In re Luxor Cab Mfg. Corp.

L. HAND, Circuit Judge (after stating the facts as above). As we agree with the District Court that the only appointment of the receivers was on June 29, it is not necessary to decide whether the Act of May 27, 1926, is retroactive as respects acts of bankruptcy committed between the date of its passage and August 27, 1926. Assuming that it is, it is plain that an act of bankruptcy was committed on June 29, 1926, when the temporary receivers were appointed; for it is scarcely possible that the alleged bankrupt should have been insolvent on August 3, and solvent on July 29, even though meanwhile in the custody of “conservation” receivers, and in any ease the petitioning creditors themselves allege the opposite. If the alleged bankrupt be insolvent, the statute makes no distinction between the appointment of temporary and permanent receivers, nor is there any reason a priori for implying one (Blue Mountain, etc., Co. v. Fortner, 131 F. 57 [C. C. A. 4]; In re Kennedy Tailoring Co., 175 F. 871 [D. C. Tenn.]), though we need not hold that a mere ex parte appointment would bo enough, if later revoked at the demand of the defendant. Here the defendant had joined in the prayer and might no longer contest the validity of the decree ; as to it the court had finally acted, the administration of its assets had begun, and would proceed to a conclusion unless the creditors upon the return day should show cause for its discontinuance. These were, however, not limited to that relief which would have restored the defendant to a possession which it was confessedly unable to protect, a result which nobody could have wanted. They might invoke the superseding jurisdiction of bankruptcy without choosing between such alternatives. Indeed, we do not understand that the appellants dispute that the decree of June 29 was an act of bankruptcy. What they do assert is that the decree of August 3 which “continued” and “made permanent” the same receivers was another such act. It is perhaps possible so to view it, but it seems to us an artificial and formal interpretation. While the decree of June 29 presupposed some subsequent action, it was not the reappointment of the receivers but to find out whether they should be relieved of duties already imposed upon them. If the creditors could not show any ground for ending their custody, it was to continue; there was to be no interregnum during which the defendant would resume possession, no new appointment, no second assumption of custody by the court. This appears to us by far the more natural way to look at wha.t happened, and, so far as diction should count, the proper meaning of the phrase “continued” and “made permanent,” used in the decree of August 3. Walker v. Morgan, 20 F.(2d) 547 (C. C. A. 5), which arose upon facts occurring before the amendment of 1926, was quite another case. The temporary receivers had not originally been appointed “because of insolvency,” and no act of bankruptcy therefore took place when they took charge. When they were “made permanent,” the court determined that the bankrupt was insolvent and entered the second decree because of that finding. The bankruptcy court could have refused to adjudicate only by holding that the continuance of the receivership' because of insolvency was not an “appointment,” the receivers having already been appointed for another reason. But, if so, it must have held that no act of bankruptcy had ever been committed at all; not the original appointment, because it was not for insolvency; not the decree making permanent the receivers, because it was no appointment. Naturally the judges did not let the essence fly off with the fumes of their own reasoning. In re Milbury Co., 11 Am. Bankr. Rep. 523, can be supported, if at all, only because the receivers were made permanent upon a second application by the bankrupt’s directors. Section 3a (4) (11 USCA § 21[a]) then read as follows: “Being insolvent,” has “applied for a receiver * * * or because of insolvency a receiver * * * Pas been put in charge.” The bankrupt had within four months made a second application for a receiver, and perhaps that was a new act of bankruptcy. Even if well decided, the case has no relevance here. Order affirmed.