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In re St. Charles Hotel Co.

decided: August 29, 1946.

IN RE ST. CHARLES HOTEL CO.


Author: Kalodner

Before BIGGS and O'CONNELL, Circuit Judges, and KALODNER, District Judge.

KALODNER, District Judge.

This is an appeal from two orders made by the District Court on October 27, 1945, the one denying the application of the Appellant herein to intervene and to file an answer to the involuntary petition in bankruptcy, the second adjudging the St. Charles Hotel Company a bankrupt. Appellant is a Receiver appointed by the Court of Chancery of the State of New Jersey to take charge of the assets of the St. Charles Hotel Company.

A chronological statement of the facts is as follows:

On November 29, 1944, certain holders of first mortgage bonds of the St. Charles Hotel Company (hereinafter referred to as "Debtor") jointly filed in the Chancery Court of the State of New Jersey a bill praying for the appointment of a Receiver of the Debtor. A rule was obtained, returnable December 12, 1944, to show cause why a temporary receiver should not be appointed. Before the return date, on December 8, 1944, the Debtor filed a voluntary petition for reorganization pursuant to the provisions of Chapter X of the Bankruptcy Act, 11 U.S.C.A. ยง 501 et seq. On the same day, the petition was approved by the United States District Court of New Jersey as properly filed and one Aaron Smith was appointed Trustee for the Debtor and its assets.

Answers to the voluntary reorganization petition were filed on January 8, 1945, by two of the complainants in the Chancery Court action, and on January 10, 1945, a rule to show cause why the petition should not be dismissed was issued, returnable January 12, 1945. The objections raised in the answers were sustained,*fn1 and on March 26, 1945, an order was entered dismissing the petition.

On March 27, 1945, one Edward S. Ladin, owner of a $500 first mortgage bond moved for leave to intervene in the Chapter X proceedings and for a rehearing of the issues raised by the answer to the petition, and to vacate the order of dismissal of March 26th.

On April 4, 1945, Harry Cassman, the Appellant herein, was appointed, upon consent of the Debtor, as Receiver by the Chancellor of New Jersey in the proceedings instituted in the Chancery Court of that State. However, because the Ladin application for rehearing was pending in the reorganization court, the Debtor's assets were not turned over by the Trustee to the New Jersey Receiver.

On April 30, 1945, the Ladin application was formally denied by the District Court, and on the same day the Trustee was ordered to relinquish custody of the Debtor's assets in his possession. Notice of appeal from the order of March 26, 1945, and the two orders of April 30, 1945 was served on May 1, 1945. However, Ladin earlier obtained from this Court, on April 28, 1945, a rule to show cause why the Trustee should not be stayed from transferring to the Debtor, or the Receiver, the Debtor's property in his custody. On May 18, 1945, that rule was made permanent, the Trustee being enjoined from transferring the Debtor's property pending the hearing and determination of the appeal.

On June 13, 1945, this Court affirmed the District Court's orders of March 26 and April 30, 1945.*fn2

On June 14, 1945, Ladin filed notice of his intention to apply to the Supreme Court of the United States for a writ of certiorari, thereby staying the mandate of this Court.*fn3

On July 2, 1945, three first mortgage bondholders, upon leave of court, filed the involuntary petition in bankruptcy here in controversy. The single act of bankruptcy set forth in the petition was the appointment of the Receiver on April 4, 1945, in the Chancery Court proceeding in the State of New Jersey. On July 17, 1945, the appellant filed his petition for leave to intervene in the bankruptcy proceeding and to answer.

On October 15, 1945, the Ladin application for a writ of certiorari was denied.*fn4 On October 27, 1945, the District Court denied appellant's petition for leave to intervene in the bankruptcy proceeding and also adjudicated Debtor bankrupt.

The Appellant has chosen to submit this appeal solely on the sufficiency of his contention that the District Court had no jurisdiction to entertain the involuntary petition in bankruptcy for the reason that the Chapter X proceeding was incomplete and the Debtor's property was in custodia legis at the time of the filing of the petition. Ti is patent, of course, that if an involuntary petition in bankruptcy could not have been filed until the denial by the Supreme Court of the Ladin petition for a writ of certiorari on October 15, 1945, the appointment of a Receiver in the state ...


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