In re Clayton

• Decision Date: 26 July 1919
• Citation: 259 F. 911
• Parties: In re CLAYTON.
• Court: U.S. District Court — District of New Jersey

259 F. 911

In re CLAYTON.

United States District Court, D. New Jersey.

July 26, 1919

David Bobker, of Newark, N.J., for claimant.

James D. Carton, of Asbury Park, N.J., for trustee.

RELLSTAB District Judge.

Samuel A. Reeves, claiming under a bill of sale made to him by Frank F. Clayton before the latter was put into bankruptcy presented to the referee his petition, praying that the trustee be directed to turn over to him the property mentioned in the bill of sale. The referee denied Reeves' claim, and he is here alleging that the referee's determination in that respect is erroneous. The reasons assigned for reversal are:

'(a) The findings are contrary to the weight of the evidence.

'(b) The findings are contrary to the provisions of law applying to and affecting the situation raised by the petition and answer.

'(c) The referee should have directed the trustee to proceed in a plenary suit, and he had no jurisdiction or authority to determine the findings as set forth in the annexed order.' In the year 1917, Clayton was the proprietor of a summer resort known as River Crest Inn, which he held under a lease with an option to purchase. During the years 1916 and 1917, Reeves had loaned him moneys from time to time. Those of the year 1917, amounting to about $5,000, were to assist him in fitting up and carrying on the Inn. He (in popular language) was Clayton's financial backer. The inn was not a financial success. Clayton's failure to make a substantial payment in August on account of such indebtedness, as he had agreed, caused Reeves to become very insistent in his demands for a settlement. The result was the execution by Clayton to Reeves, on October 27, 1917, of an assignment of the lease for the inn, and a bill of sale covering practically all his personal property other than liquors and foodstuffs contained therein. The consideration for these transfers was the $5,000 existing indebtedness referred to and an additional $1,000 then advanced by Reeves. Both bill of sale and assignment of lease were promptly recorded in the county clerk's office of the county where the inn is located, and the insurance policy covering such personal property was transferred to Reeves' name. None of the property was removed from the inn, and Clayton, with Reeves' consent, ran the inn for the remainder of the season free of rent. From the date of the transfers until about the middle of November, 1917, Clayton bought and sold liquors and foodstuffs at the inn as theretofore.

An involuntary petition in bankruptcy was filed against Clayton on the 30th of that month. When the receiver appointed in these proceedings went to the inn on February 19, 1918, he found it unoccupied, the back door unlocked and partly open, and some of the windows unfastened. He took possession of the property and subsequently turned it over to the trustee. The property claimed by Reeves is included in the property thus turned over.

As to the need of a plenary suit by the trustee: It is sufficient to say that the trustee's possession of the property made it unnecessary for him to institute a suit for its recovery and entitled him to maintain and defend his right thereto when such right was challenged by Reeves. In re Lipman (D.C.N.J.) 201 F. 169 (and cases cited page 172), 29 Am.Bankr.Rep. 139.

Under the remaining two reasons assigned as grounds for reversing the referee's findings, neither of which is specific enough to have successfully withstood a challenge, if made counsel for...