The petitioner, Joseph Pollack, on July 1, 1907, was, on his voluntary petition, adjudged a bankrupt by the District Court of the United States for the Eastern District of Missouri. *863A trustee was appointed, who took possession of the bankrupt’s property as scheduled and converted it into cash and paid nearly 16 per cent, upon the claims proved and allowed. Among the claims so allowed were claims in favor of all the respondents. The estate was closed and the trustee discharged on June 2, 1908, and on September 14, 1908, the bankrupt was granted his final discharge. On September 24, 1913, the respondent filed a petition to reopen the matter, alleging that at the time of the bankruptcy the bankrupt had an interest in a one-ninth share in a trust fund of $18,000; that he failed to schedule said property, and the same was fraudulently concealed by the bankrupt, and the respondents failed to discover the facts until within a few days of the filing of the present application to reopen the bankrupt estate, and asking also that an injunction issue against the St. Louis Union Trust Company of St. Louis, Mo., trustee, restraining it from paying over to the said Joseph Pollack the interest in the said trust fund, or any part thereof, or in any ipther matter deposited or held in trust for the said Joseph Pollack, pending the further order of court. The court on the same day ordered the matter referred to Hon. Walter D. Coles, a referee in bankruptcy, with full power to reopen the said bankruptcy estate. The referee issued an order to Joseph Pollack and to the St. Louis Union Trust Company to appear and show cause why the orders prayed should not be granted. The petitioner appeared, and filed on October 6, 1913, a demurrer to the petition of the respondents which was overruled. He then filed a return and answer to the pending application, to which respondents filed reply. The case was heard upon the issues and the referee made the following order:
That he “doth find that the bankrupt, Joseph Pollack, at the time he filed his petition in bankruptcy, and was adjudicated a bankrupt, to wit, on July 1, 1807, had a vested title and interest, subject to the life estate therein of his mother, one Mary Pollack, in a certain trust fund held by the Ht. Louis Union Trust Company as trustee under a decree rendered by tlie circuit court of the city of St. Louis, state of Missouri, in the case of ‘Mary Pollack, Plaintiff, v. Phillip Pollack, Joseph Pollack, et al., Defendants’; that said trust fund amounted to the sum of approximately $18,000, and that the said bankrupt was entitled, and is now entitled, to a one-ninth interest in said fund; that said bankrupt, at the time he filed his petition in bankruptcy, and was adjudicated a bankrupt, failed to schedule his interest in said trust fund, but knowingly and fraudulently concealed his interest therein from his creditors and his trustee in bankruptcy, for the purpose of preventing the said fund from being administered by his trustee under said bankruptcy; that the existence of said trust fund was not known to the trustee in bankruptcy of said bankrupt, or to his creditors, while the bankrupt estate was under administration in bankruptcy, and that said fund was not administered in the bankruptcy proceedings, and that knowledge of the existence of said trust fund was not acquired by the petitioners herein until shortly before the filing of their petition. The referee further finds that the interest of Mary Pollack, the mother of the bankrupt, in the trust fund before mentioned, has terminated by her death, and that the bankrupt’s interest in said fund now amounts to approximately $2,000, and that the St. Louis Union Trust Company, trustee, is about to pay over to the bankrupt his interest in said fund. The referee further finds that the creditors of the bankrupt are entitled to have the bankrupt’s interest in said trust fund administered in this bankruptcy proceeding, and the referee accordingly orders that the administration of the bankrupt estate of Joseph Pollack be, and the same is, hereby reopened for the purpose of administering the trust fund aforesaid, and for *864any other proper and appropriate purpose; and it is-further ordered that, until the further order of the referee, the St. Louis Union Trust Company, trustee, be, and it is, hereby restrained and enjoined from paying over to the bankrupt, Joseph Pollack, or in any other way disposing of the interest of said Joseph Pollack in and to the trust fund held by said trustee under the decree of the circuit court of the city of St. Louis entered in the case of ‘Mary Pollack, Plaintiff, v. Phillip Pollack, Joseph Pollack, et al., Defendants’; and it is further ordered that a meeting of the creditors of said Joseph Pollack, bankrupt, be held at the office of the referee on December 2, 1913, at 11 o’clock in the forenoon, for the purpose of appointing a trustee and transacting such other business as may properly come before such meeting, and that due notice of said meeting be given to the creditors of said bankrupt as required by law.”
