In re Cowen Hosiery Co., Inc.

Decision Date18 December 1922
Docket Number123.
PartiesIn re COWEN HOSIERY CO., Inc. v. TAUBEL-SCOTT-KITZMILLER CO., Inc. FOX et al.
CourtU.S. Court of Appeals — Second Circuit

The Cowen Company was adjudicated bankrupt upon its own petition on August 25, 1922. Within four months of that date the Taubel Company obtained a judgment against it, issued process to the sheriff of the county of New York, and levied upon certain goods of the Cowen Company on August 15th.

The sheriff's officers have ever since been in charge and custody of said goods and chattels on the bankrupt's premises. A trustee having been elected and qualified and the estate referred to a referee, that officer on September 15th

issued an order requiring the Taubel Company to show cause before him why the judgment above recited 'and the levy upon the execution issued thereunder should not be deemed null and void and why the property affected by the levy and judgment shall not * * * pass to the trustees as a part of the estate of the bankrupt.'

This order was returnable September 18th. So far as this record shows, no proceedings were ever had under this order and before the referee, but a motion was made before the judge then holding the bankruptcy court to set aside the same, and on the 18th of September an order as entered by said judge directing that the referee's show cause order be 'vacated and set aside on the ground that the referee in bankruptcy (is) without jurisdiction to make the same inasmuch as the rights of said Taubel, etc., Company cannot be determined in a summary proceeding but only by a plenary suit instituted by the trustee against it. ' This is the order sought to be revised in the present proceeding. The court below filed no opinion, but by the order complained of further directed that all action by the Taubel Company or the sheriff under the execution aforesaid should be stayed until October 9th, within which time the trustees in bankruptcy must 'commence a plenary suit' against the Taubel Company. The order also reserved a right in the bankruptcy court after the institution of said plenary suit to direct the sale of the property 'free and clear of all liens and incumbrances' and for the retention by the sheriff of the amount so collected by him 'in place and stead of said property * * * until the final determination of such plenary suit by a competent court of ultimate appeal. ' The trustees filed this petition to revise and obtained a stay pending this appeal.

Olcott Bonynge, McManus & Ernst, of New York City (Irving L. Ernst of New York City, of counsel), for trustees.

Herman Goldman, of New York City (Elkan Turk and Max A. Geller, both of New York City, and Harry G. Liese, of Brooklyn, N.Y., of counsel), for respondent.

Before HOUGH, MANTON, and MAYER, Circuit Judges.

HOUGH Circuit Judge (after stating the facts as above).

The procedure below was indefensible. The proper referee instituted a proceeding which on its face was plainly within the jurisdiction of the court and of himself as an officer thereof. That jurisdiction was challenged without even responding to the referee's process, and by means of an order to show cause issued by the judge in charge of the bankruptcy court.

This method of defense is in itself undesirable because it converts what ought to be an orderly trial into a conflict of affidavits usually (as in this case) largely irrelevant.

Further the practice is not sanctioned by statute or rule. A referee's alleged errors are properly corrected by petition for review, which may be taken at any stage of the proceeding and cover both matters of fact and of law. Bankruptcy Act, Sec. 2(10), being Comp. St. Sec. 9586.

If this case had come up from the referee in the proper way, all the material facts would have appeared in that official's certificate or return, instead of in a sprawling mass of affidavits and a cross fire of show cause orders.

Procedure such as this has never been approved by this court. In re Wood, 278 F. 355, merely shows that such bad practice is not absolutely forbidden.

The point in controversy, however, is plain. Taubel challenged the jurisdiction nominally of the referee, but really of the District Court, because he asserted that Cowen Company was solvent 10 days before it was adjudicated a bankrupt. Let it be assumed that the respondent (Taubel) alleged facts sufficient to show the assertion more than merely colorable; result is that he demanded a plenary suit within the rules recently restated in Re Marquette, 254 F. 419, 166 C.C.A. 51.

The contention therefore is that respondent (Taubel) is an adverse claimant. Authoritative definition of this phrase is found in Babbitt v. Dutcher, 216 U.S. 102, 113, 30 Sup.Ct. 372, 54 L.Ed. 402, 17 Ann.Cas. 969, where it was held that if there be a claim of adverse title to property of the bankrupt based upon a transfer antedating the bankruptcy, a plenary suit must be brought in which the adverse claim of title can be tried and adjudicated.

But whatever rights respondent had grow out of the admitted fact of its being an execution creditor with levy made on the bankrupt's property, under the laws of New York. But even after such levy the bankrupt 'remains the general owner of the property seized, and is entitled, by virtue of such ownership, to the benefit of its full value. * * * (The bankrupt) unquestionably has a right of action against any person unlawfully interfering with the property while in the...

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5 cases
  • Irby v. Corey, 8662.
    • United States
    • U.S. Court of Appeals — Fifth Circuit
    • April 8, 1938
    ...A.B.R. 79; Taubel-Scott-Kitzmiller Co. v. Fox, 264 U.S. 426, 44 Sup.Ct. 396, 68 L.Ed. 770, 2 A.B.R.,N.S., 912, reversing In re Cowen Hosiery Co., 2 Cir., 286 F. 351, 2 A.B.R.,N.S., 880; Shea v. Lewis, 8 Cir., 206 F. 877, 30 A.B.R. 436; American Finance Co. of Galveston v. Coppard, 5 Cir., 4......
  • In re Purkett, Douglas & Co.
    • United States
    • U.S. District Court — Panama Canal Zone
    • March 30, 1931
    ...the judgment creditor and stayed the proceeding before the referee. The latter order in turn was reversed by the Circuit Court of Appeals. 286 F. 351. On a writ of certiorari the judgment rendered by the latter tribunal was reversed by the United States Supreme Court. In the course of his o......
  • Jacobs v. Hyman
    • United States
    • U.S. Court of Appeals — Fifth Circuit
    • January 17, 1923
    ... ... Hyman and others, composing the partnership of Alex Hyman & ... Co., citizens of Louisiana (hereinafter styled plaintiffs), ... brought suit ... ...
  • In re Lindsay, 2985.
    • United States
    • U.S. District Court — Northern District of Iowa
    • November 27, 1935
    ...for review. The latter course seems to have appealed to the Circuit Court of Appeals of the Second Circuit in Fox et al. v. Taubel-Scott-Kitzmiller Co., Inc., 286 F. 351, which presented an analogous situation. The case cited, however, was reversed in Taubel-Scott-Kitzmiller Co., Inc., v. F......
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