DISTRICT COURT, S.D. NEW YORK
August 29, 1932
In re GLENROE CORPORATION
The opinion of the court was delivered by: PATTERSON
PATTERSON, District Judge.
This is a motion by petitioning creditors in a bankruptcy case to restrain a receiver appointed by the New York Supreme Court from proceeding further until after the election of a trustee in bankruptcy. The papers show that on January 18, 1932, the Supreme Court appointed a temporary receiver in sequestration proceedings against Glenroe Corporation, a New York corporation; that on April 8, 1932, the temporary receiver was made permanent receiver; and that an involuntary petition in bankruptcy was filed against Glenroe Corporation on May 17, 1932, adjudication following on July 5, 1932. The receiver in the state court has assets which have not yet been distributed.
As to receiverships in the state courts with a view to distribution of a debtor's property among his creditors, the general rule is that the jurisdiction of the state court is not disturbed by subsequent bankruptcy proceedings commenced over four months later, but is superseded by bankruptcy proceedings commenced within the period of four months. In re Watts, 190 U.S. 1, 23 S. Ct. 718, 47 L. Ed. 933; Stellwagen v. Clum, 245 U.S. 605, 613, 38 S. Ct. 215, 62 L. Ed. 507; Straton v. New, 283 U.S. 318, 51 S. Ct. 465, 75 L. Ed. 1060. From the papers before me, it would appear that the receivership here was for the purpose of administering the company's assets for the benefit of the creditors and was instituted less than four months before the filing of the petition.
A prima facie case for annulling the receivership is therefore made out, and the receiver will be stayed from proceeding further in the matter pending the appointment of a trustee in bankruptcy, at which time the title and right to administer the estate, as between the receiver and the trustee, may be finally dertermined. Settle order on notice.
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