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Feldman v. Trans-East Air Inc.

decided: May 7, 1974.

GEORGE FELDMAN, AS TRUSTEE IN BANKRUPTCY OF LEASING CONSULTANTS INCORPORATED, BANKRUPT, PLAINTIFF-APPELLANT,
v.
TRANS-EAST AIR, INC., HUDLEASCO, INC., AND CASTLE CAPITAL CORPORATION, FORMERLY KNOWN AS PENN-DIXIE LEASING CORPORATION, DEFENDANTS-APPELLEES



Appeal from judgment entered in the United States District Court for the Eastern District of New York, Jack B. Weinstein, Judge, dismissing plenary suit of trustee in bankruptcy and affirming order of referee in bankruptcy. Affirmed.

Hays and Timbers, Circuit Judges, and Davis,*fn* Judge.

Author: Hays

HAYS, Circuit Judge:

Appellant George Feldman, as trustee in bankruptcy of Leasing Consultants Incorporated (LCI), commenced this action to vacate an order of the referee in bankruptcy under which leases on three airplanes were disaffirmed. The trustee sought to recover possession of and title to the airplanes, and to recover all rentals obtained on the airplanes by appellees during their possession. The referee refused to vacate his order and dismissed the remainder of appellant's application for want of summary jurisdiction.

Appellant then brought a petition for review before the United States District Court for the Eastern District of New York and joined with it a plenary suit seeking essentially the same relief. The district court affirmed the order of the referee and dismissed the plenary action. 366 F. Supp. 66 (E.D.N.Y. 1973). We affirm.

I.

In August 1968 appellee Hudleasco conveyed two airplanes it owned and appellee Castle Capital conveyed one airplane it owned to appellee Trans-East Air, Inc., under a lease with an option to purchase. Both Hudleasco and Castle Capital registered title to their aircraft under the Federal Aviation Act, 49 U.S.C. §§ 1301-1542 (1970). On March 15, 1969, Trans-East conveyed the three planes to LCI under a lease with an option to purchase. Trans-East did not record the conveyances to LCI.

On August 18, 1970, LCI filed a petition for arrangement under Chapter XI of the Bankruptcy Act. On August 24 LCI petitioned the referee in bankruptcy for rejection of the airplane conveyances pursuant to section 313(1) of the Bankruptcy Act, 11 U.S.C. § 713(1) (1970). At the time of the petition LCI had ceased using the aircraft and the monthly rental of $18,150 had become a burden.

On September 2, 1970, Referee Rudin conducted a hearing and, finding no opposition, granted the petition by an order dated September 8, 1970.

On October 14, 1970, LCI was adjudicated a bankrupt and appellant was appointed trustee.

In January 1972 the trustee moved the referee to vacate his order of September 8, 1970. The bankruptcy court denied the motion on the ground that the order had created vested rights which its vacation would disturb. The trustee then filed a petition for review and commenced a plenary action in the district court.

The district court declined to reach the jurisdictional issue raised by the appellees in the plenary action. On the merits the court found the trustee's action barred by estoppel and laches. The court therefore dismissed the complaint in the plenary action and affirmed the order of the referee in bankruptcy.

II.

The trustee advances two theories for recovering the aircraft. First, he argues that the referee's order of rejection never authorized abandonment of the planes. Thus appellees converted the planes by taking possession of them and the trustee may now recover possession in an action for conversion. The trustee's second theory is that, if the referee's order is construed to ...


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