In re Cox-Rackley Co.

245 F. 367, 1917 U.S. Dist. LEXIS 975
CourtDistrict Court, E.D. North Carolina
DecidedAugust 21, 1917
StatusPublished
Cited by1 cases

This text of 245 F. 367 (In re Cox-Rackley Co.) is published on Counsel Stack Legal Research, covering District Court, E.D. North Carolina primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
In re Cox-Rackley Co., 245 F. 367, 1917 U.S. Dist. LEXIS 975 (E.D.N.C. 1917).

Opinion

CONNOR, District Judge.

The referee’s certificate discloses the following case:

Prior to February 12, 1917, respondent Plomer Brock recovered a judgment for the sum of $28.90 against Cox-Rackley Company. Respondents Langston, Allen & Taylor, attorneys at law, representing certain nonresident creditors, on or about the same date, recovered several judgments against said Cox-Rackley Company, aggregating the sum of $1,428.74. Executions were issued upon all of said judgments, returnable to the superior court of Wayne county, and placed in the hands of respondent D. G. Rhodes, deputy sheriff of said county, who immediately levied upon the stock of goods of Cox-Rackley Company, located in the town of Mt. Olive, in said county, being the place at which said corporation was engaged in conducting a general merchandise business. He advertised the goods for sale pursuant to the terms of the executions, to take place February 26, 1917.

On February 23, 1917, certain creditors of Cox-Rackley Company filed, in the office of the clerk of this court, at Raleigh, a petition in involuntary bankruptcy against said corporation, alleging insolvency and the recovery of said judgments and levy of the executions thereupon as acts of bankruptcy. A subpoena was duly issued, and, together [368]*368with a copy of. the petition, delivered to the United States marshal, returnable March 10, 1917. It appears that the deputy marshal, to whom the subpoena and petition were delivered for service, was unable to find either of the officers of the corporation until some day subsequent to February 26, 1917. No injunction, or other order, was asked for, or issued, restraining the sale of the goods, nor was any application made for the appointment of a receiver. On February 26, 1917, the deputy marshal went to Mt. Olive, and, before the sale took place, as advertised, under the executions, delivered a copy thereof to respondent D. G. Rhodes, who, pursuant to the advice of his attorney, proceeded to sell the goods and delivered them to the purchaser. He immediately paid the amount received from the purchaser, $4,800, into the office of the clerk of the superior court of Wayne county, as directed by the terms of the writs of execution in his hands, and made due return of his action in the premises, receiving from the clerk a check for $47.41, the amount of his cost and commissions. The clerk gave to respondent Homer Brock his check for $28, the amount due on the judgment recovered by him against the corporation. He gave to respondents Langston, Allen & Taylor, attorneys, a check' for the amount due on the judgment recovered by them for their clients. Fie gave to J. R. Hood, attorney for the Cox-Rackley Company, a check for $3,294.95, being the balance remaining in his hands. This amount was later paid to the trustee, and is not involved in this controversy.

The referee does not find, nor is there evidence sufficient to fix the the clerk with, notice of the filing of the petition in bankruptcy. There was some conversation in his office between the attorneys in regard to the matter, but nothing was said to the clerk calculated to put him upon notice; he proceeded in strict accordance with his official duty.

Respondents Langston, Allen & Taylor collected the check given to them by the clerk and held the proceeds about a week, during which time no demand was made on them to retain tire money, nor was any action taken towards securing an injunction or receiver. They deducted commissions and remitted the amounts due their several clients. .The referee finds that respondents Langston, Allen & Taylor and Mr. Dannenberg and D. G. Rhodes had actual knowledge that an involuntary petition in bankruptcy had been filed against Cox-Rackley Company before the sale of the goods. The knowledge of Rhodes appears to be based upon the delivery to him by the deputy marshal of the subpoena and the petition. He further finds that respondents Langston, Allen & Taylor and Dannenberg, attorneys and agents of the creditors, other than Brock, had reasonable cause to believe that Cox-Rackley Company was insolvent before the judgments were obtained, or suits were brought against said corporation. There is no evidence, or finding by the referee, in regard to knowledge or reasonable cause to believe on the part of respondent Homer Brock respecting the insolvency of Cox-Rackley Company.

On March 10, 1917, Cox-Rackley Company was adjudged bankrupt, and W. A. Dees duly elected and qualified as trustee. On April 3, 1917, he filed his petition before the referee, setting out substantially the [369]*369foregoing facts, asking that notice issue to respondents to show cause why they should not be ordered to—

“pay over and deliver the funds and assets of the estate of said Cox-Ttaekley Company, which came into their possession, or under their control, as above set forth, and for an order requiring and admonishing the judgment creditors hereinbefore mentioned and each of them, to show cause, if any they have or know, and each of them, respectively, why they should not pay over and deliver to W. A. Dees, trustee, the amount of funds and assets of the said bankrupt turned over to them on account of their respective judgments hereinbefore mentioned.”

The referee issued notice to respondents Langston, Allen & Taylor, D. G. Rhodes, and Homer Brock, returnable on April 14, 1917, when they appeared and challenged the jurisdiction of the referee to make any order or render any judgment in a summary proceeding against them. After hearing the evidence and argument, the referee found the facts as certified, and found as a conclusion of law:

“That respondents are not guilty of any contempt and that this proceeding is not the proper remedy.”

The trustee filed his petition for review in accordance with the provisions of the statute, general orders, etc. The proceeding, so far as it relates to the creditors, who received, and so far as appears retain, the proceeds of the sale, other than Homer Brock, appears to have been abandoned. The question presented upon the record, and argued by counsel, is directed to the jurisdiction or power of the court, by the summary method adopted by the trustee, to compel respondents, or either of them, to pay over the proceeds of the sale of the goods which came into, and before the filing of this petition passed out of, their possession and control.

It is conceded that respondents D. G. Rhodes and Langston, Allen & Taylor did not have in their possession, or under their control, any property or money, or anything representing property or money, of the bankrupt, on March 10, 1917, the date of the adjudication, nor on April 3, 1917, the day upon which this proceeding was instituted. Neither the bankrupt, nor this court, nor either of its officers, had in their possession, or under their control, at the date of the filing of the petition in bankruptcy, nor subsequent thereto, any goods, property, or money, the proceeds of the sale of, or representing, any such property at the time of, or subsequent to, the filing of the petition. This fact is not determinative of the rights or remedies of the trustee, but it is essential that it be kept in view for the purpose of discussing the question of procedure. The respondent D. G. Rhodes, in strict obedience to the terms of the writs of execution issued from the state court having jurisdiction in the premises had, prior to the filing of the petition in bankruptcy, levied upon and taken into his possession the property of the defendant.

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Bluebook (online)
245 F. 367, 1917 U.S. Dist. LEXIS 975, Counsel Stack Legal Research, https://law.counselstack.com/opinion/in-re-cox-rackley-co-nced-1917.