In re Chakos
| Decision Date | 03 January 1930 |
| Citation | 36 F.2d 776 |
| Parties | In re CHAKOS. |
| Court | U.S. District Court — Western District of Wisconsin |
Marks & Read, of Madison, Wis., for Frawley.
Farr & MacLeod, of Eau Claire, Wis., for Karalis.
Karalis, a secured creditor of the bankrupt, presents his motion for an order directing the trustee to pay to him without further delay the sum of $3,000 held by the trustee and heretofore ordered distributed to said Karalis. This motion is resisted by W. H. Frawley, an alleged creditor of said Karalis' assignor, Chakos, who also seeks by cross-motion authority to prosecute a suit in garnishment against the trustee as well as said Karalis.
This bankruptcy case has been a source of prolific litigation, various issues having been presented to this court as well as to the Court of Appeals. It is desirable, if possible, to curtail the further longevity of controversy.
Karalis, as assignee of a certain mortgage upon the bankrupt's property, has previously obtained an order directing the trustee to pay to him, in satisfaction of his lien, the proceeds of sale thereof, to which the lien has been transferred, in the sum of $3,000. Subsequent to the entry of this order, Frawley, claiming to be a creditor of Karalis' assignor, alleging that the assignment to Karalis was fraudulent and void in fraud of the creditors of the assignor and asserting his desire to reach said fund in satisfaction of an indebtedness of Karalis' assignor, petitioned the referee for leave to institute garnishment proceedings against the trustee in order to impound the fund pending the outcome of his suit to establish the indebtedness of Karalis' assignor and the invalidity of the assignment to Karalis. The referee in bankruptcy several months ago allowed said petition and granted such leave, and of that order no review was had. Subsequently Frawley instituted his suit to recover his indebtedness from Karalis' assignor and garnished Karalis and, by leave of court as aforesaid, the trustee in bankruptcy herein. This proceeding, authorized by the Wisconsin statutes upon garnishment, furnishing a short cut to the same end as a creditor's bill, was instituted in the state court and promptly thereafter removed to this court, where it is still pending. The allowance of Karalis' motion at this time will in effect nullify the order heretofore entered by the referee, granting leave to garnishee the trustee and will effectually dispose of the garnishment suit pending by defeating the attempt of the plaintiff therein to reach the fund in the hands of the trustee.
It is the established rule in the federal court that funds in custodia legis are not as a matter of right subject to either attachment or garnishment. See In re Argonaut Shoe Co. (C. C. A.) 187 F. 784; In re American Electric Telephone Co. (C. C. A.) 211 F. 88; and Bucher v. Vance et al. (C. C. A. 7) 36 F.(2d) 774, and cases cited in Remington on Bankruptcy, § 2880, and in footnote in 30 L. R. A. (N. S.) 720; 13 L. R. A. (N. S.) 758, and 28 C. J. 73. The reason for this rule is that a right to garnishee or attach funds in custodia legis would cause endless embarrassment and interference with the administration of estates and the court's administration of its functions.
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McGreavey v. Straw
...a receiver grow out of any act or transaction of the receiver. They interfere with the administration of the receivership. In re Chakos, D.C., 36 F.2d 776; Republic Supply Co. v. Del Rey Oil & Ref. Co., D.C., 50 F.2d 639. The history of the statute is consistent with this line of demarcatio......
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In re Jankauskas
...trustee did not object and finding that trustee could not be required to honor garnishment over trustee's objection); In re Chakos , 36 F.2d 776 (W.D. Wis. 1930) (bankruptcy court had discretion and as a matter of extension of grace to allow garnishment against trustee where no effect on ad......
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In re Quakertown Shopping Center, Inc., 26272.
...with the Court's administration of estates would seriously impede the efficiency of the Bankruptcy Act. See: In re Chakos, 36 F.2d 776, 777 (D.C.W.D.Wis., 1930). Comity between federal and state courts would be upset if the intended exclusive jurisdiction of the one were nevertheless subjec......
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Gottwals v. Manske
...consent so to do from the court having such custody. Among such cases are Dale v. Brumbly, 98 Md. 468, 56 A. 807, 64 L.R.A. 112; In re Chakos, D.C., 36 F.2d 776; Bankers' Mortg. Co. v. McComb, 10 Cir., 60 F.2d 218; the reason for their refusal to follow along with the conclusion reached in ......