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LAZARUS v. PRENTICE

June 8, 1914

LAZARUS, MICHEL & LAZARUS
v.
PRENTICE, RECEIVER OF MUSICA



APPEAL FROM THE CIRCUIT COURT OF APPEALS FOR THE FIFTH CIRCUIT

White, McKenna, Holmes, Day, Lurton, Hughes, Van Devanter, Lamar, Pitney

Author: Day

[ 234 U.S. Page 265]

 MR. JUSTICE DAY delivered the opinion of the court.

This is a motion to dismiss the appeal of Lazarus, Michel & Lazarus, interveners in a certain bankruptcy proceeding in the District Court of the United States for the Eastern District of Louisiana, where the intervening petition was dismissed (205 Fed. Rep. 413), which order was affirmed on appeal to the Circuit Court of Appeals for the Fifth Circuit (211 Fed. Rep. 326). The interveners now attempt to bring the case to this court by appeal on the ground that the judgment of the Circuit Court of Appeals was not final in the proceeding.

The facts are not materially in dispute, and, as found by both the District Court and the Circuit Court of Appeals, appear to be: Antonio Musica and Philip Musica were partners in trade under the firm name of A. Musica & Son, importers of hair in the City of New York. They had become largely indebted and on the nineteenth of March, 1913, a petition in involuntary bankruptcy was filed in the District Court of the United States for the Southern District of New York against the firm and the individual members thereof, and a receiver was appointed of the bankrupt estate, the partnership and its members being subsequently adjudicated bankrupts. On the same day the petition was filed the bankrupts and Arthur Musica were arrested as fugitives from justice in the City of New Orleans, and Lucy Grace Musica was held as a material witness. Upon search there was found upon their persons, variously distributed among them and concealed in divers ways, about $75,000 in money, and notes, mortgages and insurance policies amounting in value to some $50,000 more. Without going into detail, upon the admissions of the parties it became perfectly apparent that the property in question belonged to the bankrupt estate. The District Court for the Eastern District of Louisiana, upon petition, confirmed the receiver

[ 234 U.S. Page 266]

     as temporary receiver of that court and directed that all the property be turned over to him to be transmitted to the trustee or trustees in bankruptcy of A. Musica & Son elected and qualified in the District Court for the Southern District of New York, to be disposed of under and subject to the orders of that court.

While the Musicas took the case to the Circuit Court of Appeals, no appeal has been sued out by them to this court, and the only questions here concern the intervention of Lazarus, Michel & Lazarus, who, on April 28, 1913, filed an intervening petition in the District Court for the Eastern District of Louisiana, claiming $15,000 as attorney fees for services rendered the Musicas in the proceedings against them in the courts of Louisiana to protect their property rights and possession and for services to be rendered in representing them in proceedings in New York, if their services were there required. The decree of the District Court which was affirmed in the Circuit Court of Appeals, dismissed the petition in intervention of Lazarus, Michel & Lazarus, reserving their right to assert whatever claim they may have in the bankruptcy court of original and primary jurisdiction.

The filing of the petition and adjudication in the bankruptcy court in New York brought the property of the bankrupts wherever situated into custodia legis, and it was thus held from the date of the filing of the petition, so that subsequent liens could not be given or obtained thereon, nor proceedings had in other courts to reach the property, the court of original jurisdiction having acquired the full right to administer the estate under the bankruptcy law. Mueller v. Nugent, 184 U.S. 1; Acme Harvester Co. v. Beekman Lumber Co., 222 U.S. 300. Under clause 3 of § 2 of the Bankruptcy Act of July 1, 1898, c. 541, 30 Stat. 544, the receiver in the original case would have had the right, acting under authority of the court, to take possession in a summary

[ 234 U.S. Page 267]

     proceeding of the bankrupts' property, found as was this, in possession of those admittedly holding it for the bankrupts, and to hold the property until the qualification of the trustee or until the bankruptcy petition should be dismissed, if that should happen. Bryan v. Bernheimer, 181 U.S. 188; Mueller v. Nugent, supra. Prior to the amendment of June 25, 1910, c. 412, 36 Stat. 838, this court had held that in cases where the bankruptcy court of original jurisdiction could itself make a summary order for the delivery of property to the trustee or receiver the court of ancillary jurisdiction could do so (Babbitt v. Dutcher, 216 U.S. 102), and by clause 20, added to § 2 by the amendment of June 25, 1910, the bankruptcy courts were specifically given ancillary jurisdiction over persons or property within their respective territorial limits in aid of a trustee or receiver appointed in any court of bankruptcy. Under this amendment there can be no question that the District Court in Louisiana had authority to appoint a receiver and to take summary proceedings for the restoration of the bankrupts' estate which was in the custody of people having no right to it, in order that the same might be turned over to the bankruptcy court having jurisdiction for administration. Under the circumstances here shown, there can be no question that this authority was properly exercised in this case.

The property when seized was by virtue of the terms of the Bankruptcy Act held for and to be turned over to the court of original jurisdiction, and no right could be acquired in it by assignment subsequent to the filing of the petition which would defeat this purpose. Such assignment was a mere nullity, properly disregarded by the bankruptcy court, and notwithstanding which it could direct the delivery of the bankrupts' property to the receiver by summary order. Babbitt v. Dutcher, ...


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