In re Frischknecht

• Decision Date: 13 April 1915
• Docket Number: 207.
• Parties: In re FRISCHKNECHT.
• Court: U.S. Court of Appeals — Second Circuit

223 F. 417

In re FRISCHKNECHT.

No. 207.

United States Court of Appeals, Second Circuit.

April 13, 1915

On February 16, 1914, a petition in involuntary bankruptcy was filed against John Frischknecht to have him adjudicated an involuntary bankrupt, and on May 4, 1914, he was duly adjudicated a bankrupt. Two days prior to the filing of the petition in bankruptcy Frischknecht had made an assignment for the benefit of creditors to Henry B. Singer, and as such assignee Singer received $87,463.55. Subsequently Singer was elected the trustee of the bankrupt. Prior to the filing of the involuntary petition in bankruptcy Frischknecht had assigned certain outstanding accounts to Knauth, Nachod &amp Kuhne, bankers, for advances thereon made, which accounts exceeded the amount of the advances made, and after repayment of the indebtedness to the banking firm there remained a credit in favor of Frischknecht or of his estate of about $1,340.

Charles Hirschhorn and Fred Hirschhorn are the owners of the premises in the city of New York which were leased by them to Frischknecht prior to the bankruptcy proceedings under two certain leases for a period of 10 years, expiring February 1 1921, at an annual rental of $8,500; and on or about October 2, 1914, the Hirschhorns instituted an action in the state court in New York against Frischknecht for the sum of $5,077.03 for rent due under the leases for the months of March, April, May, June, July, August, September, and October. Frischknecht had paid the rent for the premises prior to March.

John Frischknecht is a nonresident of the country, it being alleged that he resides in St. Gall, Switzerland, and pursuant to the provisions of the New York Code of Civil Procedure, a warrant of attachment in the action was procured on that ground.

On May 9, 1914, the bankrupt made an offer to his creditors in composition in bankruptcy of 60 cents on the dollar, to be paid in cash to the creditors, which was signed and accepted by a majority in number and amount of the claims filed. The cash amount required to pay the creditors under the composition, and required to be deposited in court pursuant to the Bankruptcy Act, was, as stated by the District Judge $70,000. This did not include trustees' and attorneys' compensation and disbursements, but apparently included the commissions of the referee. The attorneys all waived in writing the deposit in the composition proceeding of a sum sufficient to pay their fees.

The sum of $70,000 was deposited by the trustee in bankruptcy on September 1, 1914, in the Equitable Trust Company of New York. The expense of the administration of the bankruptcy proceedings were concededly not paid, and the only funds available for that purpose was the excess of $614.69 remaining of the deposit to meet the composition proceeding and the sum of $1,340, the moneys remaining in the hands of the bankers.

On September 14, 1914, an order was made by the referee in bankruptcy which provided: (1) That the attorneys for the petitioning creditors were entitled to the sum of $200 for their services and $40 for their disbursements, and the trustee was directed to pay the same. (2) That the attorneys for the trustee were entitled to an allowance for services of $2,250 and $85.32 for their disbursements, and the trustee was directed to pay the same. (3) That the attorneys for the bankrupt were entitled to an allowance for services of $1,500 and to the sum of $70.14 for disbursements, and these the trustee was likewise directed to pay.

The entry of this order was consented to by the trustee's attorneys and by the bankrupt's attorneys. Thereafter, and on October 5, 1914, the attorneys for the trustee made a motion for the payment out of the moneys deposited in the composition proceeding of the allowances made to the attorneys, etc., pursuant to the order of the referee made on September 14, 1914. That order recited the fact that it appeared that there were moneys at that time deposited in the composition available for the performance of the order. It is not denied that the order of October 5, 1914, has been complied with, and that whatever sums were filed were paid out of the moneys deposited in the composition proceeding.

On December 14, 1914, a motion was made that an order issue compelling the attaching creditors to release the attachment upon moneys and outstanding accounts of the bankrupt in the hands of Knauth, Nachod & Kuhne, and directing them to turn over to the trustee any and all moneys in their possession representing a surplus of the accounts assigned to them by the bankrupt prior to his bankruptcy, as well as any and all uncollected outstanding accounts which they at that time had in their possession by virtue of that assignment. The motion was denied in all respects in an order dated December 22, 1914. And it is this order which the trustee asks this court to vacate and set aside and to grant him the relief prayed for.

Myers & Goldsmith, of New York City (Emanuel J. Myers, of New York City, of counsel), for petitioner.

Rose & Paskus, of New York City (Benjamin G. Paskus and Jacob Scholer, both of New York City, of counsel), for respondents.

Before LACOMBE, COXE, and ROGERS, Circuit Judges.

ROGERS Circuit Judge (after stating the facts as above).

The Bankruptcy Act provides two modes of procedure in the administration of a bankrupt's estate. One of these modes authorizes the bankrupt after his adjudication to make a composition with his creditors. The bankrupt, after he has been examined in open court or at a meeting of his creditors and after he has filed in court the schedule of his property and the list of the creditors required to be filed by bankrupts, may...