IN RE UNITED GENERAL WOOD PRODUCTS CORPORATION
| Decision Date | 17 August 1973 |
| Docket Number | No. 71-1451.,71-1451. |
| Citation | 483 F.2d 975 |
| Parties | In the Matter of UNITED GENERAL WOOD PRODUCTS CORPORATION, a California corporation. Richard R. CLEMENTS, Trustee-Appellant, v. The INTERNAL REVENUE SERVICE, Defendant-Appellee. |
| Court | U.S. Court of Appeals — Ninth Circuit |
Lawrence A. Diamant (argued), Herbert Wolas of Robinson & Wolas, Los Angeles, Cal., for trustee-appellant.
Karl Schmeidler (argued), Johnnie M. Walters, Asst. Atty. Gen., Tax Div., Dept. of Justice, Washington, D. C., Robert L. Meyer, U. S. Atty., Charles H. Magnuson, Lawrence V. Brooks, Asst. U. S. Attys., Los Angeles, Cal., Meyer T. Rothwacks, Crombie J. D. Garrett, Tax Div., Dept. of Justice, Washington, D. C., for defendant-appellee.
Before ELY and HUFSTEDLER, Circuit Judges, and TURRENTINE, District Judge.*
The only issue on appeal is whether the district court, 320 F.Supp. 322, correctly held that the bankruptcy court could not exercise summary jurisdiction to adjudicate the conflicting claims of the Government and the trustee to a fund derived from the debtor's accounts receivable. We hold that the debtor constructively possessed the fund when it filed its bankruptcy petition and thus that the bankruptcy court had summary jurisdiction.
United General Wood Products Corporation, the debtor, factored its accounts with Trans-West Factors ("Trans-West"). In June 1969, it recorded a financing statement evidencing Kalof Aluminum Company's ("Kalof") security interest in the accounts. Two months later the debtor authorized Trans-West to pay Kalof the proceeds of the receivables. In October 1969, when the balance of the proceeds was $2303.28, the Government, to whom the debtor owed taxes, served notice of levy on Trans-West. The debtor filed its voluntary bankruptcy petition on December 12, 1969. The trustee instituted a turnover proceeding to recover the fund. Over the Government's protest, the referee exercised summary jurisdiction and, after a hearing, held that the Government's interest in the fund was subordinate to the trustee's. Kalof did not protest the proceedings. Trans-West at all times was solely a stakeholder. The district court did not reach the merits because it decided that the referee erred in asserting summary jurisdiction.
The bankruptcy court had summary jurisdiction if United General had constructive possession of the fund when it filed its bankruptcy petition. (Thompson v. Magnolia Petroleum Co. (1940) 309 U.S. 478, 60 S.Ct. 628, 84 L.Ed. 876; see Engelbrecht v. Wildman (9th Cir. 1959) 268 F.2d 133, 134.) Constructive possession "exists where the property was in the physical possession of the debtor at the time of the filing of the petition in bankruptcy, but was not delivered by him to the trustee; where the property was delivered to the trustee, but was thereafter wrongfully withdrawn from his custody; where the property is in the hands of the bankrupt's agent or bailee; where the property is held by some other person who makes no claim to it; and where the property is held by one who makes a claim, but the claim is colorable only."
The case falls squarely within the italicized language of Taubel, because Trans-West, which had actual possession of the fund when the debtor filed its petition, made no claim whatever to the fund.1 Accordingly, the bankruptcy court had summary jurisdiction to adjudicate the conflicting claims to the fund. (Accord, 2 Collier, Bankruptcy 505 (14th ed. 1972).)
The Government's contentions to the contrary are that the debtor's constructive possession was destroyed either by its assignment to Kalof or by the Government's notice of levy. Neither argument is sound. For jurisdictional purposes, a debtor constructively possesses an asset in which he has any colorable interest when the person in actual possession does not himself assert any interest in it. Claims of third persons to the same asset are irrelevant to the jurisdictional issue.
The Government attempts to escape the impact of Taubel by creating its own fiction that either the assignment to Kalof or its notice of levy transferred the debtor's interest to those creditors. No actual transfer ever took place. We are bound by Taubel, ...
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U.S. v. Whiting Pools, Inc., 441
...bankruptcy such a holder is not subject to summary jurisdiction. It disagreed with the Ninth Circuit's decision in In re General Wood Products Corp., 483 F.2d 975 (1973), that an assignee's disclaimer of interest brought similarly seized property within the summary jurisdiction of the bankr......
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Phelps v. United States 8212 121
...We respectfully decline to follow the contrary holding (of the Court of Appeals for the Ninth Circuit) in In re United General Wood Products Corp., 483 F.2d 975 (9th Cir. 1973).' 495 F.2d, at 1285—1286. We granted certiorari to resolve the conflict between the Courts of Appeals, 419 U.S. 10......
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In re Chicagoland Ideel Cleaners, Inc.
...to have its claim adjudicated in a plenary suit. We respectfully decline to follow the contrary holding in In re United General Wood Products Corp., 483 F.2d 975 (9th Cir. 1973). The district court's order approving the turnover order is 1 The demands had to be made within 60 days of the as......
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...party for security purposes does not necessarily deprive the Bankruptcy Court of constructive possession. In re United General Wood Products, 483 F.2d 975, 976 (9th Cir. 1973). It is only "where there has been an outright and complete assignment of the chose in action to a third party prior......