Staley, Chief Judge, and Kalodner and Forman, Circuit Judges.
Appellants, Robert and Ruth Richenberg, Frank and Florence McGuire, and Glen and Arlene Luhman, appeal from an order of the United States District Court for the District of New Jersey remanding to the Referee in Bankruptcy for findings of fact and conclusions of law the issue as to who had title to certain funds paid by the appellants to Imperial "400" National, Inc. (Imperial), one of the debtors in bankruptcy.
Beginning in 1961 Imperial engaged in the business of constructing motels, advancing so rapidly that by June 1965 its chain comprised 115 motels in operation and 14 in stages of construction in approximately 38 states. Except in a few instances of motels wholly owned by Imperial, the pattern followed was, upon completion of a motel, to sell a 50 percent interest in it to a third party who became co-owner with Imperial and resided at and operated the motel. On April 30, May 11, and May 15, 1965, respectively, each couple of the appellants entered into such a separate co-owner operator agreement with Imperial and paid it a deposit of $15,000. These monies were deposited by Imperial in an account at the Peoples Trust Company of Bergen County entitled "Imperial '400' National, Inc. Escrow Account." On June 3, 1965, shortly after the last deposit had been made, a Petition for Arrangement under Chapter XI of the Bankruptcy Act was filed by Imperial and its subsidiaries.
Subsequently, on December 29, 1965, a reclamation application was filed by appellants and on the same day the Referee in Bankruptcy issued an order directing the Receiver of Imperial and the Peoples Trust Company of Bergen County to show cause why the funds held in the aforementioned account should not be returned to the appellants. The order to show cause came on for hearing on January 26, 1966, whereupon the Referee granted the application and entered an order effectuating the return of the deposits.*fn1
Meanwhile, on December 30, 1965, the Security and Exchange Commission filed a motion for leave to intervene for the purpose of moving to dismiss the debtors' petition and to dismiss the Chapter XI proceedings unless the debtors' petition should be amended or a creditors' petition filed to comply with the requirements of Chapter X of the Bankruptcy Act.
Based on these motions an order was filed on January 3, 1966 by the District Court directing Imperial and its associated debtors to show cause on January 7, 1966 why the motions of the Security and Exchange Commission should not be granted. The order also provided that any confirmation of any arrangement under Chapter XI proceedings should be stayed pending determination of the motions.*fn2 On January 7, 1966, the District Court, pursuant to its show cause order, took evidence, heard arguments and reserved its decision. At the end of the hearing the District Court orally continued the restraint contained in the order to show cause.
In an order filed on February 2, 1966, the District Court granted the Securities and Exchange Commission leave to intervene and also dismissed the Chapter XI proceedings unless either Imperial or its creditors filed an amended petition complying with the provisions of Chapter X within ten days. On February 21 the Chapter XI Receiver was replaced by a Chapter X Trustee.
On April 25, 1966, pursuant to a petition therefor by the Trustee, the District Court filed an order directing the appellants to show cause why they should not be required to turn over the funds received by them under the Referee's order of January 26, 1966. Appellants contested the jurisdiction of the District Court to entertain the Trustee's petition which, in effect, sought review of the Referee's order long after the expiration of the ten day period of limitation provided in section 39(c) of the Bankruptcy Act, 11 U.S.C. § 67(c). After asserting that it had jurisdiction to vacate the Referee's order of January 26, 1966, the District Court entered the aforementioned order on March 3, 1967 remanding the matter to the Referee and directing him to make findings as to whether the monies had been properly refunded to the appellants. This appeal followed.
At the outset, the Trustee (appellee here) challenges the jurisdiction of this court by a motion to dismiss the appeal contending that since it is taken from an order of the District Court which merely refers the matter to the Referee for an evidentiary hearing, without determining any issue on the merits, it is premature. The motion was denied, but without prejudice, and with the right of the Trustee to renew it on the argument of the merits of the appeal, which right is now being exercised.
Section 24(a) of the Bankruptcy Act, 11 U.S.C. § 47(a), provides that the Court of Appeals is vested with jurisdiction on appeals from the Bankruptcy Court "in proceedings in bankruptcy, either interlocutory or final, and in controversies arising in proceedings in bankruptcy, to review, affirm, revise, or reverse, both in matters of law and in matters of fact." Hence, as a general rule, an appeal from either an interlocutory or final order may be entertained in proceedings in bankruptcy, while in a controversy arising in proceedings in bankruptcy an appeal may be taken only from a final order. The definition of these categories has been often restated and both parties concede that:
"A controversy arising in proceedings in bankruptcy has generally been held to embrace disputes between the trustee and adverse claimants concerning the right and title to the bankrupt estate. Proceedings in bankruptcy, on the other hand, refer to matters affecting merely the administration and distribution of the estate."*fn3
Viewing the March 3, 1967 order of reference by the District Court to the Referee as an interlocutory order, this court, in ruling on its jurisdiction to hear this appeal must determine ...