In re Seger Bros. Co.

• Decision Date: 13 June 1917
• Docket Number: 3558.
• Citation: 243 F. 459
• Parties: In re SEGER BROS. CO.
• Court: U.S. District Court — Eastern District of Michigan

243 F. 459

In re SEGER BROS. CO.

No. 3558.

United States District Court, E.D. Michigan, Southern Division.

June 13, 1917

Selling & Brand, of Detroit, Mich., for trustee.

Welsh De Foe & Kahn, of Detroit, Mich., and Frank A. Stivers, of Ann Arbor, Mich., for respondent.

TUTTLE District Judge.

This is a petition by the trustee of said bankrupt seeking to have determined by this court certain conflicting claims to the ownership of a lease formerly held by said bankrupt as tenant. The sole question presented is whether this court has jurisdiction to determine herein the rights of the trustee and of the adverse claimant to such lease.

The petition of the trustee alleges that the bankrupt was, at the time of the filing of the petition in bankruptcy, the owner of the lease mentioned, covering a certain store occupied by the bankrupt in the city of Monroe, Mich.; that said bankrupt was in possession thereof until on or about February 23 1917, when one of the creditors of the bankrupt caused an execution to be levied upon certain of its property located in said store, and the sheriff of the county, in making the levy, closed said store, whereupon the bankrupt surrendered to said sheriff the keys thereof, so that said property could remain in said store undisturbed until the execution sale that, immediately upon the making of said levy, the involuntary petition was filed herein, and a receiver appointed, who forthwith took possession of said store demanding and receiving from said sheriff the keys thereof, and thereafter remaining in open and sole possession thereof until the appointment of said trustee, to whom he then surrendered possession of such store; that neither the receiver, the trustee, nor any one else having authority so to do, has ever surrendered possession of said premises or canceled said lease, or surrendered the right of said bankrupt, receiver, or trustee therein, but that said bankrupt, receiver, and trustee have asserted ownership thereof as an asset belonging to the bankrupt estate; that, pursuant to the bankruptcy law, the sale of all the assets of said bankrupt, including said lease, was advertised to be held at said store on May 4, 1917; that on May 2, 1917, the Monroe Building Company, the lessor of said lease, delivered to said receiver a notice, copy of which was attached to the petition, whereby said lessor claimed to be in possession of said store, and claimed that all rights of said bankrupt and its estate therein had ceased under said lease; that at said sale one Harold Hutchins, agent of Hutchins & Co., a corporation, announced that he held a lease from the said lessor of said store, executed after the filing of the petition in bankruptcy, and objected to the sale of said lease, expressly stating that he would resist any attempt on the part of the purchaser of the rights under said lease to remain in possession of said store, and that any person buying said lease was buying a lawsuit; that upon the election of said trustee, and prior to the sale of said property, certain witnesses were sworn by the referee in bankruptcy, and testified concerning the conflicting claims to said lease; that the secretary and treasurer of said Monroe Building Company testified that he claimed that all rights of the bankrupt and its estate under said lease had terminated by reason of a default in rent on February 20, 1917, at which time said store had been closed by a creditor of the bankrupt, and thereupon summary proceedings were commenced to recover possession thereof, which proceedings were afterwards abandoned; that said lessor attempted to charge said sheriff a larger rental than specified in said lease, which said sheriff refused to pay; that on March 1, 1917, after the filing of the petition in bankruptcy, the said lessor rendered said sheriff a bill for the amount of rental so demanded by it; that said lessor had not obtained the keys or possession of said premises; that no writing was executed by said bankrupt assigning, releasing, or canceling any rights in said lease; and that, as said lease contained a clause against assigning or subletting, said lessor claimed that all rights of said bankrupt in said lease had ceased, and that said lessor would commence ejectment proceedings against any purchaser thereof; that said sheriff, said receiver, and the president of the bankrupt testified that no surrender had been made by them, respectively, of possession of said premises to the lessor; that thereupon said lease was sold, together with the other assets of said bankrupt, on the condition that the trustee would at the expense of the estate defend the possession of the purchaser against the claims of said lessor and said Hutchins, and, if the trustee were unsuccessful therein, a refund would be made to the purchaser; that the trustee has been informed by said lessor and said Hutchins 'that, as soon as the purchaser takes possession of said store, ejectment or other proceedings will be commenced to oust him, thereby interfering with the proper administration of said estate, and jeopardizing the interests of the persons interested therein and of your petitioner as trustee, and constituting a cloud upon the title of your petitioner under said lease, and of your petitioner's said purchaser at said sale, and constituting an interference with the duties of your petitioner to reduce the assets to money for the benefit of the persons interested in said estate.'

