank of Commerce into ‘‘ participating’’ and ‘‘non-
participating’’ groups. The record, however, does not sup-
port petitioners’ claim with respect to either of these
additional matters.
(1) The New Jersey Equities Company is described as
‘‘a substantial creditor’’ of the bankruptcy estate (Pet’n.
2). The claim of said petitioner shows on its face that it
is derivative through an assignor, who was a depositor in
the Chicago Bank of Commerce in which the bankrupt
owned 1,142 shares of stock of a par value of $50 per share
(R. 335). The method by which the liability of said stock-
holder was adjudicated and satisfied in the stockholders’
liability suit in the state court is fully described on pages 2
and 3 of respondent’s answer to the prior Petition for
Certiorari, docketed as #445 to the October 1952 term of
this Court, to which reference is hereby made. It is to
be noted that said action of the Superior Court of Cook
County did not affect the proceedings in bankruptcy herein
except to prevent creditors of the Chicago Bank of Com-
merce from claiming that the stockholders’ liability of —
George R. Joslyn had not been satisfied and released (R.
348-53, 357-58). Suffice it to say at this time that the stock-
holder’s liability of George R. Joslyn to the New Jersey
Equities Company has been fully satisfied and released and
that said petitioner is not now a creditor of said George
R. Joslyn.
(2) Similarly, the classification of creditors into ‘‘par-
ticipating’’ and ‘‘non-participating’’ groups (Pet’n. 2-6)
3
is not supported by any order or decision of the lower
courts herein and is inconsistent with the basic theory of
representative or class suits—in which all members of the
class share in recoveries thereby effected (R. 173). The
findings and conclusions of the Referee in Bankruptcy, the
trial judge and the Court of Appeals in this case uniformly
recognize the representative character of the stockholders’
liability suit in the state court and the right of all creditors
to share ratably in the collection of the stockholders’ lia-
bility (R. 173, 380, 382, 423, 425). Nothing in this record
supports the separation of said creditors into different
groups, as suggested by petitioners, and the argument based
upon petitioners’ artificial classification should be ignored.
Other misstatements and unwarranted distortions of fact
are contained in petitioners’ Summary Statement of Addi-
tional Matters. For example, it is baldly stated, on page 3,
that prior to July 18, 1951, petitioners had no ‘‘actual
knowledge”’’ of the proceedings in the state court. This is
patently and demonstrably untrue. After the reopening
of the bankruptcy in 1946, the existence and status of the
stockholders’ liability suit in the Superior Court of Cook
County is spread throughout the record in the bankruptcy
court (R. 3-4, 14, 36, 41-46, 67-69, 77, 82, 87, 92-100, 107-17,
120-26, 128, 130, 133-37, 144-46, 158-59, 169, 176, 183-86, 187,
et seq., 230, 234-36).
Prior to July 18, 1951, the petitioner Horace A. Young,
as Trustee in Bankruptcy, referred to and based arguments
upon said state court proceedings in pleadings filed in the
bankruptcy court (R. 77, 82, 87, 107-17, 130, 230, 234-36).
In 1948—at a time when said trustee claims to have been
without knowledge of the state court proceedings—said
trustee was the appellant in a prior appeal in this case in
which the state court proceedings were fully considered
(Young v. Joslyn, et al., 171 F. (2d) 159, 166-67). Equally
aware of the stockholders’ liability suit in the state court
—
was Thomas Hart Fisher, Esq. (R. 75, 92-106), one of the
attorneys for the New Jersey Equities Company (R. 336,
413-14), who was also the attorney for the Elks (R. 13,
90-91, 106). This record completely disputes the claimed
ignorance of petitioners relating to the stockholders’ lia-
bility action in the state court prior to July 18, 1951.
It is not correct to say, as do petitioners on page 4, that
‘‘George R. Joslyn, having obtained his discharge in bank-
ruptcy on June 29, 1936, asserted said discharge at all times
thereafter as a valid defense to his stockholder’s liability in
the State Court proceeding.’’ Joslyn’s discharge in bank-
ruptey was removed as a bar in the state court action by the
reopening of the bankruptcy on May 20, 1946 (R. 2), and
was not thereafter relied upon by him as a defense (R.
67-69, 348-53).
