In re Schoenberg

• Decision Date: 09 April 1934
• Docket Number: No. 347.,347.
• Citation: 70 F.2d 321
• Parties: In re SCHOENBERG.
• Court: U.S. Court of Appeals — Second Circuit

70 F.2d 321 (1934)

In re SCHOENBERG.

No. 347.

Circuit Court of Appeals, Second Circuit.

April 9, 1934.

David Groberg, of Brooklyn, N. Y. (Walter B. Milkman, of Brooklyn, N. Y., of counsel), for appellant.

Samuel C. Duberstein, of Brooklyn, N. Y. (Max Schwartz, of Brooklyn, N. Y., of counsel), for appellee.

Before MANTON, SWAN, and CHASE, Circuit Judges.

SWAN, Circuit Judge.

Morris Schoenberg was adjudicated a bankrupt in September, 1931, upon his voluntary petition. Prior to the year 1931 he had conducted a retail shoe business in his own name at 643 Myrtle avenue, Brooklyn. In December, 1930, he caused to be organized a corporation by the name of M. Schoenberg, Inc. (the appellant), and to this corporation he made a lease of the store and delivered a bill of sale conveying the merchandise and fixtures of his business in exchange for its capital stock. Its officers were the bankrupt, his wife, his daughter, and his son-in-law. Since January 2, 1931, the business has been conducted as that of the corporation. The bankrupt testified that the incorporation of his business was pursuant to an agreement made with his merchandise creditors to accept his notes, with indorsers, for 60 per cent. of the debt, and that the corporation had assumed payment of these notes and was still paying them off. At the date of the transfer to M. Schoenberg, Inc., the bankrupt had creditors other than merchandise creditors. Almost all his creditors at the date of bankruptcy had also been creditors at the prior date.

In December, 1931, the trustee in bankruptcy filed with the referee, a petition charging that the aforesaid transfer was void under the Bulk Sales Act (N. Y. Personal Property Law Consol. Laws N. Y. c. 41 § 44), and praying that the corporation be ordered to turn over possession of the assets transferred and account for such of them as it had disposed of. The corporation answered setting up its claim of title and its compliance with the Bulk Sales Act, and denying summary jurisdiction. After hearings, the referee ordered the appellant to turn over the shoes and fixtures transferred to it by the bankrupt or the sum of $15,579.40, their value, within five days after service of a copy of the order. The order was made on August 23, 1932, and on August 30th the corporation petitioned for review by the District Court, which confirmed the order, without opinion, on October 24, 1932.

In the meantime, on September 9, 1932, the trustee in bankruptcy petitioned the District Court for an order adjudging the corporation and its treasurer (the bankrupt) in contempt of court for failure to comply with the referee's order of August 23d, alleging that the time for compliance had expired on August 30th. In opposition thereto an affidavit of the bankrupt was filed to the effect that the corporation had on hand only a few of the original shoes transferred to it and was ready to turn them over, together with the store fixtures, if the referee's order should be confirmed. On October 24th, the same day that the corporation's petition for review was denied, the court entered the second order appealed from, holding the corporation and its treasurer in contempt and directing that the latter be confined until the contempt of court should be purged or the court discharge him.

The first question presented concerns the jurisdiction of the referee. As to property within the actual or constructive possession of the bankrupt, a court of bankruptcy can determine in a summary proceeding controversies involving adverse claims of title, but, when possession is held by a third person, adverse claims may not be summarily adjudicated unless by consent or unless the claim is merely colorable. These principles are so well established as scarcely to need citation of authority. See Taubel, etc., Co. v. Fox, 264 U. S. 426, 432, 44 S. Ct. 396, 68 L. Ed. 770; Harrison v. Chamberlin, 271 U. S. 191, 193, 46 S. Ct. 467, 70 L. Ed. 897; MacDonald v. Plymouth Trust Co., 286 U. S. 263, 52 S. Ct. 505, 76 L. Ed. 1093. The trustee contends that the appellant consented to hearings before the referee. This is based on the fact that the treasurer of the appellant, called as a witness by the trustee, testified without objecting to the referee's jurisdiction. At the conclusion of his testimony, the referee, of his own motion, adjourned the matter in order that the corporation might be represented by an attorney. No answer to the trustee's petition had as yet been filed. At the adjournment, its attorney appeared and filed its answer, which concluded with an objection to jurisdiction and a request that the petition be dismissed. No suggestion was made by the trustee or by the referee that jurisdiction had already been consented to. At the conclusion of the evidence the attorney moved to dismiss for lack of jurisdiction. On these facts it would be going...