The opinion of the court was delivered by: HULBERT
On March 29, 1943, an order was made by this court requiring Ida C. Beyers, Rose Brown and Anna Grande Braunwarth to show cause why they should not be punished for contempt of court for having instituted an action in the Supreme Court of the State of New York, County of New York, based on a cause of action alleged to have arisen prior to, and to have been discharged and perpetually enjoined by, the final order in this proceeding, made on Feb. 3, 1938.
The order to show cause is supported by two affidavits verified, respectively, by an attorney associated with the attorneys for the petitioners, and Martin F. Shea, its vice president. In the concluding paragraph of the attorney's affidavit, he submits, and requests, as alternative relief, that the respondents "cease the prosecution of such action."
From the moving papers, it appears that prior to March 13, 1935, Burns Bros. had, for many years, occupied, and claimed title to, premises at 106th Street and East River, Borough of Manhattan, New York City. On that date, by virtue of proceedings brought by the City of New York, in eminent domain (in connection with the opening of the East River Drive), title to such property vested in the City of New York.
On or about June 30, 1937, an award was made in such condemnation proceedings to unknown owners. (The records in that proceeding have not been made available to the court on this motion.)
Meanwhile, on May 24, 1935, Burns Bros. filed its petition in this court (Clerk's file No. 62409) for relief as a debtor under Sec. 77B of the Bankruptcy Act, Title 11 U.S.C.A. Sec. 207, now Chapter 10, § 501 et seq. The order of approval, entered on that date, contained the usual provision for filing claims and the manner of giving notice, and barring any persons in interest, failing so to do, from participating in any plain of reorganization.
Such proceedings were thereafter had that a plan of reorganization was approved of Feb. 11, 1936. On Feb. 3, 1938, the final order was entered terminating this proceeding which determined that the debtor had in all respects complied with the plan of reorganization and the orders of this court relating thereto; discharging the debtor of all its debts, claims, liability and obligations of whatsoever kind and character, and perpetually enjoined: "all creditors and stockholders of, and claimants of any character against the debtor * * * from prosecuting any claim, suit or any proceeding of any nature arising out of or based on any obligation of or claim against or interest in the Debtor, * * * or against any property or assets of any character heretofore owned or controlled by the Debtor, or dealt with in the Plan of Reorganization," and declared the case closed.
I do not find any reference to the property in question in the schedules filed by the debtor, although property located at 101st Street and East River is scheduled therein.
The action brought in the New York Supreme Court was commenced on March 13, 1941. Burns Bros. interposed an answer on Oct. 6, 1941. A certified copy of the final order dated Feb. 3, 1938, was served upon the plaintiffs in that action on January 5, 1943.
Attached to the moving papers is a copy of the pleadings in the State Court action. In the complaint it is alleged that in or about 1906, one Victor Klingenbeck acquired the fee simple ownership of the property in question and that plaintiffs, and one Charles Klingenbeck, acquired an undivided title, as tenants in common, in said tract of land, bulkhead and bulkhead rights, on March 24, 1907, by descent, from Victor Klingenbeck, as his heirs at law and continued as the fee simple owners of the same, as tenants in common, until March 13, 1935, when title was taken by the City of New York.
It is alleged in the answering affidavit (and is not controverted) that:
1. The claim of Burns Bros. with respect to the title to and the award for the property at 106th Street and East River was challenged and in May, 1936, a decision was rendered by Mr. Justice McLaughlin in the condemnation proceedings, in which he determined that title to the challenged parcels and appurtenant bulkhead and bulkhead rights did not vest in Burns Bros. Matter of City of New York, 159 Misc. 741, 289 N.Y.S. 433.
2. Thereafter, on Nov. 29, 1937, a petition was filed in the condemnation proceedings on behalf of the claimants (plaintiffs in the State Court action) for an order directing the Comptroller of the City of New York to pay to them that portion of the award as it might appear they were entitled to receive.
3. Burns Bros. interposed an answer to that petition and laid claim to the condemnation award upon the basis of an affirmative defense predicated upon the alleged adverse ...