Nor did counsels’ approval of the order determining and
satisfying Joslyn’s liability as a stockholder destroy the i
judicial character of that adjudication. This record clearly
shows that Judge Hoffman ‘‘took a lot of time’’ in deciding
the matter (R. 389), that he conferred with other judges
about it (R. 390-91), that he didn’t take the ‘‘werd of any
of the lawyers as to what the law was’”’ but ‘‘checked it’’
himself because he ‘‘ wanted to be sure’’ (R. 390), and that
he required the signatures of the attorneys only for his
‘‘own protection’’ (R. 393). Under these circumstances,
the order determining and satisfying Joslyn’s liability was
a judicial determination of the matter and represents far
more than an agreement by the parties to the litigation.
It was not a ‘‘consent decree’’ in any accepted sense of
the term.
4
On page 5 petitioners repeat the argument in the prior
petition that interest was due on the claims of creditors
of the bankrupt. This is the fundamental premise upon
which both petitions are based and is adequately answered
—
5
in the final portion of this respondent’s answer to the
prior petition (Docket #445) where the relevant authori-
ties are cited and discussed. The law is well settled that
interest is not a part of bank stockholders’ liability in Illi-
nois and that the maximum amount for which a stockholder
in an Illinois bank is liable is the par value of the stock
owned by him. This was precisely the amount paid to the
receiver in the stockholders’ liability suit involved herein.
Said payment of $57,100 constituted a complete satisfaction
and discharge of the stockholder’s liability of George R.
Joslyn, and thereupon, as described by the trial judge, this
bankruptcy became ‘‘a bankruptcy case without creditors
or claimants’’ (R. 368, 380, 383). Academie discussions of
whether bankruptcy creditors are entitled to interest are
utterly meaningless in a situation—like the present—which
involves a solvent bankrupt without creditors.
Since the stockholder’s liability of the bankrupt has
been satisfied and discharged, the argument in the final
portion of the petition (pp. 6-9) to the effect that the decree
herein ‘‘permanently harms the bankruptcy administration
and the bankruptcy creditors’’ is obviously unsound. The
only purpose for continuing the bankruptcy herein would
be to permit the trustee to take physical possession of the
estate of George R. Joslyn and—after paying fees, costs,
and expenses of administration—to return the property to
the solvent bankrupt. This same result is accomplished by
the decree of the trial court herein, which expressly ‘‘re-
serves jurisdiction of George R. Joslyn for the purpose of
adjudicating and enforcing against George R. Joslyn any
and all claims for fees, costs and expenses that he may be
ordered to pay by this Court in this proceeding’’ (R. 386).
The choice between these two methods of paying fees, costs
and expenses of administration of a solvent estate is not of
such vital importance or of so great public interest as to
warrant the granting of certiorari herein.
a ae 2
5 DERE ROU hep ee eR
6
Question Presented.
The basic question underlying this case is whether the
Superior Court of Cook County, Illinois, in the stock-
holders’ liability suit therein pending had jurisdiction
to adjudicate and satisfy the liability of George R. Joslyn
as a stockholder of the Chicago Bank of Commerce. If
said state court had jurisdiction, then the liability of the
bankrupt has been satisfied by payment, and the New
Jersey Equities Company—as well as every other deposi-
tor of said bank—has ceased to be a creditor of the bank-
rupt.
No Grounds Exist for Allowance of Certiorari. ;
Petitioners seek allowance of certiorari on the grounds ;
that the decision of the Court of Appeals violates funda-
mental principles of bankruptey law and is in conflict with
the Constitution and laws of the United States and the
decisions of other Courts of Appeals. As hereafter dem-
onstrated, none of these contentions are sound.
ARGUMENT.
Since petitioners have adopted the brief and argument
attached to the petition of the Elks, heretofore docketed
as #445 to the October 1952 term (Pet’n 2, 12), the court
should carefully consider this respondent’s answer to said
petition in determining whether certiorari should be
granted herein. We shall not repeat the arguments con-
tained therein except to the extent necessary to answer
arguments contained in the present petition of the New
Jersey Equities Company and the Trustee in Bankruptcy.
At the outset attention should be focused on the ques-
tion of whether the action of the trial court in providing
for payment of fees and expenses and in terminating ‘‘a
bankruptcy without creditors or claimants”? (R. 368, 386-
87) is so unreasonable and of such public importance
as to warrant review by certiorari. In this connection, it
is well to remember that this court has repeatedly held that
the issuance of writs of certiorari ‘‘is a jurisdiction to be
exercised sparingly, and only in cases of peculiar gravity
and general importance, or in order to secure uniformity
of decision.’? See Hamilton-Brown Shoe Co. v. Wolf
Brothers & Co., 240 U.S. 251, 258, and cases therein cited.
