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In re Namoff

February 19, 1960

IN THE MATTER OF JOSEPH E. NAMOFF AND JULIUS NAMOFF, ETC., ALLEGED BANKRUPT, DEFENDANTS-APPELLANTS,
v.
HYLAND ELECTRICAL SUPPLY COMPANY ET AL., PLAINTIFF-APPELLEE.



Author: Major

Before HASTINGS, Chief Judge, and KNOCH and MAJOR, Circuit Judges.

MAJOR, Circuit Judge.

Hyland Electrical Supply Company, Chauncey's, Inc., both Illinois corporations with their principal place of business in Chicago, Illinois, and Henry M. Wolf, of Chicago, Illinois, on March 24, 1956, filed in the district court a petition in which it was alleged, among other things, that Joseph E. Namoff and Julius Namoff (sometimes referred to as Julius Namoff, Jr.), both of Hammond, Indiana, were co-partners, trading under the firm names of Chicago Wholesale Distributors and Junior's Country Fair, and that while insolvent the said partnership and Joseph E. Namoff and Julius Namoff each committed an act of bankruptcy in that they had previously made a general assignment for the benefit of creditors. To this petition Joseph E. Namoff filed his consent to adjudication. Julius Namoff filed an answer denying the existence of the partnership and made demand for trial by jury. Petitioning creditors moved to strike the request for jury trial insofar as it related to the issue of the existence of a partnership.

The district court, on November 7, 1956, entered an order allowing the motion to strike insofar as it pertained to the partnership issue and referred such issue to a referee in bankruptcy. The referee, after a rather extensive hearing, submitted his report which included findings of fact, conclusions of law and judgment denying the existence of the partnership. Thereafter, petitioning creditors filed their petition for review. Julius, the alleged bankrupt, filed his motion to dismiss such petition, which motion was denied by the court.

The court, as shown in a memorandum opinion, decided that the material findings as well as the conclusions of law of the referee as they related to the partnership issue were clearly erroneous. Thereupon, the court, on June 18, 1959, entered its judgment, vacating and setting aside that entered by the referee, and allowed the petition for review on the partnership issue. From this judgment Julius, the alleged bankrupt, appeals.

The contested issues as stated by appellant (Julius) are whether (1) the district judge erred in denying his request for a jury trial; (2) the district judge erred in overruling his motion to dismiss the petition for review, and (3) the district judge erred in vacating the judgment of the referee which denied the existence of a partnership between the bankrupt, Joseph, and the alleged bankrupt, Julius, in the operation of the businesses named in the petition.

We think this court is without jurisdiction to entertain contested issues 1 and 2. The notice of appeal seeks a review only of the judgment entered June 18, 1959. Contested issue 1 seeks a review of an order partially denying a jury demand, entered November 7, 1956. Contested issue 2 seeks a review of an order denying a motion to dismiss the petition for review, entered November 20, 1958. Thus, the first order was entered some two and one-half years, and the second order some seven months, prior to the entry of the order appealed from. Clearly, both orders were interlocutory, from which the aggrieved party had a right to appeal. Title 11 U.S.C.A. § 47. Time to appeal, however, is limited to a maximum of forty days from the entry of an allegedly erroneous order. Title 11 U.S.C.A. § 48. If only contested issues 1 and 2 were involved, the appeal would be subject to dismissal. Roberts v. Bank of America Nat. Trust & Savings Ass'n, 9 Cir., 198 F.2d 919; In re Butts, 2 Cir., 123 F.2d 250, 251. The fact that an order was subsequently entered from which an appeal was taken is no aid to the right of review of those previously entered. Of the many cases which have so held we cite two of this court. In re Trust No. 2988 of Foreman Trust & Savings Bank, 7 Cir., 85 F.2d 942, 943, and In re Irving-Austin Bldg. Corp., 7 Cir., 96 F.2d 905, 906.

