In re Casco Chemical Co.

• Decision Date: 10 August 1964
• Docket Number: No. 20667,20709.,20667
• Citation: 335 F.2d 645
• Parties: In the Matter of CASCO CHEMICAL CO., Bankrupt. Harold C. ABRAMSON, Trustee in Bankruptcy of Casco Chemical Corporation, et al., Appellants, v. SUPERINTENDENCE COMPANY, Inc., et al., Appellees (two cases).
• Court: U.S. Court of Appeals — Fifth Circuit

335 F.2d 645 (1964)

In the Matter of CASCO CHEMICAL CO., Bankrupt.

Harold C. ABRAMSON, Trustee in Bankruptcy of Casco Chemical Corporation, et al., Appellants, v. SUPERINTENDENCE COMPANY, Inc., et al., Appellees (two cases).

Nos. 20667, 20709.

United States Court of Appeals Fifth Circuit.

August 10, 1964.

Philip I. Palmer, Jr., James R. Alexander, Goldberg & Alexander, Palmer & Palmer, Dallas, Tex., for appellant.

John K. DeLay, Jr., Storey, Armstrong & Steger, Dallas, Tex., for appellee Excel Packing Co.

Carswell H. Cobb, Robert F. Ritchie, Ritchie, Ritchie & Crosland, Dallas, Tex., for appellee W. C. Boedeker.

Harris, Brown & Harris, Nashville, Tenn., for appellee McRedmond Brothers, Inc.

Charles F. Brown, Nashville, Tenn., Carl W. Wilson, Dallas, Tex., James W. Sargent, Wichita, Kan., Wynne, McKenzie, Jaffe & Tinsley, Dallas, Tex., for appellee Superintendence Co., Inc.

Before TUTTLE, Chief Judge, and BROWN and GEWIN, Circuit Judges.

JOHN R. BROWN, Circuit Judge.

Although these cases, one in bankruptcy, the other a Civil Action, were separately filed, tried and considered and were separately briefed before us,¹ they are so intertwined that for the Court itself to avoid becoming a party to undue repetition, the cases may be separately disposed of in this single opinion. The bankruptcy case² challenges the Referee's denial of summary jurisdiction. The Civil Action³ attacks the District Court's dismissal of an independent proceeding brought under F.R.Civ.P. 60(b) on the ground that it was not filed within the one year prescribed for grounds (1), (2) and (3). By this rule 60(b) proceeding, the Trustee sought to obtain a turnover of the same funds which were the subject matter of the unsuccessful bankruptcy summary proceedings. For our purposes, the facts may be severely capsulated.

I.

During 1959, Casco⁴ was active in the business of buying and selling tallow, soybean oil, and similar products. Among the customers purchasing these items was Bunge.⁵ Casco's accounts receivable financing was handled through the First National Bank in Dallas. Under the procedure set up, Casco drew a sight draft upon Bunge for each pending sale. After inquiry and verification of the account debtor, the Bank would purchase the draft. The draft with commercial documents attached would then be presented through regular banking channels to the purchaser, Bunge. The sale and assignment of these drafts was guaranteed by Boedeker.⁶

In August and September of 1959, the Bank purchased sight drafts drawn by Casco on Bunge in a total amount of $159,330.12. All were dishonored upon presentment. The Bank thereafter instituted suit against Bunge for the collection of the accounts receivable assigned to it. After the drafts were dishonored by Bunge, but before the Bank's suit was filed, Casco assigned a portion of this same Bunge account receivable to Excel.⁷ About the same time Superintendence⁸ served a writ of garnishment upon Bunge in New York City. Another creditor of Casco, McRedmond,⁹ also asserted some character of lien.

Bunge removed the Bank's state court suit to the federal court where it became C.A. 8353. In that proceeding Bunge filed an action of interpleader, 28 U.S.C.A. § 1335; F.R.Civ.P. 22, admitted liability for a sum ultimately fixed at $76,051.58 which it deposited in the Registry of the Court, and impleaded, among others, the claimants Boedeker, Superintendence, Excel, and McRedmond. In the meantime, the Bank called on Boedeker to honor his guaranty which he did.¹⁰ The Bank assigned all of the accounts, drafts, etc. to him and he was substituted for the Bank in the interpleader action.

Presumably after much backing and filling, negotiation and discovery, the parties reached an agreed disposition,¹¹ and on October 5, 1961, the District Court entered a final judgment, consented to by Boedeker, Superintendence, Excel, and McRedmond ordering an agreed distribution of the $76,051.58.¹² Thereafter, the Clerk disbursed the funds from the Registry as prescribed in the judgment of October 5, 1961. It is that judgment which is now the subject of the rule 60(b) Civil Action.

