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UNITED STATES v. FAIRBANK REALTY CORP.

May 21, 1943

UNITED STATES
v.
FAIRBANK REALTY CORPORATION



The opinion of the court was delivered by: ABRUZZO

ABRUZZO, District Judge.

A judgment was entered in favor of the United States of America, the judgment-creditor, and against the Fairbank Realty Corporation, the judgment-debtor, on September 16, 1942, in this Court for the sum of $45,822.30. On February 25, 1943, a receiver of the property of the debtor corporation was appointed by this Court for the purpose of collecting the judgment.

This motion is now made by three officers and directors (Samuel Rottenberg, Jacob H. Cohen and Bernard Semel) of the Fairbank Realty Corporation, the judgment-debtor, for an order extending the receivership to effect the collection of a judgment claimed to be owned by them in the sum of $89,642.15 against the judgment-debtor herein.

 This latter judgment was recovered against the Fairbank Realty Corporation in the Supreme Court of the State of New York, Richmond County, on January 9, 1939, in an action brought by Hugh W. Murphy, Inc., a creditor of the corporation. It is alleged that the three individuals, Samuel Rottenberg, Jacob H. Cohen and Bernard Semel, acquired this judgment on July 6, 1942 by virtue of an assignment from Hugh W. Murphy, Inc. At the time of the assignment of the judgment, supplementary proceedings in aid of execution were pending in the Supreme Court of the State of New York and a receiver had been appointed in those proceedings.

 A history of the Murphy judgment against the debtor corporation indicates that, failing to uncover assets of the judgment-debtor, the receiver appointed by the Supreme Court brought action against certain officers and directors of the debtor corporation, including the present movants in this Court; namely, Samuel Rottenberg, Jacob H. Cohen and Bernard Semel. That action was based on allegations of waste, mismanagement and diversion of assets, ascribed to the defendant officers and directors. While the matter was pending, Rottenberg, Cohen and Semel, who were defendants in the action, paid the Murphy corporation $15,000 in settlement of that suit and obtained an assignment of the judgment to which they now seek to have the receivership in this Court extended.

 Shortly after the present motion came on to be heard, the receiver herein moved to obtain an order granting him leave to commence and maintain an action against Rottenberg, Cohen and Semel, based upon the identical allegations claimed in the Supreme Court action settled by these three individuals for the sum of $15,000.

 The two statutes involved in the determination of this motion are as follows:

 New York Civil Practice Act

 "§ 806. Extension of existing receivership. Only one receiver of the property of a judgment debtor shall be appointed. Where a receiver thereof has already been appointed, the court or judge instead of making the order prescribed in the last section but one, must make an order extending the receivership to the said special proceeding. Such an order gives to the judgment creditor the same right as if a receiver was then appointed upon his application, including the right to apply to the court to control, direct or remove the receiver, or to subordinate the proceedings in or by which the receiver was appointed to those taken under his judgment. L.1935, c. 630.

 District Court Rules of Civil Procedure

 Rule 69. "(a) In General. * * * The procedure on execution, in proceedings supplementary to and in aid of a judgment, and in proceedings on and in aid of execution shall be in accordance with the practice and procedure of the state in which the district court is held, existing at the time the remedy is sought, except that any statute of the United States governs to the extent that it is applicable. * * *" 28 U.S.C.A. following section 723c.

 In opposition to the motion, the Government claims:

 1. The motion must be denied because this Court has no power to extend the existing receivership to a judgment obtained in a court of the State of New York.

 2. The application must be denied because upon the facts at bar the three individuals instituting the motion are ...


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