In re Lighthall

• Decision Date: 29 March 1915
• Docket Number: 347.
• Parties: In re LIGHTHALL.
• Court: U.S. District Court — Northern District of New York

221 F. 791

In re LIGHTHALL.

No. 347.

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

March 29, 1915

This is an application by Mary J. Lighthall, as administratrix of the estate of John H. Lighthall, the above-named bankrupt, in her own behalf and that of her coadministratrix, for an order of this court vacating an order heretofore made opening the estate of the above-named bankrupt, on the ground it had not been fully administered, and also directing Harry P Pendrick, the trustee of the estate in bankruptcy of said John H. Lighthall, to pay over to said administratrices the sum of $349.25 which came to the hands of the said trustee on or about February 15, 1915, on the ground, principally, that the estate of the bankrupt had been fully administered, and that the said sum of $349.25 was 'after-acquired property'; that is, property acquired by the bankrupt after he was adjudicated a bankrupt.

Rockwood & McKelvey, of Saratoga Springs, N.Y., for petitioners.

Corliss Sheldon, of Saratoga Spring, N.Y., for trustee in bankruptcy.

RAY District Judge (after stating the facts as above).

On or about the 9th day of January, 1901, John H. Lighthall filed his voluntary petition in bankruptcy in this court, and such proceedings were had that he was adjudicated a bankrupt and said Harry P. Pendrick was duly appointed and qualified as trustee of his estate in bankruptcy.

In the schedules filed by such bankrupt there was set forth and stated as an asset of the estate a claim of $1,187 held and owned by said John H. Lighthall against one Moses C. Smith who had then made an assignment for the benefit of his creditors to one John H. Hall. The assignee of Lighthall had paid on this claim a dividend of 50 per cent. At the time said Lighthall was so adjudicated a bankrupt, said Moses C Smith was the owner of a one-fourth interest in a life insurance policy of $5,000 on the life of one frederick M. Smith. It was due and payable on the death of said Frederick M. Smith, and, of course, would lapse if the premiums were not paid, and was subject to cancellation in certain contingencies. At that time it was of not much cash value, if of any value. How long premiums would have to be paid was not known.

The trustee in bankruptcy of Lighthall did not sell said claim, or make any disposition thereof. The assignee of Moses C. Smith, who owed Lighthall, made no disposition of such policy, but continued to hold same. About July 3, 1903, the estate of said Lighthall in bankruptcy was closed and the accounts of the trustee settled, and he was discharged. No order was made transferring the claim against Moses C. Smith bank to the bankrupt, Lighthall, or disposing of it in any way. Thereafter, and on or about the 4th day of October, 1906, said John H. Lighthall, the bankrupt, died intestate, and the said Mary J. Lighthall, his widow, and one Lillian E. Roach, were duly appointed administratrices of his estate. Payments on the said policy of insurance were kept up and it remained in force. Said Frederick M. Smith, on whose life said policy of insurance was issued, died in the year 1913, and said one-fourth interest therein so owned by said Moses C. Smith was paid to said John H. Hall as assignee of said Moses C. Smith, who was so indebted to said Lighthall and to his trustee in bankruptcy on his appointment as such.

February 2, 1915, on petition of B. J. Murray, a creditor of said John H. Lighthall, existing at the time of said adjudication and who presented his claim, but was not paid, the District Judge of the Northern District of New York, where said bankruptcy proceedings were had, made an order reopening the said bankruptcy proceedings, on the ground said estate in bankruptcy had not been fully administered. February 15, 1915, the County Court of the County of Herkimer, N. Y., having jurisdiction of the estate of Moses C. Smith and of his assignee, Hall, made an order and decree directing said assignee to pay to said Harry P. Pendrick, as trustee in bankruptcy of said John H. Lighthall, said trustee having given a new bond, the said sum of $349.25, the dividend on said claim of said John H. Lighthall on the settlement of the accounts of said assignee of Moses C. Smith, and which dividend was made possible by the death of said Frederick M. Smith and the payment of said policy of life insurance, and pursuant to said order or decree said sum or dividend was paid to said trustee in bankruptcy accordingly. The said administratrices of the estate of said John H. Lighthall claim said money, and move to have the order reopening the estate in bankruptcy of John H. Lighthall revoked or set aside, and the trustee directed to pay such money to them.

The contention is that such estate in bankruptcy had been fully administered, as the claim against Moses C. Smith was of no value when the estate was closed, as stated, and that the interest in such fund paid on the policy of insurance and derived in the manner and through the channels mentioned was and is after-acquired property-- that is, property acquired by Lighthall, or his estate, subsequent to the time he was adjudicated a bankrupt-- and that it goes, not to his trustee in bankruptcy, but to the administratrices of his estate for distribution to his widow and next of kin entitled thereto, if any, after payment of creditors whose claims came into being after Lighthall filed his petition in bankruptcy.

It should be stated that Lighthall was discharged in bankruptcy, but this did not release his estate, which existed and passed to his trustee in bankruptcy, from liability to pay the proved and allowed debts existing prior to the filing of the petition in bankruptcy. The closing of the estate in bankruptcy did not operate to transfer the title of unadministered assets, the title to which had vested by operation of law in the trustee, back to the bankrupt. If such were the effect of closing the estate of a bankrupt, it would be of no avail to reopen the estate when not fully administered. If title to property vested in the trustee is divested by closing the estate before it is fully administered, there would be nothing to administer after the reopening, and reopening the estate would be of no avail to creditors who existed prior to adjudication and who duly proved their claims.

Subdivision 8 of section 2 of the Bankruptcy Act vests the bankruptcy court with...