Meanwhile on the preceding day, October 4, 1961, and without the actual knowledge of either the District Judge or any of these four claimants or their counsel, an involuntary petition in bankruptcy was filed against Casco in that very same Court. Because it was filed the day before the distribution of funds ostensibly due by Bunge to Casco, it was the Trustee's theory both in the summary and Civil Action proceedings that this was a transfer of funds belonging to the Bankrupt after bankruptcy not made for a present fair consideration and hence invalid under § 701 sub. d(1)-(5) of the Bankruptcy Act, 11 U.S.C.A. § 110, sub. d(1)-(5).

The original bankruptcy petition filed October 4, 1961, by one creditor only, alleged three acts of bankruptcy in conclusory general terms. On February 26, 1962, more than four months after October 5, 1961, an amended petition was filed. The amended petition alleged in specific terms acts of bankruptcy consisting of a fraudulent transfer under § 67 sub. d(2), 11 U.S.C.A. § 107, sub. d (2), the factual grounds therefor being the interpleader judgment of October 5, 1961, and the transfer to the four named claimants and, by reason of the same facts, a perferential transfer within four months of the filing of the petition. Thereafter on April 16, 1962, there was an adjudication by agreement and default. Subsequently, in July 1962, the Trustee instituted summary turnover proceedings against these claimants. Each claimant made express, timely objection to summary jurisdiction. In the hearings before the Referee, the claimants made two principal assertions. The first was that the original involuntary bankruptcy petition was so defective that it could not be deemed to have been filed on October 4, 1961, and hence the distribution the next day, October 5, was not a transfer after bankruptcy. The second contention was that, even assuming that October 4 was the date of bankruptcy, neither the Bankrupt nor the Court of Bankruptcy had possession of the fund on that date. By an order of February 28, 1963, the Referee formally denied summary jurisdiction. In the course of the Referee's opinion, later approved fully by the District Court,¹³ the Referee held that October 4, 1961, was the date of bankruptcy, but that the funds were not in the actual or constructive possession of the Bankrupt or the Bankruptcy Court on that date.

On February 21, 1963, just a few days before the Referee's decision, the Trustee filed the Civil Action against the Claimants Superintendence, Excel, McRedmond, Boedeker, and others under F.R. Civ.P. 60(b) to review and set aside the judgment of October 5, 1961. The complaint recited the events we have described including the distribution under the judgment of October 5, 1961. Thereafter it asserted that this "suit is an independent action to set aside the Judgment rendered October 5, 1961 * * * for cause, and derives its jurisdiction from the original proceeding," and alleged that such judgment "rendered * * * after the bankruptcy of CASCO * * * was based upon mistake, inadvertence, surprise and excusable neglect; constructive fraud, misconduct and misrepresentation of the adverse parties; * * * is void for lack of a necessary party; and, other good and sufficient reasons exist justifying relief from the operation of said judgment." All of which reasons, it continued, "compel pursuant to Rule 60b * * * that the judgment * * * be set aside, and the fund turned over to the referee * * * for distribution * * *."

The claimant-defendants Superintendence, Boedeker, Excel, and McRedmond asserted in various ways that the Trustee had no standing since he was not a party to the judgment, urged that the action was not timely filed since brought more than one year after October 5, 1961, asserted laches generally, and denied any meritorious basis for the claim largely on the ground that the date of bankruptcy was February 26, 1962, the date of the amended petition rather than the original filing on October 4, 1961.¹⁴ Without ever hearing any evidence, solely on the basis of pleadings and answers given in response to the Trustee's request for admissions, F.R.Civ.P. 36, the Court by brief memorandum opinion dismissed the case because the "requisites of Rule 60b have not been satisfied" since the case was not filed within one year of the judgment of October 5, 1961. If meant to be more than a declaration as a legal proposition that an action seeking such relief had to be filed within one year, the Court's conclusions undertake to find facts on which there was no evidence whatsoever.¹⁵

II. Bankruptcy Appeal

The Trustee attacks the Referee's order, confirmed by the District Judge, holding that this was not a case for summary jurisdiction. This attack rests on the simple assertion that the fund ($76,051.58) was in the actual possession of the Bankrupt Casco since it was in the immediate, direct, actual and exclusive physical custody of the Bankruptcy Court.

Since the Clerk of the United States District Court for the Northern District

of Texas in his official capacity had possession of the fund in the Registry, and the District Court is the Court of Bankruptcy, § 2, sub. a(9), (10), 11 U.S.C.A. § 11, sub. a(9) (10), the Trustee reasons that this is all sufficient. He bases this on the general proposition that property is deemed in the actual possession of the Court of Bankruptcy when an officer of the Court is in actual, physical possession of it whether such officer be a trustee, receiver or judicial representative.¹⁶

We agree with the Court below. For there to be actual possession of the property by the Bankruptcy Court, the property must be reduced to actual possession by "the trustee or * * * some other officer of the Bankruptcy Court as the property of the bankrupt." 2 Collier, Bankruptcy § 23.052, at 471 n. 10 ...