Fierman v. Seward Nat. Bank, 97.

• Decision Date: 03 January 1930
• Docket Number: No. 97.,97.
• Citation: 37 F.2d 11
• Parties: FIERMAN v. SEWARD NAT. BANK OF NEW YORK.
• Court: U.S. Court of Appeals — Second Circuit

37 F.2d 11 (1930)

FIERMAN v. SEWARD NAT. BANK OF NEW YORK.

No. 97.

Circuit Court of Appeals, Second Circuit.

January 3, 1930.

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Willcox, Swiger & Chambers, of New York City (Arlen G. Swiger, of New York City, Frederic L. Clark, and Andrew R. McCown, both of Philadelphia, Pa., Leo Oppenheimer and Milton P. Kupfer, both of New York City, of counsel), for appellant.

David W. Kahn, of New York City, for appellee.

Before MANTON, SWAN, and AUGUSTUS N. HAND, Circuit Judges.

SWAN, Circuit Judge (after stating the facts as above).

1, 2 It is elementary that the Pennsylvania bankruptcy court had jurisdiction to collect and distribute the estate of the Pennsylvania bankrupt, the Hardwood Company. When the bankrupt's property was sold free of liens, the liens upon the property became rights against the substituted proceeds of sale, and claimants to this fund were obliged to assert their rights by applying to the court in whose custody it was. See In re Rochford, 124 F. 182 (C. C. A. 8); In re Kohl-Hepp Brick Co., 176 F. 340 (C. C. A. 2); Murphy v. John Hofman Co., 211 U. S. 562, 29 S. Ct. 154, 53 L. Ed. 327. Hence the bank, claiming ownership of the bonds, very properly intervened in the Pennsylvania proceedings, at first to prevent the destruction of its lien by the proposed sale, and later to reach the substituted fund. Indeed, no other course was open to it, if it wished to realize anything upon its collateral security.

But Fierman, as McConnell's trustee in bankruptcy, was under no similar necessity. He had the alternatives of claiming the Pennsylvania fund, or of refraining from intervention in the Pennsylvania proceedings and bringing a preference suit against the bank in any court of competent jurisdiction. If he claimed the fund, he would necessarily submit for decision by the Pennsylvania referee his claim that McConnell's transfer of the note and mortgage bonds to the bank was a voidable preference, for only by establishing this would he show any title in himself. See In re Valecia Condensed Milk Co., 233 F. 173 (D. C. Wis.); Logan v. Haynes, 11 F.(2d) 369 (C. C. A. 8). On the other hand, if he did not intervene, a decision awarding the fund to the bank would decide nothing as to the preference, and would affect not at all his right to maintain a preference suit against the bank. In such a suit, if he proved the preference, he would get a decree for the value of the bonds, not for the physical return of them. The bonds themselves would have been converted into the fund which the Pennsylvania court would distribute to the bank.

The legal principles above stated are not seriously disputed, if we correctly understand the contentions of the parties. At least, it is conceded that, if Fierman submitted his claim of title to the bonds or to the substituted fund to the jurisdiction of the Pennsylvania court, that court had power to determine the conflicting rights of the parties, and no injunction should have issued. The real dispute is whether or not he did so submit himself. The District Court found that he did not.

In our opinion, that conclusion is too doubtful to justify the granting of an injunction pendente lite upon affidavits. Indeed, to our minds the proof strongly points to the opposite conclusion. When Fierman applied to Referee Davis to enjoin the bank from selling the bonds, he swore that he was represented before the Pennsylvania referee by his counsel, Mr. Kahn, and that the referee had set a hearing for July 11th, to determine who is the owner of the bonds, and who is entitled to be heard upon the application to sell the bankrupt's property free of liens, and he added that all the rights of the bank would be litigated in that proceeding, and that the referee would there determine whether the "bonds are the property of the Seward National Bank or...