In re Meter Maid Industries, Inc.

• Decision Date: 16 June 1972
• Docket Number: No. 72-1144 Summary Calendar.,72-1144 Summary Calendar.
• Citation: 462 F.2d 436
• Parties: In the Matter of METER MAID INDUSTRIES, INC., Bankrupt Debtor. B & G LIMITED, Appellant, v. Edward H. LEVIN, Trustee, Appellee.
• Court: U.S. Court of Appeals — Fifth Circuit

462 F.2d 436 (1972)

In the Matter of METER MAID INDUSTRIES, INC., Bankrupt Debtor.

B & G LIMITED, Appellant, v. Edward H. LEVIN, Trustee, Appellee.

No. 72-1144 Summary Calendar.^*

United States Court of Appeals, Fifth Circuit.

June 16, 1972.

Robert R. Frank, Frank, Strelkow & Marx, Miami Beach, Fla., for appellant.

John L. Britton, Robert W. Rust, U. S. Attys., Miami, Fla., Scott P. Crampton, Asst. Atty. Gen., Tax. Div., Dept. of Justice, Meyer Rothwacks, Crombie J. D. Garrett, Charles E. Anderson, Attys., Tax Division, Department of Justice, Washington, D. C., for appellee.

Before WISDOM, GODBOLD and RONEY, Circuit Judges.

GODBOLD, Circuit Judge:

B & G Limited petitioned the referee in bankruptcy for reclamation of shares of capital stock and other papers from Edward H. Levin, trustee for the bankrupt Meter Maid Industries, Inc. On August 5, 1971 the referee entered an order granting the reclamation and directing that Levin turn over the property in issue to B & G within ten days. On August 10 the Internal Revenue Service served a notice of levy on the trustee advising him in effect that property in his possession owing to Stuart Greenfield, the sole shareholder of B & G Limited, or his wife, must be delivered to the IRS in satisfaction of taxes owed by the Greenfields. In a quandary about the proper party to whom he should deliver the reclaimed property, Levin returned to the referee on August 26 with a petition for instructions. The referee modified his earlier order so as to require Levin to turn over to IRS all of Greenfield's property in his possession. The District Court affirmed the referee's order and dismissed the petition for review, and B & G appeals. We affirm.

B & G contends that the property is not subject to levy of the IRS because in custodia legis. The doctrine of custodia legis refers to the power of the bankruptcy court to assume complete control over the assets of a bankrupt estate and to prevent any action that would tend to embarrass the court in the equitable distribution of the estate. 1 Collier on Bankruptcy, ¶ 2.06 (14th ed. 1971). Property in custodia legis is not attachable because of "the desirability of avoiding a clash between judicial jurisdictions which would result from any attempt to use the process of one to seize assets in the control of another judicial authority. Such collisions are especially pronounced where the judicial departments belong to different sovereignties, as in the case of garnishment process issuing out of a state court to attach property in the hands of a receiver of the federal Bankruptcy Court." In re Quakertown Shopping Center, Inc., 366 F.2d 95, 97-98 (3d Cir. 1966). Accordingly, it follows that when authority for the law's custody and for the Internal Revenue's levy derive from the same source, with no potential clash between jurisdictions, the doctrine against attachment does not prevail.

In Quakertown the IRS served notice of levy against the receiver in a Chapter XI bankruptcy to attach property owing to a claimant of the debtor, and the claimant-taxpayer objected. After determining that the power to levy is conferred on the IRS by § 6331 of the Internal Revenue Code and is a summary administrative remedy of self-help designed to provide a prompt and convenient method for satisfying delinquent tax claims, the court concluded:

The United States here was simply exercising its right of self-help expressly granted to it by the same authority which created the Bankruptcy Court and authorized Chapter XI proceedings. . . . The present case is not one in which there is a judicial attachment issuing out of some other court, seeking to seize property in the possession of the Bankruptcy Court. None of the evils of collision between the judicial process of one court and another court\'s authority over the funds can arise here.

Id. at 97-98. Consequently it held the levy valid and enforceable. We perceive no distinction between Quakertown and the case at hand and therefore find the doctrine of custodia legis inapplicable as a bar to the levy.

Relying on § 39(c) of the Bankruptcy Act, 11 U.S.C. § 67(c), B & G maintains alternatively that pursuant to the referee's August 5 order it is entitled to possession of the papers held by the trustee because the referee lacked jurisdiction to enter a further order regarding that property. Section 39(c) provides that an order of a referee shall become final after ten days unless a person aggrieved by it shall petition for review within the ten day period or any extension thereof. We have found § 39(c) "clearly inelastic in its command that some paper (either a petition for review itself or a petition to extend the filing time for a petition for review) be filed within ten days of the issuance of the order complained of." St. Regis Paper Co. v. Jackson, 369 F.2d 136, 139 (5th Cir. 1966). Since no qualifying paper was timely filed, B & G's argument runs, the referee's August 5 order became final and his later order concerning the same subject matter was a nullity for lack of jurisdictional authority. Two courts have agreed with appellant's position. See In re Beverly Hills Security Investments, 233 F.Supp. 737 (D.Ariz.1964); In re P.R.R.R. & Transport Co., 201 F. Supp. 44 (D.P.R.1962).

We do not quibble with our previously expressed view of the unyielding nature of the ten-day limit imposed by § 39(c), but we would have to strain beyond our powers to hear any clarion call for the statute's applicability in this situation. Section 39(c) speaks of time limits for review "by a judge" for purposes of determining when a referee's order is final and such review thus precluded. Apart from review by a judge,...