382 U.S. 323 (1966)
The corporate bankrupt began business on April 21, 1960, and borrowed $50,000 from two local banks.1 Petitioner Katchen served as an accommodation maker on the two corporate notes.2 After the company suffered a disastrous fire, its funds and collections were placed in a trust account under Katchen's sole control.3 From this account he made two payments on one note and one payment on the other.4 Bankruptcy followed within four months of these payments.5
Katchen filed two claims in the bankruptcy proceeding.6 One claim was for rent due from the bankrupt.7 The other was for a payment on one of the notes made from his personal funds.8 The trustee responded with a petition asserting that the payments from the trust fund to the banks were voidable preferences.9 The trustee demanded judgment for the amount of the preferences along with the amount of an unpaid stock subscription owed to the corporation by Katchen.10
Katchen's objection to the summary jurisdiction of the referee was overruled.11 Judgment was rendered for the trustee on both the preferences and the stock subscription.12 Katchen's claims were to be allowed only when and if the judgment was satisfied.13 The District Court sustained the referee.14
A divided Court of Appeals sitting en banc affirmed the judgment for the amount of the voidable preferences but reversed the judgment for the amount of the stock subscription.15 The trustee did not seek review of the adverse decision on the stock subscription.16 The Supreme Court granted certiorari on Katchen's petition.17
Whether a bankruptcy court has summary jurisdiction to order the surrender of voidable preferences asserted and proved by the trustee in response to a claim filed by the creditor who received the preferences?18
The Bankruptcy Act confers summary jurisdiction on bankruptcy courts to adjudicate §57g objections to claims.19 It also confers jurisdiction to order the surrender of voidable preferences as part of the claim allowance process.20 This is because the power to allow or disallow claims includes full power to inquire into the validity of any alleged debt.2122 The objection is part and parcel of the allowance process.23
Yes. When Katchen filed claims in the bankruptcy proceeding, the trustee's assertion of voidable preferences under §57g became part of the summary allowance process subject to adjudication by the bankruptcy court.24 The referee overruled the objection to summary jurisdiction and rendered judgment for the trustee on the preferences arising from payments out of the trust account.25 The structure and purpose of the Bankruptcy Act support summary adjudication of such objections to achieve prompt administration of the estate without the delay of plenary suits.26
The power to allow or disallow claims includes full power to inquire into the validity of any alleged debt. The objection is part and parcel of the allowance process subject to summary adjudication.27
The bankruptcy court has summary jurisdiction to order the surrender of the voidable preferences.28
Whether the Seventh Amendment entitles a creditor filing a claim in bankruptcy to a jury trial on the issue of whether voidable preferences were received?29
When the issue of voidable preferences arises as part of the process of allowance and disallowance of claims, it is triable in equity.30 The Seventh Amendment does not require a jury trial because the Bankruptcy Act converts the creditor's legal claim into an equitable claim to a pro rata share of the res.31
No. Although a creditor might be entitled to a jury trial in a plenary action if no claim is filed, the situation changes when the creditor files a claim.32 In that case the issue is converted to an equitable one triable without a jury.33 In this case Katchen filed claims for rent and for a payment on one of the notes, making the preference issue part of the equitable claim allowance process in the bankruptcy court.34 The proceedings of bankruptcy courts are inherently proceedings in equity.35 There is no Seventh Amendment right to a jury trial for determination of objections to claims, including §57g objections.36
The determination of the preference issues in the equitable proceeding renders unnecessary a trial in a plenary action because of the res judicata effect to which that determination is entitled.37
The Seventh Amendment does not entitle the creditor to a jury trial in these circumstances.38