Respondent believes that even if this court should be of
the opinion that the method suggested by petitioners for
paying fees and expenses of the bankruptey is preferable
to the method adopted by the trial court, the slight differ-
ence between these two methods is not sufficiently great or
of such public interest as to justify the issuance of the writ
herein.
Pt gees egpaoyicr: eet aL reg a * 2 rier ease ys.
PEEP reek ame teeth PIS BHR TAR PATON ROT SIE I, See Sn a A a TS aN SL eee
SEA eR ne ES teh PISA TET i ;
"¥
I.
THE STATE COURT HAD JURISDICTION TO ADJUDI-.
CATE AND SATISFY THE STOCKHOLDER’S LIA-
BILITY OF GEORGE R. JOSLYN.
Despite protestations to the contrary, the principal ques-
tion involved herein is whether the Superior Court of Cook
County had jurisdiction to adjudicate and satisfy the
liability of George R. Joslyn as a stockholder of the Chi-
cago Bank of Commerce. If it did, no depositor in said
bank could thereafter enforce any claim against said stock-
holder based upon a depositer-ereditor relationship. Since
this is precisely the position in which the New Jersey
Equities Company and the Elks find themselves, it is obvi-
ous that the extent of the jurisdiction of the state court
becomes extremely important herein.
A. Acclass suit in the Superior Court of Cook County was
the proper method of enforcing the stockholder’s lia-
bility of George R. Joslyn.
The Constitution and statutes of Illinois create the lia-
bility which is the basis of the claim of the Elks and the
New Jersey Equities Company as petitioners herein. See
the Illinois Constitution, Art. XI, §6 and the Banxine
Acr of Illinois, § 6 (Ill. Rev. Stat. (1951) Chap. 164, § 6).
It has long been established by statutes and court de-
cisions in Illinois that the proper method of enforcing the
liability of stockholders in Illinois banks is by a class suit
for the benefit of all creditors of the bank. Banxine Act
oF Inutnors (Ill. Rev. Stat. (1951) Chap. 164, § 11); Heine
v. Degen, 362 Ill. 357, 365-6; Babka Plastering Co. v. City
State Bank, 264 Ill. App. 142, 151-3; Elkin v. Diversey Tr.
a
¢ Svgs. Bank, 363 Ill. 160, 164-5; RFC v. Central Republic
Trust Co., 11 F. Supp. 976, 983-4 (D. C. Til.).
The class suit filed by this respondent in the Superior
Court of Cook County was an action of the character recog-
nized in Illinois as proper for the enforcement of stock-
holders’ liability. Hillmer v. Chicago Bank of Commerce,
375 Il. 266.
9
B. Prior to the bankruptcy herein the Superior Court of
Cook County acquired and retained jurisdiction over
the person of George R. Joslyn and the subject matter
of his stockholder’s liability.
In 1932—more than four years prior to the bankruptcy
proceedings herein—the Superior Court of Cook County
acquired jurisdiction over the person of the bankrupt and
the subject matter of his stockholder’s liability (R. 373,
375-76, 348-49). At the same time, the court appointed a
receiver to receive the amounts due from stockholders and
enjoined all creditors of said bank from seeking to enforce
this liability elsewhere (R. 183-86). Said injunction is still
in force (R. 350, 97-98).
Both the state court and the trial court herein have found
as a fact that the Superior Court of Cook County obtained
and retained jurisdiction to determine the stockholder’s
liability of George R. Joslyn (R. 348-53, 375-76).
That the snbsequent bankruptcy of the defendant J oslyn
did not ipso facto destroy the power of the state court to
proceed to judgment in the action to enforce stockholders’
liability is evident from the decisions of this court in
Connell v. Walker, 291 U. §. 1, 5-6, Dimock v. Revere
Copper Co., 117 U. S. 559, 564, and Norton v. Switzer, 93
U. S. 355, 362 and numerous cases therein cited.
ER ELLE SIL ERIE RAD IONE TT PIAS BT Ee a SA
7
C. Neither of the petitioners herein took any action to stay
the stockholders’ liability suit in the state court.
