In re Looschen Piano Case Co.

• Decision Date: 18 October 1919
• Citation: 261 F. 93
• Parties: In re LOOSCHEN PIANO CASE CO.
• Court: U.S. District Court — District of New Jersey

261 F. 93

In re LOOSCHEN PIANO CASE CO.

United States District Court, D. New Jersey.

October 18, 1919

Horton & Tilt, of Paterson, N.J., and George D. Hendrickson, of Jersey City, N.J., for trustee.

William B. Gourley, of Paterson, N.J., for respondents.

DAVIS District Judge.

For some time previous to 1901 Jared J. Looschen had been engaged in the manufacture of piano cases at Paterson, N.J. In June of that year he caused to be incorporated the Looschen Land &amp Building Company, and conveyed to it the real estate used in the manufacture of said cases, and at that time or later he conveyed other property to it. He took the stock issued by said company in payment for the said property, except qualifying shares held by other directors. On February 13 1903, he caused to be incorporated the Looschen Piano Case Company and conveyed to it the machinery equipment, and 'all the property he then owned, together with the good will of his business. ' He continued the business of manufacturing piano cases through these corporations until March 1, 1917, on which date an involuntary petition in bankruptcy was filed against the Looschen Piano Case Company. On the same day, upon its written consent, filed with the petition or shortly thereafter, the company was adjudicated a bankrupt, and on April 11, 1917, Thomas H. Milson was appointed trustee of the bankrupt estate. On petition of the trustee, filed May 1 1917, an order was made by the referee on April 12, 1918, extending the trusteeship in bankruptcy to the Looschen Land & Building Company, and directing the said land company to turn over and deliver to the said Thomas H. Milson, trustee as aforesaid, 'the entire assets and property belonging to the said Looschen Land & Building Company, together with all books of account, muniments of title, all capital stock and certificates thereof, and to execute any and all documents or instruments which may be necessary to vest the title to the property of said Looschen Land & Building Company in the said Thomas H. Milson, trustee as aforesaid. ' That order is before this court for review.

On the return day of the rule to show cause why the trusteeship of Thomas H. Milson should not be extended to the land company, the 'land company and its stockholders appeared specially and objected to the power and jurisdiction of the referee to consider the matters raised on the motion,' or on the petition and rule to show cause, and filed an application to dismiss the petition and order to show cause. Testimony was taken and the referee denied the application, but the land company took no action regarding the order of the referee, in which he held that he had jurisdiction and refused to dismiss. The land company, upon being granted further time for such purpose, filed its answer, in which it answered the petition on the merits of the case and renewed its objection to the jurisdiction of the court.

The petitioner maintains that the referee did not have jurisdiction to hear and determine the matter adjudicated in said order, because the property held by the land company belongs to it, and none of it was ever owned by the piano company or conveyed by it to the land company. Therefore it maintains that there should have been a plenary suit to determine the ownership of property belonging to the land company in accordance with the provisions of section 23 of the Bankruptcy Act of July 1, 1898, c. 541, 30 Stat. 552 (Comp. St. Sec. 9607).

The trustee contends that, since the petitioner took no steps to have the order in the jurisdictional question reviewed within 10 days, in accordance with the rules of this court, it has become final and is conclusive against it. He further contends that the petitioner could not subsequently review its objection to the jurisdiction by joining it with the defense upon the merits of the case in the answer. In re Kornit Mfg. Co. (D.C.) 192 F. 392, 395. But the land company 'having at the outset unequivocally objected to the referee's jurisdiction, and never having expressly waived it, and the order under review being the first made by the referee determining the ownership of said accounts, the jurisdictional question is still alive. ' When the answer to the merits is not interposed until after the objection to the jurisdiction is overruled, pleading to the merits is not a waiver of the objections. In re Gottlieb & Co. (D.C.) 245 F. 139, 145, and the cases there cited. The case will therefore be considered on its merits.

In cases in which third parties hold property which the trustee believes belongs to the bankrupt and is a part of his estate in bankruptcy, great care should be exercised, for it is a serious matter to adjudge by summary process that the property claimed by one person belongs to the estate in bankruptcy of another, and therefore must be surrendered to his trustee. At the same time it should be borne in mind that the interest of creditors must not be sacrificed by long and useless litigation. The bankruptcy court is clothed with power 'to cause the estate of bankrupts to be collected reduced to money, and distributed, and determine...