Thereupon the bankrupt filed a petition for the review of said order by 'the United States District Court. The District Court upon hearing said application ordered:
“That the finding and order of the referee reopening said estate be and the same are in all things hereby approved and confirmed, and that the petition of said bankrupt for a review of the same be and the same is hereby denied and dismissed on the merits.”
And this is a proceeding to revise the said order of the District Court. This was not an application to set aside the order of discharge under Bankr. Act July 1, 1898, c. 541, § 15, 30 Stat. 550 (Comp. St. 1913, § 9599), but was an application to reopen the estate under section 2, and particularly subdivision 8 thereof, which is as follows:
The courts of bankruptcy are hereby invested with such jurisdiction at law and in equity as will enable them to — -
“(8) Close estates, whenever it appears that they have been fully administered, by approving the final accounts and discharging the trustees, and reopen them whenever it appears they were closed before being fully administered.” Comp. St. 1913, § 9586.
[1,2] The first point made here is that the referee erred in overruling the demurrer to the application to reopen the bankruptcy case. The court of bankruptcy is an equity court (section 2 of the Bankruptcy Act), and demurrers in such cases were abolished by rule 29 of the new equity rules, which became effective February 1, 1913, and this demurrer was not filed until October 6, 1913. It could have been well overruled on this ground. After the demurrer was overruled the bankrupt pleaded over in an answer which covers four pages of the printed record. Such action upon his part was a waiver of any error in the ruling on demurrer. Eau Claire National Bank v. Jackman, 204 U. S. 522, 535, 27 Sup. Ct. 391, 51 L. Ed. 596; Campbell v. Haverhill, 155 U. S. 610, 612, 15 Sup. Ct. 217, 39 L. Ed. 280; Stanton v. Embry, Adm'r, 93 U. S. 548, 553, 23 L. Ed. 983; Marshall v. Vicksburg, 15 Wall. 146, 149, 21 L. Ed. 121; Railroad Co. v. Harris, 12 Wall. 65, 84, 20 L. Ed. 354; Campbell v. Wilcox, 10 Wall. 421, 423, 19 L. Ed. 973; Watkins v. United States, 9 Wall. 759, 761, 19 L. Ed. 820; Young v. Martin, 8 Wall. 354, 357, 19 L. Ed. 418; Aurora City v. West, 7 Wall. 82, 92, 19 L. Ed. 42; Bell v. Railroad Co., 4 Wall. 598, 602, 18 L. Ed. 338; Clearwater v. Meredith, 1 Wall. 25, 42, 17 L. Ed. 604; United States v. Boyd, 5 How. 29, 50, 12 L. Ed. 36; Evans v. Gee, 11 Pet. 80, 85, 9 L. Ed. 639. But as Judge SANBORN, who dissents from this *865opinion, thinks the petition stated a cause of action, and there was no error in overruling the demurrer, we will not consider this question further.
[3] Complaint is made that the referee took judicial notice of what the record showed in the original bankruptcy case. That was before the same referee, and there was certainly no error in his considering anything that appeared in the record in that case, as that was the same case in which the application was pending. The motion to strike parts of the report of the referee in the District Court was therefore without merit, and properly disregarded by the District Court.