Petitioners admit that they never participated in the
state court proceedings prior to the satisfaction of Joslyn’s
stockholder’s liability on July 18, 1951 (Pet’n 3). This is
a true statement of fact and is fatal to much of petitioners’
argument for reversal of the action of the trial court herein.
10
In a desperate effort to overcome the obvious effect of
inaction on their part, petitioners claim that they did not
have ‘‘any actual knowledge of’’ the state court suit until
‘‘a few days before September 11, 1951’’ (Pet’n 3-4). As
previously pointed out, this claimed ignorance on the part
of petitioners is utterly false.
The Trustee in Bankruptcy, who is acting as his own at-
torney herein, described and referred to the state court suit
in at least three separate pleadings filed by him in the
bankruptcy court prior to the settlement of the liability of
George R. Joslyn on July 18, 1951 (R. 77-89, 107-17, 234-36).
He was both party and counsel in a prior appeal wherein
the court fully considered the state court proceedings
(Young v. Joslyn, 171 F. (2d) 159, 166-67).
Similarly, Thomas Hart Fisher, Esq., one of the attor-
neys for the petitioner New Jersey Equities Company (R.
336, 413), has also been an attorney for the Elks ever since
reopening of the bankruptcy in 1946 (R. 13, 90-901). Said
attorney was necessarily cognizant of the stockholders’
liability suit in the state court when he filed the answer of
the Elks to the intervening petition based upon said stock-
holders’ liability suit (R. 104, 106).
The failure of petitioners to take appropriate action to
stay proceedings in the state court should now preclude
them from complaining about the adjudication by the state
court and the satisfaction therein of the liability of George
R. Joslyn as a stockholder of the Chicago Bank of Com-
merce.
ADA GOEL OLDIE RY, LE IEICE NELLIE EET RENE 22 TI BSE
11
TI.
THE ACTION SOUGHT TO BE REVIEWED HEREIN
IS A PROPER EXERCISE OF THE DISCRETION OF
THE BANKRUPTCY COURT.
Petitioners urge review by certiorari because, they say,
the trial court’s approval of the action of the state eourt
was a relinquishment of the paramount and exclusive juris-
diction of the bankruptcy court. This argument is
predicated on the fallacy that bankruptey courts are
devoid of all discretion and that all matters affecting
bankrupts personally—as well as their property—must be
tried and determined only in the bankruptey court. Such
is not the law—as will appear from an examination of
Callaway v. Benton, 336 U. S. 132, and other decisions of
this court hereafter cited.
A. Bankruptcy courts are inherently courts of equity and,
as such, are vested with discretionary powers.
This court in U. S. National Bank vy. Chase National
Bank, 331 U.S. 28, said:
“It has long been established that ‘courts of bank-
ruptcy are essentially courts of equity, and their pro-
ceedings inherently proceedings in equity.’ ’’ (Citing
cases.) p. 36.
See also Sec. 2 of the Bankruptey Act (11 U. 8. C. A. § 11).
Respondent submits that a court of equity without dis-
cretionary powers, as contended for by petitioners, is
judicially incomprehensible.
.
‘
LARA ON PN MME BABE NLP ENERGIE A 7 RE Me IES OT
12
B. The Bankruptcy Act does not limit the discretionary
power of the bankruptcy court in the situation pre-
sented by this record.
Numerous provisions of the Bankruptcy Act necessarily
require the exercise of discretionary powers in order to
effectuate the purposes of the act. Thus, Section 11(b) and
(ec) (11 U.S. C. A. § 29) invests the bankruptcy court with
discretionary power to. determine whether a trustee in
bankruptcy should prosecute or defend litigation pending
in other courts. Similarly, Section 63(b) (11 U.S. C. A.
§ 103) expressly vests in the bankruptcy court full discre-
tion to authorize the liquidation of claims against the bank-
rupt ‘‘in such manner as the court shall direct.’’
It is particularly noteworthy that, although other provi-
sions of the Act also require the exercise of discretionary
powers, petitioners herein have failed to cite a single sec-
tion of the Act which prohibited the trial court from enter-
ing the order sought to h~> reviewed.
C. The concept of ‘‘paramcunt and exclusive jurisdiction”’
is not inconsistent with the exercise of ‘‘discretionary
power’’ by the bankruptcy court.