The petition prayed that a hearing thereon be granted for the purpose of bringing in the persons claiming rights in said lease and determining in this cause their respective rights; that all claims that said lease had been canceled or surrendered be quieted by proper order of this court; and that the trustee and his purchaser be decreed to have a valid title thereto as against said lessor and those claiming under it; and that the latter be restrained from interfering with the possession of said premises to be given to said purchaser, and from taking any proceedings to regain possession thereof or to oust the trustee or his purchaser therefrom.

In the showing of respondents appearing specially in response to the order to show cause, respondents deny the jurisdiction of this court to determine in this cause and on this petition the conflicting rights to this lease, claiming that they are adverse claimants within the meaning of the Bankruptcy Act, and that this court is without jurisdiction to determine the issues raised by such petition, except in a plenary action, and even in such action not without consent of respondents. Respondents allege that in a proper suit they will introduce testimony tending to prove the facts set forth in the notice delivered by the said lessor to the said receiver hereinbefore referred to. Said notice alleged that said lessor claimed the right to possession of the said premises; that said lessor, prior to the filing of said petition in bankruptcy, commenced legal proceedings to recover possession of said premises, which proceedings resulted in a voluntary surrender of said premises to the said lessor by the said bankrupt, and prior to the filing of the said petition in bankruptcy, in consequence of which surrender said proceedings were discontinued, and the lessor entered into actual possession of the property; that after obtaining actual possession of said premises the rights of said lessor therein were exercised by it through the aforesaid sheriff, to whom said lessor rented the same for the purpose of storing goods seized by him on a writ of execution; that the actual possession of the said premises by said sheriff as tenant of said lessor continued until after the adjudication in bankruptcy, whereupon the aforesaid trustee, without the knowledge or consent of said lessor, took possession of the said premises from the said sheriff, and has continued in the possession of the same by virtue of the permission of the said lessor, such lessor having all the time since the adjudication asserted rights of possession in said premises, and having permitted the use of the same only on the understanding that the said trustee should pay therefor a reasonable rental for the use thereof; that since the date of abandonment of the aforesaid legal proceedings the said lessor had been at all times in actual and legal possession of the said premises.

In their brief, respondents refer to a judgment recovered by the said Monroe Building Company as of March 12, 1917, in an action for possession instituted by it against said bankrupt before the circuit court commissioner for said Monroe county, based on the ground that said bankrupt had violated a covenant in said lease against assignment without the lessor's consent by making an assignment for the benefit of creditors.

The jurisdiction of this court to grant the relief prayed in this proceeding is disputed, and it therefore becomes necessary to determine this question of jurisdiction before proceeding to a consideration of the merits of the case.

That the court may determine whether it possesses this jurisdiction is clear. Louisville Trust Co. v. Comingor, 184 U.S. 18, 22 Sup.Ct. 293, 46 L.Ed. 413; First National Bank of Chicago v. Chicago Title & Trust Co., 198 U.S. 280, 25 Sup.Ct. 693, 49 L.Ed. 1051; In re Rathman, 183 F. 913, 106 C.C.A. 253 (C.C.A. 8.).

As was said in the case first cited:

'In many cases jurisdiction may depend on the ascertainment of facts involving the merits, and in that sense the court exercises jurisdiction in disposing of the

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