It appears that prior to and in February, 1899, there was pending in the circuit court of the city of St. Louis a case entitled “Mary Pollack v. Phillip Pollack, Samuel Winter, Henry Pollack, Joseph Pollack, St. Louis Safe Deposit & Savings Bank, Charles Pollack, Martin Pollack, Hannah Goodman, Lotta Hart, Harrietta Freefield, and Lilly Drukker”; that in said action a decree was entered on March 6, 1899, that the court—
“doth find, that the ten (10) bonds of one thousand dollars each with coupons attached, issued by the city of Greenville, Texas, and the cashier’s check issued by the St. Louis National Bank, dated December 7, 1896, for the sum of eight thousand dollars, payable on demand to the order of Phillip Pollack and by him indorsed in blank, mentioned in the pleadings, together constitute the capital of a trust fund which was on June 1, 1891, set aside and appointed by the defendant Phillip Pollack upon the following express trusts: The entire annual income and increase of said trust fund was appointed and appropriated by said Phillip Pollack to the use and for the support of his mother, the plaintiff, Mary Pollack, for the term and period of her natural life. The capital of said trust fund remaining at the death of said Mary Pollack was appointed and appropriated by said Phillip Pollack to be divided and distributed to Harrietta Freefield, Lilly Drukker, Hannah Goodman, Lotta Hart, Martin Pollack, Phillip Pollack, Henry Pollack, Charles Pollack, and Joseph Pollack, the children of the said Mary Pollack, in equal shares, and in full title discharge of said trust. And the court doth further find: That said trust was upon the further condition that the said Mary Pollack should receive a reasonable and comfortable support from said fund, and that if the necessity should arise, and the Income at any time prove to be insufficient, that then resort might be had to-the capital of said trust fund to supply such deficiency. That said trust fund was at the commencement of this suit, and is now, deposited in a safe deposit box in the vault of the defendant the St. Louis Safe Deposit & Savings Bank in the names of defendants Phillip Pollack, Samuel Winter, Henry Pollack, and Joseph Pollack as trustees for plaintiff, and custodians of said box, and its contents. That from June 1, 1891, to December 7. 1896, all the income of said trust fund was collected by the defendant Phillip Pollack, and has been frilly and faithfully paid over and accounted for by him to the plaintiff, Mary Pollack, the beneficiary thereof, according to the terms and requirements of said trust. That from and after December 7, 1896, differences and disagreements arose among said trustees in regard to the management and investment of said trust fund, so that they were no longer able, and are not now able, to act in harmony in carrying out the purposes of said trust, and that their removal from their office as trustees has become necessary. The court further finds that the United. States bond for the sum of one hundred dollars, with coupons attached, now in said safe deposit box, is not a part of the capital of said trust fund, but belongs to the plaintiff, Mary Pollack, and that the other papei-s, receipts, and vouchers now in said safe deposit box belong to the defendant Phillip Pollack. The court further finds from the evidence that tile plaintiff, Mary Pollack, has failed in establishing- the right and title claimed by *866•her to the possession of said fund as her absolute property, and that she is not entitled to the relief prayed for in her amended petition.
“It is therefore ordered, adjudged, and decreed by the court: That.said trust in said capital fund of eighteen thousand dollars, and the income thereof, be established and confirmed for the uses, to the persons, and upon the terms hereinabove found and declared. That the defendants Phillip Pollack, Samuel Winter, Henry Pollack, and Joseph Pollack be discharged and removed from their offices as trustees of said fund and shall recover nothing for their services as trustees. That the St. Louis Trust Company be and is hereby appointed sole trustee of said trust, to take possession of and hold said trust under the direction of this court, and to preserve, manage, invest, reinvest, collect, account for, and pay over the income and principal thereof at the times, to the persons, and in the proportions provided for in this decree. That the defendant the St. Louis Safe Deposit & Savings Bank and the said Phillip Pollack, Samuel Winter, Henry Pollack, and Joseph Pollack are ordered and directed, upon demand of the St. Louis Trust Company, to permit said trustee to open said safe deposit box, and to take possession of all the contents thereof. That said St. Louis Trust Company, after taking possession of said property as trustee, shall deliver to the plaintiff, Mary Pollack, upon demand, the United States bond for one hundred dollars, with its