Petitioners base much of their argument (pp. 12-14)
upon the theory that the terms ‘‘discretionary power’’ and
‘‘paramount and exclusive jurisdiction’’ are mutually ex- —
clusive (Pet’n 12). That such is not the law is clear from
the decisions of this court in Callaway v. Benton, 336 U. S.
132, Nathanson v. N.L.R.B., 344 U. S. 25, and Thompson v.
Magnolia Petroleum Co., 309 U.S. 478.
In Callaway v. Benton this court said:
‘“We have held that a court of bankruptcy has ex-
clusive and‘nondelegable control over the administra-
tion of an estate in its possession. * * * There
a RI I NS: FERRERO PS EI REN ee —
13
can be no question, however, that Congress did not
give the bankruptcy court exclusive jurisdiction over
all controversies that in some way affect the debtor’s
estate. * * * What it did give is exclusive juris-
diction of the debtor and its property wherever lo-
cated. * * * We think that the interest here in-
volved is not part of the property of the debtor, and
that the district court’s assertion of exclusive juris-
diction was error.’’ 336 U. §S. 132, 142-43. (Italics
ours.)
To the same effect is the recent case of Nathanson v.
N.L.R.B., 344 U. S. 25, 30, decided by this court three
months ago, which cited and relied upon Thompson v. Mag-
nolia Petroleum Co., 309 U. S. 478, 483-84.
In a supreme effort to make this case appear to be
something different from that shown by the record, peti-
tioners contend that the Court of Appeals affirmed a sur-
render of the paramount and exclusive jurisdiction of the
bankruptcy court (Pet’n 13) and permitted the state court
“to collect and distribute the assets’’ (Pet’n 14). The in-
ference, of course, is that the assets referred to were as-
sets of the bankruptcy estate.
The truth of the matter is that the subject matter of the
state court proceedings was an action in personam—as
distinguished from a proceeding in rem—and that the only
funds collected and distributed by the state court were
moneys paid by the father of the bankrupt to satisfy the
liability of his son (R. 376-77, 351-52, 246). Said funds
were not a part of the bankruptcy estate and were in no
way available to the Trustee in Bankruptcy herein.
In these circumstances, the bankruptcy court, in the
wise exercise of its discretion, elected not to interfere with
the state court proceedings—as it had a right to do in the
exercise of its paramount and exclusive jurisdiction—be-
cause no assets of the bankrupt’s estate were involved in
aah a a RI Be a Aewte Fea OS er a hia GDS tg
SR ey RM AY
ETE a MTP Se Te PELLET A ae ee
14
that suit. This action conformed to the decisions above
cited, in which this court recognizes that the exercise of
discretionary powers by the bankruptcy court is not in-
consistent with the paramount and exclusive jurisdiction of
that court.
III.
RELEVANT AUTHORITIES SUSTAIN THE ACTION
OF THE LOWER COURTS HEREIN.
‘On pages 8 and 9 of the answer of this respondent to the
petition of the Elks (Docket +445) are collected the cases
most analogous to the facts disclosed by this record. All
of said cases support the action of the lower courts herein.
_A. Dimock v. Revere Copper Co., 117 U. S. 559, is decisive
of the issues herein.
In a procedural situation somewhat similar to the one
presented by this record, this court held in Dimock v. Re-
vere Copper Co. that bankruptcy proceedings did not bar a —
state court, which had acquired prior jurisdiction over the
person and subject matter, from entering a valid judgment
in the state court.
For obvious reasons, petitioners herein have failed to
refer to or distinguish the Dimock case which this respond-
ent believes to be decisive herein.
B. Cases cited by petitioners are inapplicable and irrele-
vant herein.
Petitioners cite only three decisions of this court in sup-
port of their argument concerning the mutually exclusive
character of ‘‘discretionary powers’’ and ‘‘ paramount and
exclusive jurisdiction’’ of the bankruptcy court (U.S.F.
- ' ’ .
SPP Rue RE EERO RT PNR NE IE een Re tee —
15
G. Co. v. Bray, 225 U. 8. 205, New York v. Irving Trust Co.,
288 U. 8. 329, Pepper v. Litton, 308 U. 8. 295), and are
forced to admit (Pet’n 13-14) that the most recent decision
of this court does not support their argument but recog-
nizes the existence of a discretionary power in the bank-
ruptey court (Nathanson v. N.L.R.B., 344 U. 8. 25, 30, 97
L. ed. 13, 17 (Advance Sheets) ).
None of the cases cited by petitioners involved a solvent
bankrupt having no unpaid creditors, and a cursory exam-
ination of these cases discloses their inapplieability and
irrelevancy herein.
