In re Crosby Stores, 5009-5011.

• Citation: 61 F.2d 812
• Decision Date: 17 November 1932
• Docket Number: No. 5009-5011.,5009-5011.
• Parties: In re CROSBY STORES, Inc. GROSS et al. v. IRVING TRUST CO. (two cases). WEISMAN et al. v. SAME.
• Court: United States Courts of Appeals. United States Court of Appeals (3rd Circuit)

61 F.2d 812 (1932)

In re CROSBY STORES, Inc.

GROSS et al. v. IRVING TRUST CO. (two cases).

WEISMAN et al. v. SAME.

Nos. 5009-5011.

Circuit Court of Appeals, Third Circuit.

November 17, 1932.

Merritt Lane, of Newark, N. J., for appellants.

Samuel Kaufman and Bilder & Bilder, all of Newark, N. J., and Arthur Leonard Ross, of New York City, for appellee.

Before WOOLLEY, DAVIS, and THOMPSON, Circuit Judges.

THOMPSON, Circuit Judge.

These are appeals from an order of the District Court for the District of New Jersey sitting in bankruptcy. The facts are undisputed and are as follows:

Crosby Stores, Inc., operated a chain of stores in New York and New Jersey. A bill of complaint was filed in September, 1931, in the Court of Chancery of New Jersey for the appointment of a receiver for Crosby Stores, Inc., under section 65 of the General Corporation Act of New Jersey, Revision of 1896, as amended by P. L. 1931, p. 545 (Comp. St. Supp. § 47 — 65). On October 13, 1931, the Court of Chancery of New Jersey appointed receivers who took possession of the corporation's assets in New Jersey and continued to operate the two New Jersey stores, buying and selling merchandise and incurring obligations. On October 14, 1931, an involuntary petition in bankruptcy was filed in the District Court for the Southern District of New York against Crosby Stores, Inc., and the Irving Trust Company was appointed receiver in bankruptcy by that court. The corporation was adjudged a bankrupt on October 30, 1931, and on December 1, 1931, the Irving Trust Company was continued in office as trustee in bankruptcy. The trustee sold all of the assets of the bankrupt, including the two stores in New Jersey. On December 14, 1931, the Court of Chancery of New Jersey made allowances aggregating $10,350 to its receivers and their counsel. The District Court for the District of New Jersey, upon petition by the trustee in bankruptcy, in a summary proceeding upon a rule to show cause, ordered the state court receivers and their counsel to turn over to the trustee in bankruptcy all of the assets of the bankrupt estate in their possession, together with the allowances paid to them; to file their accounts in the District Court sitting in bankruptcy; and to have their compensation and fees fixed by that court. The state receivers then took this appeal.

The question presented is: Did the Court of Chancery of New Jersey have the power to fix the compensation of its receivers and the fees of their counsel after bankruptcy had intervened within four months of the date of filing the bill of complaint in the state court and the appointment of the receivers by the state court?

A similar question was decided by this court in Silberberg v. Ray Chain Stores, Inc., 58 F.(2d) 766 (certiorari denied October 17, 1932, Winne v. Silberberg, 53 S. Ct. 83, 77 L. Ed. ___. In that case the District Court for New Jersey sitting in equity appointed receivers who applied to it for compensation. Bankruptcy intervened prior to the petition for compensation. The District Court sitting in equity denied the petition, holding that after bankruptcy any application for the receivers' compensation and the fees of their counsel should be made to the District Court sitting in bankruptcy. We sustained the District Court, following the decision of the Ninth Circuit in Moore v. Scott (C. C. A.) 55 F. (2d) 863. Although in the instant case the disputed jurisdiction is between a state court of chancery and a federal court of bankruptcy, the principle involved is the same as that in the Silberberg Case. Congress has vested the jurisdiction in bankruptcy in the federal courts and has made this jurisdiction exclusive in the interests of the insolvent estate and the preservation of the rights of both secured and unsecured creditors. Isaacs v. Hobbs Tie & Timber Co., 282 U. S. 734, 51 S. Ct. 270, 75 L. Ed. 645; Straton v. New, 283 U. S. 318, 51 S. Ct. 465, 75 L. Ed. 1060. Applying the rulings of Moore v. Scott, supra, and authorities cited therein, and our own ruling in Silberberg v. Ray Chain Stores, supra, we reach the conclusion that the state court lost jurisdiction to fix the compensation of the receivers and the fees of their counsel after the bankruptcy court acquired jurisdiction. The language of the Supreme Court in Lion Bonding & Surety Co. v. Karatz, 262 U. S. 640, 43 S. Ct. 641, 642, 67 L. Ed. 1151, is persuasive. Mr. Justice Brandeis there said: "Even where the court which appoints a receiver had jurisdiction at the time, but loses it, as upon supervening bankruptcy, the first court cannot thereafter make an allowance for his expenses and compensation. He must apply to the bankruptcy court...