coupons attached, taking her receipt therefor, and shall deliver to the defendant Phillip Pollack, on demand, the other papers, receipts, and vouchers found in said box, taking his receipt therefor. That said St. Louis Trust Company, as trustee, shall take into its possession and hold the ten bonds, for one thousand dollars each, with coupons attached, issued by the city of Greenville, Texas, together with sqid cashier’s check for eight thousand dollars, as the principal of said trust fund. That said trustee shall collect and invest and keep invested said sum of eight thousand dollars upon good security, and shall collect and pay over to the plaintiff, Mary Pollack, taking her receipt therefor, the entire net income from said bonds and money, in monthly installments of not less than seventy-five dollars each, payable on the first day of each calendar month, as long as she shall live.' If at any time the net income from said trust fund shall be insufficient to pay said monthly payments as they fall due, then said trustee may take from and pay over to said Mary Pollack such sum from the principal fund as may be necessary to make up the deficiency of the income. The court reserves the right upon motion in this cause of the plaintiff or of the trustee from time to time to order the payment of such .further sums to plaintiff out of the principal of said trust estate as the court may deem necessary to pay for plaintiff’s necessaries, maintenance, and support, and such order shall be made upon such notice to the parties interested in the fund as the court may require. Upon the death of the said Mary Pollack said trustee is ordered and directed to pay the expenses of her last illness and funeral, and to also expend a reasonable sum,, not exceeding two hundred dollars, for a monument at her grave, and is then ordered and directed to pay over the balance of the principal fund, and unexpended income, if any, to the defendants Phillip Pollack, Henry Pollack, Joseph Pollack, Charles Pollack, Martin Pollack, Hannah Goodman, Lotta Hart, Harrietta Freefield, and Lilly Drukker, or their heirs or legal representatives, in equal shares, discharged of this trust, and said trustee may sell any securities on hand for such purpose.”
Subsequent to that decree, and before the filing of the application to reopen this case, the said Mary Pollack departed this life. It will be observed that in the decree—
“the court further finds from the evidence that the plaintiff, Mary Pollack, has failed in establishing the right and title claimed by her to the possession of said fund as her absolute property, and that she is not entitled to the relief prayed for in her amended petition.”
In Mr. Pollack’s schedules filed with his petition in voluntary bankruptcy he did not enumerate any interest in the trust funds referred *867to in the state court case, and if such interest should have been reported the failure to report it was a concealment, and as it appears that at least a portion of the respondents had never heard of his having any interest under the decree until a few days before their application was made to reopen the case, the action of the court below should be sustained; that is, the sole question is whether he had such interest in the trust fund as should have been scheduled by him.
[4] It is strenuously contended that the property was in custodia legis. As already stated a bankruptcy court is a court of equity. The fact that this property could not be reached by execution has no force, as the court in which the proceeding was pending is clothed with full equity powers. It may for the purposes of this case be conceded that a bankruptcy court would not, under the circumstances, have interfered with the possession of the state court of the property until it had disposed of the trust under which it was held; but when the court which had obtained possession had completed the execution of its powers the bankruptcy court was entitled to the possession of the balance undisposed of. Carling v. Seymour Cumber Co., 51 C. C. A. 1, 113 Fed. 483. The writ of certiorari was denied in this case by the Supreme Court May 5, 1902. 186 U. S. 484, 22 Sup. Ct. 943, 46 L. Ed. 1261; In re English, 62 C. C. A. 572, 127 Fed. 940.
[5] There has been elaborate discussion as to whether the interest of Pollack, the bankrupt, in this fund, was a vested or a contingent remainder. Some confusion exists from the attempt to apply legal terms having their primary application to real estate to personal property.
‘■The term ‘estate’ Is properly applicable only to real property. * * * While, however, the term ‘estate,’ in its original and proper use, applies only to real property, it is frequently employed to designate personal property.” Smith on Personal Property, 24 and 25. “Contrary to the ancient common-law doctrine, it is now well established that there may be an interest in expectancy in personal property.” Id. 27.
