71 F.2d 371 (5th Cir. 1934), 7313, Gerstel v. Shaw

Docket Nº:7313.
Citation:71 F.2d 371
Party Name:GERSTEL v. SHAW. In re HENRY J. SMITH, Inc.
Case Date:June 15, 1934
Court:United States Courts of Appeals, Court of Appeals for the Fifth Circuit

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71 F.2d 371 (5th Cir. 1934)




In re HENRY J. SMITH, Inc.

No. 7313.

United States Court of Appeals, Fifth Circuit.

June 15, 1934

Page 372

Troy C. Davis, Arthur S. Friedman, and Aaron M. Kanner, all of Miami, Fla., for appellant.

B. R. Cisco, of Miami, Fla., and Henry P. Adair, of Jacksonville, Fla., for appellee.

Before BRYAN, FOSTER, and SIBLEY, Circuit Judges.

SIBLEY, Circuit Judge.

On summary proceedings brought by Gerstel as trustee in bankruptcy of Henry J. Smith, Inc., the referee ordered Mary G. Shaw and her representatives to turn over to the trustee the possession of Alcazar Hotel and all the personal property in it. This ruling was reviewed before the District Judge on the grounds, among others, that Miss Shaw was an adverse claimant and entitled to plenary proceedings before the court; that she was a landlord in peaceful possession of her premises denying any outstanding lease to the bankrupt; and that, if there were such a lease, it was in default, would be burdensome to the bankrupt's estate, and the trustee had not adopted it and had no funds to make good the default. The District Judge reversed the turnover order, thinking that Miss Shaw was an adverse claimant, and, without deciding whether the claimed lease was of force, held that it would be burdensome and that the trustee could not operate the hotel at a profit under it, and ordered that he should proceed no further as to it. As to the personalty, he ordered the dismissal of the summary proceedings without prejudice to the right of the trustee on leave from the referee to file plenary suit for all or any portion of it as he might be advised, or to defend any foreclosure of thie mortgage on the property. The trustee has taken an appeal as of right allowed by the District Judge, instead of applying for it to this court. It is questionable whether a judgment denying a turnover order and directing a trustee to reject a lease to the bankrupt is thus reviewable. Taylor, Trustee, v. Voss, 271 U.S. 176, 46 S.Ct. 461, 70 L.Ed. 889; Ahlstrom v. Ferguson (C.C.A.) 20 F.2d 515; In re Federal Photo Engraving Corporation (C.C.A.) 54 F.2d 628; In re Miller & Harbaugh (C.C.A.) 56 F.2d 141; In re Goldman (C.C.A.) 62 F.2d 421. But, according to the case first cited, we may in any event dispose of the questions of law presented.

The bankrupt, Henry J. Smith, Inc., once owned the Alcazar Hotel, but on April 17, 1931, conveyed it to Zalzar Corporation with all the furniture, furnishings, equipment, appliances, and fixtures of every kind on the premises, subject to a first and second mortgage. The first was to Alzar Investment Corporation to secure notes of $7,500 each falling due on the 21st day of January, February, and March of each year until 1936, when $343,100 fell due, all with 7 per cent. interest from date. About $5,000 was due on the second mortgage. Henry J. Smith, Inc., remained in possession after this conveyance and operated the hotel, as the trustee claims under a lease to it from Zalzar Corporation dated April 23, 1931, for a term of four years, subject to the right of either party to discontinue it at the end of any year on ninety days' notice. Henry J. Smith owned both the contracting corporations and signed the lease for each as its president. The rent reserved was the payment of 'all interest and amortization due to Alzar Investment Corporation and to Jacksonville Properties, also all taxes and licenses due on the Alcazar Hotel, and all operating expenses and repairs. ' It was covenanted that: 'On the expiration of this lease the property is to be given up in as good order in all respects as it now is, reasonable wear and tear and damage by fire alone excepted. ' The furniture and fixtures were not expressly mentioned, but they were used with the hotel as a part of 'the property known as the Alcazar Hotel' which was leased. Henry J. Smith, Inc., paid for considerable furnishings from time to time afterwards, but it is disputed whether

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they became its own property or were replacements which it was bound to make. No one except Smith knew of this lease, not even the manager of the hotel, until it was produced after the trustee was appointed. The two attesting witnesses had disappeared, and the genuineness of the transaction is contested. Assuming its genuineness, the payments promised as rent were...

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