In re Hoey, Tilden & Co.

• Decision Date: 17 November 1922
• Citation: 292 F. 269
• Parties: In re HOEY, TILDEN & CO. Ex parte KAUFMANN.
• Court: U.S. District Court — Southern District of New York

292 F. 269

In re HOEY, TILDEN & CO. Ex parte KAUFMANN.

United States District Court, S.D. New York.

November 17, 1922

T Langland Thompson, of New York City, for petitioner.

Rosenberg & Ball, of New York City, for trustee.

Carter Ledyard & Milburn, of New York City, for New York Stock Exchange.

B. W B. Brown, and Rounds, Hatch, Dillingham & Debevoise, all of New York City (Chester B. McLaughlin, Jr., of New York City of counsel), for alleged bankrupts.

Pratt & McAlpin, of New York City, for J. Reed Lane, a creditor.

Edward D. Kelly, of New York City, for W.J. Ferguson.

Thomas H. Mahony, of New York City, for Marion Koster.

Henry H. Kaufman, of New York City, for the Receiver.

McReynolds & Hunter, of New York City, for James I. Brokaw.

LEARNED HAND, District Judge.

This motion affects two different suits, the dates being all important. The suit touching the Coffee Exchange seat was commenced on July 21, 1922, more than three weeks before the petition was filed and the receiver appointed herein, on August 15, 1922. As it was a suit to establish a constructive trust in specific property, it was not superseded by the bankruptcy proceedings. It is true that these would supersede insolvency suits in the state court (In re Diamond's Estate (C.C.A. 8th) 259 F. 70, 170 C.C.A. 138); or suits to administer partnership assets on dissolution (New River Coal Co. v. Ruffner (C.C.A. 4th) 165 F. 881, 91 C.C.A. 559). This is because bankruptcy is the exclusive means of administering and distributing the assets of an insolvent among his creditors. In Re Watts & Sachs, 190 U.S. 1, 27, 23 Sup.Ct. 718, 47 L.Ed. 933. The bankruptcy court may, and indeed must, draw to itself any such administration even by summary order when necessary, as in the case of assignments for creditors. Bryan v Bernheimer, 181 U.S. 188, 21 Sup.Ct. 557, 45 L.Ed. 814.

There is, however, no case that I can find which holds that after a suit in rem has been started in a state court, bankruptcy proceedings are in a different position from any other judicial proceedings; or that the earlier court must yield because the later court is one of bankruptcy. Furthermore, it is not in this class of cases necessary that the earlier court should have actually assumed custody of the res before the second suit is commenced. It is enough that the first should be one in which custody could be assumed at any time after bill filed. Farmers' L. & T. Co. v. Lake Street Ry. Co., 177 U.S. 51, 20 Sup.Ct. 564, 44 L.Ed. 667; Moran v. Sturges, 154 U.S. 256, 284, 14 Sup.Ct. 1019, 38 L.Ed. 981; Zimmerman v. So. Relle (C.C.A. 8th) 80 F. 417, 25 C.C.A. 518. Orinoco Iron Co. v. Metzel (C.C.A. 6th) 230 F. 40, 144 C.C.A. 338, was a case where the suit in rem had been commenced after petition filed and the decision turned on that fact. Therefore I can see no reason for staying the suit to reclaim the Coffee Exchange seat. A permanent injunction could issue only in case it were proper to protect the summary jurisdiction of this court; a temporary injunction might issue until the trustee made himself a party. There is no need of this latter, because the receiver may intervene in the state suit until the trustee is appointed, and then the trustee be substituted.

It is true that there is joined in this suit an action against the bankrupt for money had and received. This is not in rem and is a dischargeable debt. The bankrupt might get a stay but not the receiver, who has no interest in protecting the bankrupt against suits in personam. The judgment, if obtained, would not be a liquidation of the claim against the estate which has no interest in the action. Therefore the receiver's motion is denied so far as concerns that suit.

The Stock Exchange suit stands on a different basis. On August 15, 1922, the petition was filed and a receiver appointed. A bill similar to the Coffee Exchange suit was filed and a rule nisi obtained on the 16th to establish a trust upon the net proceeds of the Stock Exchange suit then held by the treasurer of the exchange. As the receiver had not obtained possession of these assets, the question depends upon whether the filing of the petition and the appointment of the receiver put these assets into the constructive possession of the court so as to protect them from any suits in rem and to draw all litigation into the bankruptcy court. There is, of course, no doubt that property held for the bankrupt without adverse claim may be summarily collected by the bankrupt court. Mueller v. Nugent, 184 U.S. 1, 22 Sup.Ct. 269, 46 L.Ed. 405; Bryan v. Bernheimer, supra. The question is not wholly clear whether, if a claim be made by a third person before petition filed against such a fund, the claim is adverse and prevents summary jurisdiction. In First National Bank v. Chic. T. & T. Co., 198 U.S. 280, 25 Sup.Ct. 693, 49 L.Ed. 1051, the seed was in warehouse under receipt and the bankrupt had pledged the receipts. It was held that the bankruptcy court had no summary jurisdiction over the pledgees. The pledgees had not asserted any adverse claim before petition filed, though of course they had their pledges. In Whitney v. Wenman, 198 U.S. 539, 25 Sup.Ct. 778, 49 L.Ed. 1157, the bankrupts had made a colorable lease to a warehouseman and pledged the receipts as in First National Bank v. Chic. T. & . Co., supra. It was held that the District Court had jurisdiction under section 23b, Bankruptcy Act (Comp. St. 9607), without the defendant's consent, because as a bankruptcy court it could reduce to possession the bankrupt's assets. It is not clear whether this was because possession under the colorable lease was really the bankrupt's, or because possession for the bankrupt brought the property within the summary jurisdiction of the court. The court's reference to First National Bank v. Chic. T. & T. Co., supra, does not with deference go very far to distinguish the cases.

Copeland v. Martin (C.C.A. 5th) 182 F. 805, 105 C.C.A. 237 denies summary jurisdiction over the assignee of a debt acknowledged to be due the bankrupt. Of course, there can be no possession of a chose in action, but Orinoco Iron...