In re Rubin

242 F. Supp. 408, 1965 U.S. Dist. LEXIS 6807
CourtDistrict Court, E.D. Pennsylvania
DecidedJune 14, 1965
DocketNo. 28768
StatusPublished
Cited by4 cases

This text of 242 F. Supp. 408 (In re Rubin) is published on Counsel Stack Legal Research, covering District Court, E.D. Pennsylvania primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
In re Rubin, 242 F. Supp. 408, 1965 U.S. Dist. LEXIS 6807 (E.D. Pa. 1965).

Opinion

DAVIS, District Judge.

The above, captioned debtor, Herman Rubin, filed a Petition for Arrangement under Chapter XI of the Bankruptcy Act on February 23, 1965. On that same day, this Court appointed Frank E. Gordon, Esquire, Receiver for the Debtor’s property. At the time of filing the Petition for Arrangement, the debtor was in the wholesale pastry business. The debtor would purchase pastries from various suppliers and resell these pastries to retail outlets through driver-salesmen. The debtor would purchase the pastries from the supplier at a discount and they would then be resold at retail prices by the driver-salesmen to established customers on established routes. Notice of the appointment of the Receiver was given to the driver-salesmen and to the suppliers of the debtor by the attorney for the creditor petitioning for the appointment. John Reber Baking Corp., a creditor-supplier and the driver-salesmen also had notice of the appointment of the Receiver in that the driver-salesmen and the general manager for John Reber Baking Corp. and its counsel were present before this Court in an informal hearing following the appointment. Thereafter, for approximately one week, the Receivers1 ran the debtor’s business by purchasing from John Reber Baking Corp. its daily supply of pastries and turning them over to the driver-salesmen who in turn [411]*411sold them to the retail customers on the established routes.

These business dealings were then terminated between John Reber Baking Corp. and the Receivers. Subsequently, the Receivers filed a Petition for a citation for contempt, wherein the Receivers alleged that John Reber Baking Corp. is selling directly to the driver-salesmen and circumventing the Receivers’ operation of the debtor’s business.

To the Receivers’ Petition for a contempt citation Motions to Dismiss by John Reber Baking Corp. and the driver-salesmen were heard by the Referee and granted on the ground that this Court lacks jurisdiction over the person of the defendants because of the lack of service of process of the Order appointing the Receiver and further that no property of the debtor was involved in the Petition.

It cannot be argued that established routes of a wholesale distributor with established retail customers are not property and therefore not an asset of the debtor’s estate. Indeed counsel for the respondents to this Certificate for Review admitted at oral argument that established routes were property, an intangible asset of any distributing business. Therefore when the Petition for Arrangement was filed with the debtor in possession of this business, constructive possession of this intangible property vested in this Court whether or not there was any dispute as to the ownership of this property (routes). Once having acquired possession, actual or constructive, there is a sufficient basis of jurisdiction in the bankruptcy court to determine the right to such property in a summary proceeding. Central Republic Bank & Trust Co. v. Caldwell, 58 F.2d 721 (8th Cir.1932).

This intangible property, the established routes of retail customers, is property in the constructive possession of the bankruptcy court. The Referee’s finding that no property of the debtor was involved in the petition for a contempt citation is rejected. Where property once in the custody of the bankruptcy court is removed, return of the property may be summarily ordered without a trial of title; that issue may be tried later when and if the alleged owner seeks to reclaim. White v. Schloerb, 178 U.S. 542, 20 S.Ct. 1007, 44 L.Ed. 1183 (1900). In re Rose Shoe Manufacturing Co., 168 F. 39 (2nd Cir.1909); Gamble v. Daniel, 39 F.2d 447 (8th Cir.1930); In re Smith, 18 F.2d 797 (W.D.Wash.1927).

The jurisdiction of the bankruptcy court to take summary action regarding the debtor’s property rests on possession, actual or constructive, of the property involved. Taubel-Scott-Kitzmiller Co. v. Fox, 264 U.S. 426, 44 S.Ct. 396, 68 L.Ed. 770 (1924). Once jurisdiction attaches, it is not lost by the fact that later on possession of the property passes to strangers without Order of the Court and while bankruptcy proceedings are still active. It is immaterial how the change of possession has come about, the jurisdiction continues and the Court has summary power to order return of the property. The filing of the bankruptcy petition has the effect of an attachment and injunction and the property is in custodia legis. Whitney v. Wenman, 198 U.S. 539, 25 S.Ct. 778, 49 L.Ed. 1157 (1905); Acme Harvester Co. v. Beekman Lumber Co., 222 U.S. 300, 32 S.Ct. 96, 56 L.Ed. 208 (1911).

Under Section 311 of the Bankruptcy Act, 11 U.S.C.A. § 711, the Court in which the Chapter XI Petition is filed has exclusive jurisdiction of the debtor and his property, wherever located. It follows therefore, that the filing of the Petition is a caveat to all the world that the petition is in effect an attachment and an injunction and that the possession of the debtor’s property has become vested in the bankruptcy court. Mueller v. Nugent, 184 U.S. 1, 22 S.Ct. 269, 46 L.Ed. 405 (1902); Clay v. Waters, 178 F. 385 (8th Cir.1910); In re Mitchell, 278 F. 707 (2nd Cir.1922).

The Order appointing a Receiver contained an ex parte Order enjoining and restraining all persons from inter[412]*412fering with the property of the debtor which was then in the actual or constructive possession of the Receiver. This Order of Injunction was not only in personam but also operated in rem to prevent interference with or the invasion of the property rights of the debtor. It was broad enough in its terms to enjoin all persons from interfering with the property in custodia legis and was sufficient as a public record to impart constructive notice to all. Converse v. Highway Construction Co. of Ohio, 107 F.2d 127 (6th Cir.1939).

It is well established law that whoever unlawfully interferes with property in the possession of the Court, is guilty of contempt and it is equally settled that whoever unlawfully interferes with officers and agents of the Court in the full and complete possession and management of property, is guilty of contempt. Ex parte Tyler, Petitioner, 149 U.S. 164, 13 S.Ct. 785, 37 L.Ed. 689 (1893).

In the case of Converse v. Highway Construction Co. of Ohio, supra, which involved a corporate reorganization under Section 77B of the Bankruptcy Act, 11 U.S.C.A. § 207, wherein the appellants were held in contempt of court for interfering with the operation of the debtor’s business which was in the constructive possession of the Bankruptcy Court, the Court of Appeals stated at page 130 of 107 F.2d:

“As we view the case, the question of the injunction is immaterial.

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242 F. Supp. 408, 1965 U.S. Dist. LEXIS 6807, Counsel Stack Legal Research, https://law.counselstack.com/opinion/in-re-rubin-paed-1965.