In re Ferrell

• Decision Date: 20 January 1932
• Docket Number: No. 4082.,4082.
• Citation: 2 F. Supp. 348
• Parties: In re FERRELL.
• Court: U.S. District Court — Southern District of Florida

2 F. Supp. 348

In re FERRELL.

No. 4082.

District Court, S. D. Florida.

January 20, 1932.

Frank J. Heintz, of Jacksonville, Fla., for petitioning creditors.

Zacharias, Sabel & Reinstine, of Jacksonville, Fla., for bankrupt.

RITTER, District Judge.

This matter comes on for hearing on petitions of Pacific Mutual Life Insurance Company and the Accacia Mutual Life Insurance Company to review an order of the referee in bankruptcy overruling their motions to quash and to dismiss the petition filed by the trustee in bankruptcy, upon which an order to show cause was directed to the petitioners. The trustee's petition states that the bankrupt, after the filing of the involuntary petition in bankruptcy, and prior to the appointment and qualification of the trustee, paid to the respective defendants premiums on policies of insurance issued on the bankrupt's life; that the money so paid was the money of the bankrupt estate, and was paid without right or authority, and seeks in a summary action to have the said premium moneys returned to the trustee. Upon a rule to show cause being issued upon that petition by the referee, the defendant insurance companies filed the aforesaid motion attacking the jurisdiction of the court on various grounds, which we shall dispose of in the order presented.

Taking the motion to quash and dismiss of the Pacific Mutual Life Insurance Company as presenting the questions for both defendant insurance companies, the first ground is that it "denies the jurisdiction of this court over the person of Pacific Mutual Life Insurance Company, a corporation, and/or property or money which may be in the possession, custody or control of Pacific Mutual Life Insurance Company." Counsel, in their brief, in arguing this question, assert that the insurance company is a resident and has its principal place of business in the state of California, and the Accacia Mutual Life Insurance Company has its domicile and principal place of business in the District of Columbia, and that consequently no summary proceedings by a trustee in bankruptcy can be had within the jurisdiction of this court, but must be in the bankruptcy court where the defendants reside. My answer to this argument is that nowhere in the petition are the facts so argued set forth. Certainly the statement quoted from the motion is a mere conclusion of law, without any jurisdictional facts being set forth. Therefore that part of the motion must be deemed irrelevant, and denied accordingly.

The other points in the motion may be summarized under the general proposition that the petition does not set forth facts sufficient to give summary jurisdiction in this matter; that, under the facts, the trustee can only proceed in a plenary action, if at all, to recover the money so paid. The bankruptcy court has full power to bring in parties whenever necessary to completely dispose of the matters before it.

A bankruptcy court has the power in the first instance to determine the existence of the conditions upon which its right to proceed depends in reference to deciding title to bankruptcy property. Taubel-Scott-Kitz-miller Co. v. Fox, 264 U. S. 426, 44 S. Ct. 396, 68 L. Ed. 770; Priest v. Weaver (C. C. A.) 43 F.(2d) 57. That is, it must be decided whether the title of a third person is colorable merely, or whether there is adverse possession. If the property is in the possession of the bankrupt at the time the petition is filed, either actually or constructively, it is in custodia legis, in which case the court may proceed by summary action to determine all questions or claims in reference thereto. If it is not in such possession, but in the possession of other parties asserting a substantial adverse claim, then the trustee must proceed by plenary suit. Mueller v. Nugent, 184 U. S. 1, 22 S. Ct. 269, 46 L. Ed. 405; 5 Remington on Bankruptcy (3d Ed.) par. 2365, p. 448; In re Hoover-McClintock Motor Car Co. (D. C.) 1 F.(2d) 660, 661.

"The jurisdiction of the bankruptcy court to determine in a summary proceeding adverse claims created before the filing of the petition in bankruptcy to liens upon and titles to property claimed by the trustee as that of the bankrupt is conditioned and limited by its actual possession thereof." In re Rathman (C. C. A.) 183 F. 913, 914; In re Rochford et al. (C. C. A.) 124 F. 182; Clay v. Waters (C. C. A.) 178 F. 385, 21 Ann. Cas. 897; Shea v. Lewis (C. C. A.) 206 F. 877; In re McMahon (C. C. A.) 147 F. 684; In re Lipman (D. C.) 201 F. 169; Silver v. Stearns (C. C. A.) 58 F.(2d) 626.

The next question therefore is, Was the money paid to the insurance companies a part of the bankrupt's estate in possession of the bankrupt at the time of payment? I do not think there can be any serious dispute of the fact that all the property of a bankrupt at the time the petition in bankruptcy is filed is in the custody of the court, whether a receiver is appointed or not, and the bankrupt holds the property as a quasi trustee for his creditors. He so holds the property until the appointment and qualification of a trustee, who thereupon becomes vested by operation of law with the title of the bankrupt as of the date of adjudication. Acme Harvester Co. v. Beekman, 222 U. S. 300, 32 S. Ct. 96, 56 L. Ed. 208; section 1382, vol. 4, Remington on Bankruptcy; Johnson v. Collier, 222 U. S. 538, 32 S. Ct. 104, 56 L. Ed. 306. This last case decides that, between the time of filing the petition in bankruptcy and the appointment of a trustee, the estate can be protected by the bankrupt in the institution and maintenance of a suit to prevent loss, where it will aid the estate; that, for such purpose, title is in the bankrupt until the trustee is appointed. Remington on Bankruptcy, vol. 4, § 1384.

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