In U.S.F. d G. Co. v. Bray, 225 U. 8. 205, the state court,
in proceedings filed after the bankruptcy, sought to affect
and deal with funds in the possession of the Trustee in
Bankruptcy. In the present case, the state court acquired
jurisdiction long prior to the bankruptcy and did not in
any manner seek to affect the bankruptcy estate or funds
held by the trustee. It is apparent that the action of the
trial court herein was not the surrender of control over
funds in the possession of the Trustee in Bankruptcy, as
was the action of the court in U.S.F. & G. Co. v. Bray.
New York v. Irving Trust Co., 288 U. S. 329, involved a
situation in which the State of New York sought ‘‘to par-
ticipate in the assets of a bankrupt’’ (p. 330) and the
question there involved was whether the state could estab-
lish its claim in bankruptey. The inapplicability of this
decision to the facts herein—where the state court judg-
ment has been satisfied by a third party—and the judg-
ment creditor did not seek ‘‘to participate in the assets of
the bankrupt,”’ is too apparent to merit further discussion.
Pepper v. Litton, 308 U. S. 295, involved the disallowance
of a claim in bankruptey and the administration of the
bankrupt’s assets by the bankruptcy court. No such situa-
tion is presented by the record herein.
POLL REI ELIS PLETE INTL I LE TY LORE EAE NTS NTS OR aan eat
16
In the final portion of their brief (pp. 14-18) petitioners
discuss at length the case of Brown v. O’Keefe, 300 U. S.
598, which was cited in the opinion of the Circuit Court of
Appeals (R. 426). Contrary to petitioners’ contention that
the Court of Appeals placed much emphasis on this case, it
is apparent from a reading of the decision that the court
merely referred to the case in explaining its decision on
the prior appeal reported in 171 F. (2d) 159. The deci-
sion of the Court of Appeals sought to be reviewed was in
no way dependent upon Brown v. O’Keefe, and the treat-
ment of that case by the Court of Appeals does not warrant
the consideration given it by petitioners. The complete
answer to petitioners’ argument concerning Brown vy.
O’Keefe is already in the record at pages 486 to 490, to
which the attention of the court is directed if petitioners’
argument assumes any importance herein.
The principal relevancy of Brown v. O’Keefe at this
stage of the proceeding lies in the recognition therein by
this court that Section 63(b) of the Bankruptey Act (11
U. S. C. A., § 103), which provides for the liquidation of
claims in such manner as the bankruptcy court may direct,
invests that court ‘‘with discretionary power that can be
fitted to the needs of varying situations’’ (300 U. S. 598,
605). This is directly contrary to petitioners’ present con-
tentions, and was the basis of the action of the lower courts
herein.
17
CONCLUSION.
Because the petition herein is not limited to matters
usually contained in petitions for certiorari, but also in-
cludes extended arguments relating to the merits of the
action of the lower courts, respondent has included herein
answers to all of such arguments. On this record, even if
certiorari should be granted herein, the action of the lower
courts would have to be affirmed.
Respondent respectfully submits that the Petition for
Writ of Certiorari shold be denied because:
(1) Petitioners have failed to point out any con-
flict between the decisions of the Court of Appeals
herein and decisions of this court or other Courts of
Appeals.
(2) The choice between the method of terminating
this bankruptcy, which was approved by the Court of
Appeals, and the method contended for by petitioners
is not of general importance or of great public in-
terest.
(3) The bankrupt herein is solvent—with no un-
paid creditors—and any decision on the merits would
be of narrow and limited interest.
(4) Petitioners are, in reality, seeking a review of
the decisions below on the sole ground that they are
erroneous. Magnum Import Co. v. DeSpoturno Coty,
262 U. S. 159, 163.
Respectfully submitted,
Kart Epwin Seyrarra,
Counsel for Respondent,
Armin F. Hillmer,.
PEPE IY IL IE OE EISSN TENS WNL Ie ip SDN AeA SKE ANN RPT gh sae .
: ? 7 ‘ Pete ee aes ES ENE ee EE Rae OS, PARP
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