In re Lilyknit Silk Underwear Co.
| Decision Date | 31 August 1934 |
| Docket Number | No. 359.,359. |
| Citation | 73 F.2d 52 |
| Parties | In re LILYKNIT SILK UNDERWEAR CO., Inc. FULTON COUNTY SILK MILLS et al. v. IRVING TRUST CO. |
| Court | U.S. Court of Appeals — Second Circuit |
Weil, Gotshal & Manges, of New York City (Eli M. Spark, of New York City, of counsel), for appellants.
Hahn, Abeson & Golin, of New York City (Julius J. Abeson, of New York City, of counsel), for trustee.
Before MANTON, SWAN, and CHASE, Circuit Judges.
After an involuntary petition in bankruptcy had been filed in the Southern District of New York against Lilyknit Silk Underwear Company, Inc., the corporation, before adjudication, made an offer in composition that was accepted by a majority of its creditors in number and amount. A minority of the creditors objected. A reference to a special master resulted in a report recommending confirmation of the composition offer which was duly confirmed by the District Court. That order was reversed in this court on appeal. See In re Lilyknit Silk Underwear Co., 64 F.(2d) 404.
The order of confirmation, made September 9, 1932, directed payment to creditors within ten days of composition dividends of 17½ per cent. of their claims in cash, and two notes each of 5 per cent. This was done as ordered, and most of the creditors accepted the dividends. The appellees, however, refused them, and the appeal from the order of confirmation was taken October 4, 1932. No effort was made by the objecting creditors to obtain a stay of the order directing the payment of the dividends in composition pending the appeal. These payments were made in part with funds advanced by a third party, but the remainder came from the bankrupt's estate.
It is now claimed that because the creditors receiving the dividends, or at least a representative number of them, were not made parties to the former appeal, the effect of the final decree therein is not binding upon them. This court held in Re Gottlieb, 262 F. 730, that such creditors need not be made parties. In so far as that decision may be in conflict with Field & Co. v. Wolf (C. C. A.) 120 F. 815, we are committed to our former position, as appears from having already entertained the appeal in this matter without the joinder of such creditors as parties. In re Lilyknit Silk Underwear Co., supra.
Nor is the fact that objecting creditors failed to apply for a stay of the order providing for the payment of composition dividends pending the former appeal of moment now. They might have done so and, if they had, might have secured one. But no one knows whether they would have obtained one or not. Compare Haebler v. Myers, 132 N. Y. 363, 30 N. E. 963, 15 L. R. A. 588, 28 Am. St. Rep. 589. While it would have been a wise course to do that, it was wholly unnecessary so far as their right to appeal was concerned. Moreover, the creditors who accepted the dividends were bound to know that those who objected had the right to and might appeal within the time allowed, and they could not assume that such an appeal, if taken, would be fruitless. Besides that, the trustee in bankruptcy is the petitioner here. It acts for all the creditors. It is entitled to have its rights as trustee enforced, and those rights cannot be affected by the failure of objecting creditors to try to have the payments stayed.
So the bald question of whether or not a trustee in bankruptcy may recover the assets of the bankrupt's estate which have been used to pay dividends under a composition order which has been reversed is squarely before us. So far as we have been able to discover there has hitherto been no decision on this precise point. No provision in the Bankruptcy Act (11 USCA) and no General Order (see 11 USCA § 53) expressly covers it.
It has been held that, where a composition has been set aside under section 13 of the Bankruptcy Act (11 USCA § 31), payments in composition already received by creditors need not be returned. In re Roukous (D. C.) 128 F. 645; Ex parte Hamlin, Fed. Cas. No. 5,993. This has been so held on the theory that, as creditors have all been paid pro rata, none is...
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Pepper v. Litton
... ... which have been used to pay dividends under a composition order later reversed; In re Lilyknit Silk Underwear Co., Inc., 2 Cir., 73 F.2d 52. And even though the act provides that claims shall ... ...
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Braunstein v. McCabe
...... take the place and are vested with the powers of assignees in bankruptcy under former bankrupt acts."). 15. In In re Lilyknit Silk Underwear Co., 73 F.2d 52 (2d Cir.1934), cited in Pepper, the Second Circuit had held that a trustee could recover funds that had been paid out as dividends......
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United Properties Inc. v. Emporium Department Stores, Inc.
...court would proceed with the distribution even though an appeal was pending. In so doing, the Referee relied on In re Lilyknit Silk Underwear Co., Inc., 73 F.2d 52 (2d Cir. 1934). The Referee "* * * if the confirmation is reversed by a higher Court, it will be the trustee\'s duty, if there ......
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LiButti v. U.S.
...a stay pending appeal does not preclude the possibility of it obtaining restitution. See Fulton County Silk Mills v. Irving Trust Co. (In re Lilyknit Silk Underwear Co.), 73 F.2d 52, 53 (2d Cir.1934). Although a court deciding whether to award restitution may consider failure to seek a stay......
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Remedies for Wrongfully-issued Preliminary Injunctions: the Case for Disgorgement of Profits
...v. United States, 178 F.3d 114, 121 (2d Cir. 1999), and Fulton County Silk Mills v. Irving Trust Co. (In re Lilyknit Silk Underwear Co.), 73 F.2d 52, 53 (2d Cir. 127. As explained above, the court's decision whether to issue a preliminary injunction should be based on an assessment of the "......