In re Federal Biscuit Co.

• Decision Date: 10 February 1913
• Docket Number: 149.
• Citation: In re Federal Biscuit Co., 203 F. 37 (2nd Cir. 1913)
• Parties: In re FEDERAL BISCUIT CO.
• Court: U.S. Court of Appeals — Second Circuit

203 F. 37

In re FEDERAL BISCUIT CO.

No. 149.

United States Court of Appeals, Second Circuit.

February 10, 1913

J. M Gardner, of New York City, for petitioner.

Rosenberg & Levis, of New York City (J. N. Rosenberg and W. J. Barr both of New York City, of counsel), for respondent.

Before LACOMBE, WARD, and NOYES, Circuit Judges.

NOYES Circuit Judge.

The bankruptcy act authorizes the District Court as a court of bankruptcy to stay suits against the bankrupt founded upon provable claims pending in state courts at the time of the bankruptcy. It also authorizes such stays in attachment actions instituted within four months of the bankruptcy, the lien of the attachment being invalidated thereby. But the power is given in both cases only for the benefit of the bankrupt estate. If the estate have no interest in the suit or action it cannot properly be stayed. As this Court said in In re Mercedes Import Co., 166 F. 427, 92 C.C.A 179:

'As the trustee in bankruptcy has no interest whatever in the claim against the surety, we think the creditor's rights and equities are questions to be disposed of by the state court.'

In the Mercedes case the facts were somewhat similar to those appearing here. An attachment suit had been brought in a state court against a corporation which subsequently became bankrupt. A bond was substituted for the attachment. The District Court stayed the action but this Court reversed the order upon the ground indicated in the extract quoted, viz that the bankrupt estate had no interest in preventing proceedings in the state court which looked only to enforcing the obligation of the surety company upon the attachment bond. But in the Mercedes case the attachment was made more than four months before the bankruptcy and, what is particularly important, no property of the bankrupt estate was held directly or indirectly to indemnify the surety. In the present case, on the other hand, the attachment was made within four months of bankruptcy and if Anger has a right to the property transferred for his benefit the trustee has a substantial interest in the attachment action. If the surety company is held it can look to Anger for indemnity and he may avail himself of the property of the estate. Thus if a stay be not granted a suit against a bankrupt on a provable claim brought within four months of bankruptcy may result in a depletion of the assets of the estate-- a result clearly in...