In re Franklin Suit & Skirt Co.

J. B. McPHERSON, Circuit Judge. [ 1 ] The preliminary question .to be determined is whether Skubinsky v. Bodek (C. C. A. 3d Circuit) 172 Fed. 332, 97 C. C. A. 116, 24 L. R. A. (N. S.) 985, 19 Ann. Cas. 1035, forbade the District Court to make the particular inquiry that has just been completed. There were two inquiries, and these must be distinguished. The first, which was unlike the second, began on October 23, 191E An-involuntary petition had been filed a few days before, and a receiver had been appointed. On October 23d he asked for, and obtained, the appointment of a special referee under section 21a of Act July 1, 1898, c. 541, 30 Stat. 552 (U. S. Comp. St. 1901, p. 3431). Proceedings were taken by the referee with the final result that the Court of Appeals, in a short per curiam, reported in Podolin v. McGettigan (C. C.) 193 Fed; 1021, followed Skubinsky v. Bodek, and set aside-all that had been done under section 21a. . The petition of October 23d is therefore out of the case, and need not be further referred to. As already stated, the second inquiry — which is now under consideration — is distinct and separate. The petition was presented on November 3d, and asked the court to determine summarily whether certain goods, which were pointed out with precision, were really the property of the bankrupt, and were being withheld from the receiver by a person who was merely the bankrupt under another name. In substance, it was averred that the apparent title to these goods had been juggled with in order to obscure the truth, and that, while other persons might appear on the surface to be the owners, the bankrupt had never- really parted with title, but had joined in the trick.' It was said that the goods had been shuffled about so as to confuse the situation, but investigation would show that the present possessor was only the bankrupt under a thin disguise. Objection was made that the court could not undertake even such a rudimentary inquiry in a summary manner, but that the receiver must proceed by plenary suit; Skubinsky v. Bodek being relied upon to sustain this contention. In my opinion that decision is not in point; the Court of Appeals has been careful to distinguish, the precise question that is now presented, and [601] to approve in advance the course that has beerl pursued in the pending case. All that Skubinsky v. Bodek decides is that a special reference under section 21a is not permitted before adjudication, because the bankrupt’s estate is not yet “in process of administration under this act.” But the court, evidently foreseeing that inquiries like the present would sometimes be indispensable, said with much significance (172 Fed. 335, 97 C. C. A. 119, 24 L. R. A. [N. S.] 985, 19 Ann. Cas. 1035): “It doubtless is true that a receiver may be authorized by the act, even before adjudication, to collect and secure possession of moneys and other property belonging to the alleged bankrupt; but such action on the part of the receiver before an adjudication does not constitute or involve ‘process of administration under this act.’ It is simply gaining control of the estate which is to be subjected to the process of administration, if an adjudication of bankruptcy shall be made.” And this quotation is in entire accord with the decisions of the Supreme Court and other courts to which the report of the special master refers. There is a convenient collection, also, in Whitney v. Wen-man, 198 U. S. 539, 25 Sup. Ct. 778, 49 L. Ed. 1157. It seems almost superfluous to say that, when the District Court entertained the petition of November 3d, it was not acting under section 21a, but under its general equity powers, reinforced by clauses 3 and 7 of section 2. No one can doubt, 1 think, that the District Court has power to issue process upon such a petition, and to call before it the necessary parties and witnesses in order to investigate that kind of a complaint directly and summarily. If, as the result of such an inquiry, it should appear that the goods in question are held under a real adverse title, even if such title be founded upon what may seem to be fraud, it would no doubt be necessary to fight that controversy out in a plenary suit; but if there should be no real claim of title, either fraudulent or bona fide, and if the goods should be merely held by a person who is the bankrupt himself in disguise, the court would unquestionably have power to take the goods into its own custody as the property of the bankrupt and proceed to administer them according to law. And what the court could do directly, it can certainly do by the help of a special commissioner, or a special master, or a special referee —the name is of no importance whatever — to whom in the first instance an inquiry may for convenience be committed. To my mind, the question seems to admit of only one answer, although of course others see it differently. The whole subject has been thoroughly discussed, and its principles seem to be well settled. If there is a real adverse title, it must be attacked by a plenary suit; but the court may always inquire whether a title is really adverse, or is a mere sham. [2] As I think, therefore, the court had undoubted power to undertake the inquiry; and, if this be true, the result will be found in the clear and forcible report of Mr. Hunter, which I adopt (without repeating it) as my own conclusion upon the facts. In a word, the property in question is now, and always has been, the bankrupt’s. And it is therefore ordered that S. P.udsky, N. Cupersmith, and S. [602] Silverstein, either or all of them, do forthwith deliver to the receiver the merchandise named in the petition of November 3, 1911. And it is further ordered that S. Rudsky pay the costs of this proceeding.