Rottenberg v. United States, 241.

• Decision Date: 24 March 1944
• Docket Number: No. 241.,241.
• Parties: ROTTENBERG et al. v. UNITED STATES.
• Court: U.S. Court of Appeals — Second Circuit

142 F.2d 151 (1944)

ROTTENBERG et al. v. UNITED STATES.

No. 241.

Circuit Court of Appeals, Second Circuit.

March 24, 1944.

Lloyd B. Kanter, of Brooklyn, N. Y. (Lewis, Marks & Kanter and Thomas F. Kiely, all of Brooklyn, N. Y., of counsel), for appellants.

Homer R. Miller, of Washington, D. C. (Samuel O. Clark, Jr., Asst. Atty. Gen., Sewall Key and A. F. Prescott, Sp. Assts. to the Atty. Gen., Harold Kennedy, U. S. Atty., and Vine H. Smith and Nathan Borock, Asst. U. S. Attys., all of Brooklyn, N. Y., on the brief), for appellee.

Before L. HAND, SWAN, and AUGUSTUS N. HAND, Circuit Judges.

L. HAND, Circuit Judge.

Rottenberg, Cohen and Semel, as assignees of Hugh W. Murphy, Inc., a judgment creditor of the Fairbank Realty Corp., appeal from an order of the district court which denied a motion — made pursuant to § 806 of the New York Civil Practice Act — to extend to the judgment of a state court, an already existing receivership in a proceeding supplementary to execution. The facts were as follows. On January 9, 1939, Hugh W. Murphy, Inc., obtained a judgment of nearly $90,000 against a corporation, known as the Fairbank Realty Corporation, in the Supreme Court of the State of New York. The papers do not show that execution was taken out and returned unsatisfied upon this judgment, but that is to be inferred, for on May 31, and June 6th, the Murphy company began a proceeding supplementary to execution by issuing subpoenas out of the Supreme Court, for the examination of Rottenberg and Cohen, who were officers of the judgment debtor. Their testimony was taken, and on June 19, 1939, upon application of the Murphy company, the Supreme Court appointed one, Klages, receiver in the proceeding; and in 1940 Klages sued Rottenberg, Cohen and Semel, for waste, mismanagement and diversion of the judgment debtor's assets. On July 6, 1942, Rottenberg, Cohen and Semel purchased the Murphy judgment for $15,000, and shortly thereafter they procured a discontinuance of the receiver's action against them, and on September 1, 1942 the discharge of the receiver. Meanwhile, on July 17, 1940, the Collector of Internal Revenue served a notice of a tax levy upon Klages, as receiver, covering all the property of the Fairbank Realty Corporation, in the sum of somewhat over $41,000. On September 16, 1942, the United States took judgment for the taxes against the Fairbank Realty Corporation, in the District Court for the Eastern District of New York, and on January 29, 1943, it began in that court a proceeding supplementary to execution, and secured the appointment of Klages as receiver for the second time of the assets of the judgment debtor. Thereupon, on February 10, 1943, Rottenberg, Cohen and Semel moved in the federal court for an order extending this receivership to the Murphy judgment. The judge denied this motion on the ground that Rule 69(a) of the Rules of Federal Procedure, 28 U.S.C.A. following section 723c, gives no jurisdiction to a federal court in supplementary proceedings over judgments of a state court, which have not been reduced to judgment in a federal court. This appeal is from that order.

We do not find it necessary to decide whether Rottenberg, Cohen and Semel were obliged to reduce their state judgment to judgment in a federal court as a condition of extending the receivership to their judgment under § 806 of the New York Civil Practice Act. In Globe Indemnity Co. v. Roe, D.C., 37 F.Supp. 761, the judgment was that of a New Jersey court, and that made a very different situation; in Young v. Aronson, D. C., 27 F. 241, the order which Judge Brown denied would have subjected the receiver to the orders of two courts. For argument we shall assume that no federal judgment was necessary; and this we may do, because in any event Rule 69(a) incorporates the state practice as a whole, under which, as assignees of the Murphy judgment, Rottenberg, Cohen and Semel had no standing to procure an extension of the receivership. Section 802(1) of the Civil Practice Act provides that a proceeding supplementary to execution "shall be deemed closed two years from the service of the order, subpœna or warrant whereby the proceeding is instituted unless the court shall make an order extending the proceeding for a definite time." In the case at bar the state court made no such order; and, if the letter of the statute controls, the proceeding of the Murphy company was "closed" before July 1, 1941, for it had been "instituted" before the end of June, 1939. The appellants argue that Herlihy v. Watkins, 252 App.Div. 605, 300 N. Y.S. 242, decided the contrary; but we do not agree. In that case the first judgment creditor, Herlihy, served Watkins, the judgment debtor, on December 22, 1930, but did not secure any receiver until September 1, 1936, nearly six years later. The second judgment creditor, a corporation, began a supplementary proceeding on June 27, 1936, and moved for its own receiver in October, 1936. Watkins, the judgment debtor, raised the point at that time that there was already one receiver, and the court therefore merely extended that receivership to the second judgment. The second judgment creditor at some earlier time had...