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IN RE RELIANT GAGES

June 3, 1968

In the Matter of RELIANT GAGES, INC., Bankrupt


The opinion of the court was delivered by: WYATT

WYATT, District Judge.

 The Report of Referee Townsend dated May 1, 1968 has been submitted to the Court. The Report deals, among other things, with allowances after final report of the Trustee.

 On submission of the Report, the allowances noted therein to Richard W. Sprague, Esq., were opposed by Boice Gages, Inc., a substantial general creditor of the voluntary bankrupt.

 The petition was filed in this Court on January 23, 1962, and on the same day Howard Schwartzberg was appointed Receiver.

 The bankrupt had conducted its business in Santa Maria in Santa Barbara County; this County was in the Central Division of the Southern District of California until March 1966 after which it has been in the Central District of California.

 By order made February 2, 1962, by the United States District Court for the Southern District of California (Northern Division) Mr. Schwartzberg was appointed Ancillary Receiver.

 It is said that on the same day there was a petition to the Court in California and that "pursuant to said petition" Robert W. Sprague, Esq., was "appointed counsel", presumably to the Ancillary Receiver. When the order was made (presumably there was an order, see General Orders 44) does not appear.

 Apparently the Ancillary Receiver promptly took possession of the assets of the bankrupt in California.

 Mr. Schwartzberg, the Receiver and also Ancillary Receiver, was elected Trustee on February 15, 1962.

 Immediately upon his qualification the Trustee became vested with title to all property of the bankrupt, not affected by the "prior possession of a receiver * * * of any court" (11 U.S.C. § 110).

 There was no necessity for any ancillary receivership in California after February 15, 1962 and of course no necessity for any services of counsel to the Ancillary Receiver, except possibly preparation of papers for a final report and for "paying * * * the expenses of ancillary administration" (11 U.S.C. § 11(a)(20)).

 While Mr. Schwartzberg was both Ancillary Receiver in California and Trustee there after February 15, 1962, and while title to the assets in California was in him as Trustee, there was a period during which possession, care and custody of the California assets was in the California bankruptcy court through Mr. Schwartzberg as its Ancillary Receiver. During this period the bankruptcy court in California as "the ancillary court" had jurisdiction over the California assets which had been taken "into its custody" to the extent at least of paying "therefrom * * * the expenses of ancillary administration, and transmitting the property or its proceeds to the court of primary jurisdiction" (11 U.S.C. § 11(a)(20)). It is elsewhere specifically provided that the "ancillary court * * * shall determine and may allow" the costs, expenses, etc. of ancillary receivers (11 U.S.C. § 109(c)). This last provision was enacted in 1938, apparently to legislate the practice approved in In re Schulte-United, 59 F.2d 553 (8th Cir. 1932); see also 11 U.S.C. § 76(a)(4).

 In fact, however, the California bankruptcy court did not exercise jurisdiction over the property in its custody to fix the expenses of ancillary administration but, with or without orders, the property was transferred to the possession, care and custody of Mr. Schwartzberg as Trustee without the fixing of the expenses of ancillary administration.

 By the end of June 1962, the Trustee had converted to cash all assets in California and had all such cash in his name except for a bank account in California in the name ...


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