In re Jack Stolkin, Inc., 215.

• Decision Date: 07 July 1930
• Docket Number: No. 215.,215.
• Citation: 42 F.2d 829
• Parties: In re JACK STOLKIN, Inc. PENDER v. CLARK et al.
• Court: U.S. Court of Appeals — Second Circuit

42 F.2d 829 (1930)

In re JACK STOLKIN, Inc. PENDER v. CLARK et al.

No. 215.

Circuit Court of Appeals, Second Circuit.

July 7, 1930.

Gregory, Stewart & Montgomery, of New York City (W. Randolph Montgomery and Harold Remington, both of New York City, of counsel), for appellants.

Benjamin Siegel, of New York City, for trustee-appellee.

Before MANTON, SWAN, and AUGUSTUS N. HAND, Circuit Judges.

AUGUSTUS N. HAND, Circuit Judge (after stating the facts as above).

The item of $41.50 was a part of the payment for services performed by the employees of the Credit Men's Adjustment Bureau before the filing of the petition in bankruptcy, and the $332.58 was a payment for compensation of the assignees. Both payments were made by the assignees after the filing of the petition for services rendered before.

This appeal relates only to the foregoing two items, and the question before us is whether the District Court had the right to pass upon the validity of these payments in a summary proceeding. The assignees and the Credit Men's Adjustment Bureau, Inc., insist that they are in the position of adverse claimants in respect to these items and that they may require the trustee in bankruptcy to establish any claim which he has against them in a plenary action.

A summary remedy may be had to recover property belonging to the estate which is actually or constructively in the possession of the bankrupt. Inasmuch as an assignment for the benefit of creditors is of itself an act of bankruptcy which, if made within four months of the filing of the petition, is avoided by an adjudication in bankruptcy, it might have been held as an original proposition that everything connected with the administration by the assignees which had not been adjudicated by the state court before the filing of the petition was open to examination and revision by the bankruptcy court. Indeed the Supreme Court said in Bryan v. Bernheimer, 181 U. S. at page 192, 21 S. Ct. 557, 559, 45 L. Ed. 814:

"The general assignment made by Abraham to Davidson did not constitute Davidson an assignee for value, but simply made him an agent of Abraham for the distribution of the proceeds of the property among Abraham's creditors."

But the Supreme Court, while adhering to the rule that the bankruptcy court may summarily order the assignee to turn over property in his hands or under his control which formerly belonged to the bankrupt in so far as it is not fairly required to pay obligations which he incurred before the petition was filed, or to compensate him for his services, has treated him as an adverse claimant in respect to such items.

In Louisville Trust Co. v. Comingor, 184 U. S. 18, 22 S. Ct. 293, 46 L. Ed. 413, an assignee had paid his counsel and himself after the filing of a petition in bankruptcy such sums "as would have been due him under the established practice of the State Court." In re Reiswig (D. C.) 253 F. 390, at page 396. The Supreme Court held that, as to these sums, the assignee asserted adverse claims existing at the time the petition was filed, and that the trustee in bankruptcy must proceed against him by plenary action.

In Galbraith v. Vallely, 256 U. S. 46, 41 S. Ct. 415, 65 L. Ed. 823, a situation arose almost precisely like the present. Judge Amidon had attempted in a very able opinion (sub nomine In re Reiswig D. C. 253 F. 390) to distinguish Louisville Trust Co. v. Comingor, supra, and had sustained the power of the bankruptcy court to pass upon the claims of the assignee for his own compensation and certain disbursements in a summary proceeding. His decision was affirmed by the Court of Appeals of the Eighth Circuit (261 F. 670); but in a unanimous opinion the Supreme Court said (256 U. S. at page 50, 41 S. Ct. 415, 416, 65 L. Ed. 823):

"The principle of the Comingor Case has never been departed from in this court. It establishes the right of an assignee for the benefit of creditors, to the extent that he asserts rights to expenses incurred and compensation earned under an assignment in good faith before the bankruptcy proceedings, to have the merits of his claim determined in a judicial proceeding suitable to that purpose, and not by summary proceedings where punishment for contempt is the means of enforcing the order. We see no occasion to depart from this practice."

Thus it seems to have been steadily held that the claims of an assignee for compensation or indemnity for expenses in matters antedating the filing of a petition in bankruptcy so far as they are not colorable cannot be disposed of in a summary proceeding. The amount which may...