The opinion of the court was delivered by: Marovitz, District Judge.
Review of Order of Referee in Bankruptcy
The matter before the court is a petition for review of an
order of the referee in bankruptcy. The petition was filed by
Wilkes, Besterfield & Company*fn1 (hereafter Wilkes), a firm
of accountants, who appeal from the referee's order overruling
their motion to dismiss the complaint of the trustee in
bankruptcy against them. It is the contention of Wilkes that
the summary jurisdiction of the Bankruptcy Court does not
extend to determine the liability of Wilkes in an accountant's
The trustee's complaint, taken as true for our purposes
here,*fn2 seeks recovery of $315,000.00 damages allegedly
sustained by the bankrupt estate because of respondents'
failure properly to perform an accounting assignment for which
they had been hired by the trustee. The trustee asserts that
Wilkes is before the court because they were retained by court
order to complete some routine bookkeeping entries. The referee
found that the Court of Bankruptcy had summary jurisdiction to
determine the liability of the accountants for the criminal
action of one of their employees, on the rationale that Wilkes'
consent to perform the bookkeeping task was sufficient consent
to make them subject to the summary jurisdiction of the
Bankruptcy Court for all matters flowing from the contract.
F. W. Koenecke & Sons, Inc., was adjudicated a bankrupt on a
petition filed March 13, 1969, by three creditors. On June 26,
1972, the trustee filed a petition (the complaint), wherein he
alleges that shortly before the bankruptcy Clifford Kahler and
Robert Koenecke, both officers of the company, conspired, with
the aid of one Alex Birnie, an employee of Wilkes, to engage in
alleged fraudulent transfers made by the bankrupt corporation
The employment of Wilkes to update all of Koenecke's accounting
was specifically authorized by an order entered by the Court of
Bankruptcy on March 27, 1969. The trustee alleges (Count VI,
Paragraph 4) that "the partnership, through Alex R. Birnie,
altered or caused to be altered the books and records of the
bankrupt corporation in such manner as to conceal from the
trustee and from the court the fact that $315,000.00 in cash
had been diverted from the estate to one Clifford Kahler with
the aid, abetment and participation of Alex R. Birnie, the
employee of the partnership."
Wilkes moved to dismiss the complaint on the grounds that the
Bankruptcy Court lacked summary jurisdiction to grant relief,
and contends that a plenary proceeding is called for.
The boundaries of the summary jurisdiction of the Bankruptcy
Court are not clearly defined, and the absence of clearly
demarcated areas accounts for the difficulty in resolving this
particular dispute. It is agreed by both parties that the
specific category under consideration is whether summary
jurisdiction has been obtained by the Court of Bankruptcy
through either express or implied consent. See generally, 2
Collier, Bankruptcy 23.08 (14th ed.). The sole issue
is whether Wilkes' employment by the trustee constitutes a
consent to summary jurisdiction.
The trustee argues that a person who contracts with the
Bankruptcy Court submits himself to the jurisdiction of the
court for all purposes connected with or arising out of the
contract, including any damage which might be sustained by
virtue of the failure of Wilkes, or its employee Birnie,
properly to perform the duties for which they had been retained
by the court.
The respondents contend that this consent is only partial, and
that consent jurisdiction based on contracting is limited to
the following three circumstances:
1. When a party sues the estate under the contract or
otherwise uses the contract ...