But the order as to the schedules is that the bankrupt must report property in reversion, remainder, or expectancy. The form does not distinguish between vested and contingent remainders, but it requires the listing of an interest in both realty and personalty in remainder or in expectancy.
November 28, 1898, the Supreme Court adopted the General Orders and Eonns in Bankruptcy. 172 U. S. 653, 18 Sup. Ct. iv. By General Order No. 38 the forms were especially adopted. By form 3, schedule 1) (4), headed “Property in Reversion, Remainder or Expectancy,” the bankrupt is required to report such property. What was meant by the word “expectancy,” and does it include the property here in question? In Pearsall v. Great Northern Railway Co., 161 U. S. 646, on page 673, 16 Sup. Ct. 705, on page 713 (40 L. Ed. 838), the Supreme Court had said:
“A vested right is defined by Fearne, in his work upon Contingent Remainders, as ‘an immediate fixed right of present or future enjoyment,’ and by Chancellor Kent as ‘an immediate right of present enjoyment, or a present fixed right of future enjoyment.’ 4 Kent, Com. 202. It is said by Mr,, Justice Cooley that ‘rights are vested, in contradistinction to being expectant *868or contingent. They are vested when the right to enjoyment, present or prospective, has become the property of some particular person or persons as a present interest. They are expectant when they depend upon the continued existence of the present condition of things until the,, happening of some future event. They are contingent, when they are only to come into existence on an event or condition which may not happen or be performed until some other event may prevent their vesting.’ Principles of Const. Law, 332.”
Eight of the Supreme Judges who rendered that decision were still on the Supreme bench when General Orders in Bankruptcy were promulgated. The only change in the court was the appointment of Mr. Justice McKenna in lieu of Mr. Justice Eield. It is scarcely within the range of possibility that all the eight Judges who concurred or dissented in Pearsall v. Great Northern Railway, and least of all that Mr. Justice Brown, who wrote the opinion of the court, had, when they used the word “expectancy” in the General Orders and Eorms, forgotten what they said in the Pearsall 'Case as to its meaning. It is not unusual to require a report of property which cannot be utilized by the trustee. For example, a bankrupt is required to report all the property which he • claims is exempt, although all that can be done with it is to set it off to him. Again, he is required to report what portion of the bankrupt estate has passed under assignment for benefit of creditors, although, if it was more than four months before the bankruptcy, it cannot be recovered by the trustee. Other provisions might be cited, but this is sufficient for our purpose. In other words, the rule requires the reporting of much property that may or may not be held by the trustee that the courts may determine its liability for the payment of debts. Such determination is a part of the administration of the estate. Bearing this in mind, the rules required the bankrupt to report any interest he had in remainder, vested or contingent, or in expectancy, and that he had an interest either in remainder or in expectancy in this state court trust is beyond dispute.
If a trustee be now appointed, it will be his duty to apply to the state court for. this fund, and if it refuses to turn it over to then apply to the United States District Court for an order. Carling v. Seymour Lumber Co., supra. It will be for those courts to then determine the exact nature of the interest held by Pollack in the fund, and it would be improper for this court to prejudge that matter for either state or federal court. Revised Statutes, § 720, provides:
“The writ of injunction shall not be granted by any court of the United States to stay proceedings in any court of a state, except in cases where such injunction may be authorized by any law relating to proceedings in bankruptcy.”
Under this section the court was clearly right in granting the injunction in this case. Without either approving or disapproving the special finding of the referee that Pollack had a vested interest in remainder in the trust fund in question, he was clearly bound to report it in his schedules, in place of reporting, as he did, that he had no such interest, and it was clearly, not only within the power of the court, but it was its duty, to reopen this case, because it appears it was “closed before being fully administered”; and the petition to revise is denied.
<gss>For other casos see same topic & KEY-NUMI3B11 in all Key-Numbered Digests & Indexes
<@=^For other cases see same topic & KEY-NUMBER in all Key-Numbered Digests & Indexes