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IN RE JAYBAR REALTY CORP.

January 15, 1942

In re JAYBAR REALTY CORPORATION


The opinion of the court was delivered by: CAMPBELL

CAMPBELL, District Judge.

This is a hearing on a petition by William E. Lahey to review, and for an order adjudging erroneous and void, on the ground that the Referee had no jurisdiction to make the same, so much of a certain order dated December 1, 1941, made by a Referee in Bankruptcy of this district, on the petition of the Trustee herein, as overrules the special appearance of said William E. Lahey adjudges the claim of William E. Lahey invalid and without foundation in law or in fact, and directs the Comptroller of the City of New York to pay a certain sewer assessment refund, claimed by said William E. Lahey, to the Trustee in bankruptcy, herein.

There is no substantial dispute as to the facts, which are as follows:

 On December 24, 1935, a sewer assessment was levied by the City of New York upon the property involved.

 On October 14, 1936, this property, with that assessment unpaid, was acquired by William E. Lahey, by deeds, subject to the same sewer assessment, and bearing United States Internal Revenue Stamps totaling $1. Less than two weeks after, and on October 26, 1936, the bankrupt entered into a contract with William E. Lahey for the purchase of the property, subject to taxes and assessments, for $21,125, payable $500 cash; $2,500 on delivery of the deed, and the balance by reducing the then existing mortgage to the difference between $18,125, and the total amount of taxes and assessments with interest and penalties, which were liens, to the date of closing. Title was closed on January 15, 1937, and the mortgage was reduced to $3,585, in accordance with the contract by deducting the unpaid taxes and assessments. On the same date an extension agreement was entered into between William E. Lahey, and the bankrupt, specifically providing that the non-payment of these taxes and assessments shall not be deemed to be a violation of the terms of the extension of the mortgage. On May 22, 1937, William E. Lahey's mortgage was paid in full and discharged.

 In May, 1937, the bankrupt raised a building loan, secured by a mortgage on the property, and part of the advances was paid to the City to clean up all taxes and assessments with interest and penalties outstanding.

 On June 29, 1937, Local Law No. 27, 1937, became effective. This reduced the particular assessment in question by 30%, and provided for the repayment by the City of such excess to "all persons who have paid or caused to be paid to the city of New York the assessment * * *." Section 3. Pursuant thereto the bankrupt applied for the refund by application received September 15, 1938, and the United Title and Mortgage Company filed a consent to payment of the refund to the bankrupt, stating that its payment of the taxes and assessments to the City had been "as agent for" the bankrupt. The City issued warrants to the bankrupt and a partial assignee totaling $801.80, and approved payment of $1,094.10, to another partial assignee. These partial assignments, as well as other encumbrances, have since been discharged and vacated.

 Thereafter, and in March, 1939, the petition in bankruptcy was filed herein. On January 4, 1940, the Trustee procured an order directing the City to turn over the sum of $296.90, which was then unassigned, but when Lahey, for the first time thereafter, made claim to refund, the City refused to comply.

 The Trustee thereupon brought an application for an order directing the City to turn over the entire refund of $1,895.90. The City consented to the complete disposition of the matter by the Referee. William E. Lahey appeared by attorney, and at first, by affidavit sworn to November 1, 1941, requested that the Trustee's application be denied, and made a cross-application for order "directing the City of New York to turn over, deliver and forthwith pay to William E. Lahey, the sum of $1,895.90." Later he withdrew from this position, and filed a special notice of appearance contesting the summary jurisdiction of the bankruptcy court, together with a statement of adverse claim. His special appearance was overruled and his motion to dismiss the petition on the same grounds was denied.

 William E. Lahey has now filed a petition to review setting forth eight specific allegations of error, relating to jurisdiction, the merits, and evidentiary matters.

 At the close of the hearing the Referee rendered an oral opinion (Stenographer's Minutes, pp. 44-49), which I adopt, and would affirm on it, but for the fact that the matter has been more carefully and fully argued before me, citing what Counsel urge as authorities sustain their respective positions.

 There seems to be no substantial dispute as to the facts, therefore, the issues involve only a question of law.

 That being so, the bankruptcy court has summary jurisdiction. While, undoubtedly, a plenary suit would lie, such a suit is not absolutely necessary. In re R. & W. Skirt Co. et al., 2 Cir., 222 F. 256.

 When the petition in bankruptcy was filed herein, the City recognized only the bankrupt, or its assignees, as the owners of this fund. William E. Lahey had not, up to that time, made any claim thereto, but for the first time asserted any claim ...


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