We hold that contested issues 1 and 2 are not subject to review, and there is no point in discussing them. Even so, we have considered the arguments of the respective parties on these issues and have no doubt but that the court's order as to each was correct.

This brings us to the important issue as to whether the district court erred in entry of the order from which this appeal comes, that is, the order vacating the judgment of the referee on the issue of existence of a partnership. The solution of this issue encompasses the perplexing problem as to our scope of review. A reading of the many cases where the problem has been entertained by courts of various circuits reveals some contrariety of opinion. Appellees seem to believe that the scope of review, as announced by decisions of this court, is broader in this circuit than in some of the others and cite In re Duvall, 7 Cir., 103 F.2d 653; In re United Finance Corp., 7 Cir., 104 F.2d 593, and Webb v. Frisch, 7 Cir., 111 F.2d 887.

There is no doubt but that a district judge is empowered by statute to review the order of a referee. Title 11 U.S.C.A. § 11 provides, "The courts * * of bankruptcy [district courts] are invested * * * with such jurisdiction at law and in equity as will enable them to exercise original jurisdiction in proceedings under this title [Bankruptcy] * * * to * * * Consider records, findings, and orders certified to the judges by referees, and confirm, modify, or reverse such findings and orders, or return such records with instructions for further proceedings * * *." This broad statutory power bestowed upon a district court is qualified by General Order in Bankruptcy 47, following Section 53, which provides, "* * * the report of a referee * * * shall set forth his findings of fact and conclusions of law, and the judge shall accept his findings of fact unless clearly erroneous."

We think it would be a waste of time and effort to discuss or even cite the many cases where courts have attemped to elucidate on the right and power of a reviewing court. We are faced with the problem of either affirming or reversing the order of the district court from which the appeal is taken, which requires a determination as to whether it was erroneously entered. This in turn depends upon whether the district court erred in its findings and conclusion that those made by the referee were "clearly erroneous."

The district court, in connection with its judgment now under review, filed a memorandum opinion in which it discussed the various findings made by the referee in support of his conclusion that no partnership relation existed between Julius and Joseph Namoff. In support of its conclusion to the contrary, the district court in its memorandum expressly found that each of such findings made by the referee was clearly erroneous and stated its reasons therefor. We have made a careful study of the testimony and have no hesitancy in stating that if we were the triers of the facts we would, as the district court did, reach a conclusion different from that of the referee. Even with the serious limitation which General Order 47 places upon the authority of a district court to set aside an order of a referee, we still think the district court reached the correct result.

It must be kept in mind that General Order 47 is directed at the findings of the referee and not at the conclusions drawn therefrom. It is apparent that the referee, erroneously we think, treated the issue of partnership as one of fact. In our judgment, it is a conclusion or at any rate an ultimate fact to be deduced from those which are evidentiary. In Stewart v. Ganey, 5 Cir., 116 F.2d 1010, 1013, the issue was whether there had been a concealment of assets by the bankrupt. The court set aside the finding of concealment made by a referee and held that there was no concealment. The court reasoned that the issue of concealment "was an ultimate question of fact" which could be decided by the district court without regard to General Order 47. Thus, the judgment of the district court, which had vacated the order of the referee, was affirmed. In this connection, we are impressed with the soundness of a statement in Costello v. Fazio, 9 Cir., 256 F.2d 903, 908, "Where a finding of fact by the referee is based upon conflicting evidence, or where the credibility of witnesses is a factor, a district court and, on appeal, a court of appeals will seldom hold such a finding clearly erroneous. The same reluctance is not encountered with regard to a factual conclusion from given facts. In the latter case, the proper conclusion from given facts can be made by the trial judge, or the court of appeals, as well as the referee."

That the referee treated the issue of partnership as one of fact is further emphasized by the admission, over objection, of a line of testimony which permitted lay witnesses to express their opinion on that issue. For example, creditors were permitted, over objection, to state in substance that they dealt with Julius and Joseph Namoff as individuals and not as partners. It is reasonable to think that the referee attached weight to this line of ...


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