Case ID: ad_157/html/0872-01.html
Source: Caselaw Access Project
Author: {"author": "Hotchkiss, J.:", "license": "Public Domain", "url": "https://static.case.law/"}
Date Created: 2024-08-24T03:29:51.129683

A. H. Alden & Co., Limited, Suing on Behalf of Itself and Others Similarly Situated, Plaintiff, v. New York Commercial Company, Defendant. Banca Commerciale Italiana, Respondent; John Z. Lowe, Jr., and Others, as Trustees in Bankruptcy of New York Commercial Company, Appellants.
    First Department,
    July 10, 1913.
    Receiver — authority of court to summarily order receiver to pay over moneys of insolvent, where issue of fraud involved — petition by owner of drafts and bills of lading attached to compel receiver of insolvent drawee to pay over proceeds of property represented by said bills of lading.
    Although the court may, in its discretion, grant an application to compel a receiver to pay over moneys where the facts are simple, or where only questions of law are raised, and the issue does not involve conflicting claims of third parties, where the contest involves an issue of fraud, ordinarily triable by jury, the better practice is to deny the application.
    
      Hence, where a petition alleges that certain drafts, drawn payable to the order of the drawer, with bills of lading attached, were indorsed and sold to the petitioner by whom they were forwarded to its agent; that the agent surrendered the bills of lading and their muniments of title to the drawee, relying upon the latter’s solvency; that the drawee took and received such muniments of title, with intent to secure possession of the goods, without paying the drafts; that the goods were received by the drawee; that the drafts were protested for non-payment; that in an action based upon the drawee’s insolvency, a receiver was appointed in another State and thereafter the same person was appointed ancillary receiver in this State, and as such has come into the possession of the proceeds of the property represented by the bills of lading; and the answer to the petition puts in issue all of the material allegations of fraud, and it further appears that the drawee was adjudicated a bankrupt, and that the receiver was appointed a trustee prior to the date of the petition, the court should not direct the receiver to pay over moneys in his possession, and an order referring the issues to a referee to take proof and report thereon should be reversed and the petition denied.
    Appeal by John Z. Lowe, Jr., and others, as trustees, etc., from an order of the Supreme Court, made at the New York Special Term and entered in the office of the clerk of the county of New York on the 28th day of April, 1913, as resettled on the petition of the respondent, referring the issues to a referee to take proof and report thereon.
    
      Joseph M. Hartfield, for the appellants.
    
      Louis F. Doyle, for the respondent.
   Hotchkiss, J.:

The petition alleges that at London, Eng., on January 23, 1913, A. H. Alden & Co., Limited, drew its three several drafts, payable to its own order, upon the New York Commercial Company, which drafts were drawn against several shipments of rubber aggregating 724 cases represented by bills of lading and shipping documents attached to the drafts. The drafts, with bills of lading, were immediately sold by Alden & Co., Limited, to the petitioner, to whom they were indorsed and delivered with the bills of lading and shipping documents. The drafts and accompanying papers were forwarded by petitioner to its agent in New York city, and were on February 3, 1913, accepted by the Commercial Company, and thereupon the agent surrendered to the Commercial Company the bills of lading and other muniments of title to the rubber, relying upon the supposed solvency of the Commercial Company, which, as it is alleged, unknown to the agents, was then hopelessly insolvent, and took and received such muniments with the intent to secure possession of the rubber and not to pay the drafts. The rubber arrived in New York and was received by the Commercial Company on February fourth. On February fifteenth the appellant John Z. Lowe, Jr., was by the Court of Law and Chancery of the city of Norfolk, Va., appointed receiver of the Commercial Company in an action based upon the company’s insolvency, and on February 17, 1913, Lowe was appointed ancillary receiver of the company in this State in the action above entitled, and as such ancillary receiver has come into the possession of upwards of $33,000, representing the proceeds of a part of the aforesaid identical cases of rubber, and the same remains in his hands. ■ On April fourth the drafts were protested for non-payment.

On the foregoing facts the petitioner asked for an order directing Lowe as receiver to pay over to it the moneys aforesaid.

The answer of Lowe, as receiver, to the petition put in issue all of the material allegations of fraud. It further appeared by affidavits that on April 12, 1913, the Commercial Company was adjudicated a bankrupt by the United States District Court for the Southern District of New York, and that Lowe and two others were appointed trustees of the bankrupt’s estate and were such trustees prior to the date of the petition herein. Subsequent to the entry of the order appealed from the trustees were made parties to and substituted for the New York Commercial Company, defendant in the action in which this petition is entitled, and as such are appellants on this appeal.

We may, for the purpose of this appeal, concede that the petition states facts sufficient to entitle the petitioner in a proper proceeding to reclaim the money in question. (Whitten v. Fitzwater, 129 N. Y. 626.) The argument of the respondent is substantially as follows: The trustees in bankruptcy have not taken possession of the assets of the Commercial Company; so long, therefore, as these assets remain under the control of this court it is its right and duty to deal with them without regard for the bankruptcy proceedings. While it is unquestionably within the power of this court to entertain summary applications of this character under appropriate circumstances, it is purely a matter of discretion for it to do so, and it is by no means a matter of course for it to exercise such jurisdiction. Where the facts are simple or where only questions of law are involved, and the issue does not involve conflicting claims of third parties, such summary applications may properly be permitted, but where, as here, the contest involves an issue of fraud ordinarily triable by jury, the better practice is to decline jurisdiction. (Matter of North River Bank, 60 Hun, 91; People v. St. Nicholas Bank, 77 id. 159, 174.) We may also observe that, while it may be true that the trustees in bankruptcy have not yet acquired from the receiver possession of the assets of the bankrupt company, and that, therefore, as matter of technical right this court has the power to entertain the present application and to proceed therein until it shall have directed its receiver to attorn to the trustees .in bankruptcy (Matter of Watts, 190 U. S. 1), yet we must remember that the Bankruptcy Law is paramount and that, when properly moved by the trustees, it would be a matter of course for this court to pass the necessary order investing them with the assets in the hands of its receiver. We may assume that such an application will be made in due course; but, if not, the petitioner’s. right to bring a plenary action for the enforcement of his claim is in no way prejudiced.

The order should be reversed, with ten dollars costs and disbursements, and the petition denied, with ten dollars costs.

Ingraham, P. J., Laughlin, Scott and Dowling, JJ., concurred.

Order reversed, with ten dollars costs and disbursements, and motion denied, with ten dollars costs.