The opinion of the court was delivered by: EGAN
This matter comes before the Court on certificates for review of two orders filed by a Referee in Bankruptcy.
In view of what has happened in this and a companion bankruptcy matter (Cause No. 25409),
the petitions for review of restraining orders entered on March 27, 1958 and April 3, 1958, by the Referee against Emerson Radio of Pennsylvania, Inc., and Philadelphia Distributors, Inc., have become moot.
The facts are apparently undisputed. Lewis Dion, for some time prior to January 1, 1957, operated as an individual a number of stores now known as discount houses. The principal place of business was the property situate at 3642-44-46 North Broad Street, Philadelphia, which was titled in his name.
On or about January 1, 1957, he transferred to a corporation known as Dee's, Inc., all of the asserts of his business, and the corporation assumed all of his liabilities. There was no deed delivered for the transfer of the real estate, because evidently he did not wish to pay the real estate transfer taxes.
However, the real estate was transferred on and into the books of the corporation and the corporation, from that time on, assumed all of the obligations of the prior business and of the real estate, and had in its possession and control all of the assets of the prior business, including the said real estate.
Such was the condition of this business on March 10, 1958, when Dee's, Inc. filed a petition for an arrangement under Chapter XI of the Bankruptcy Act, 11 U.S.C.A. § 701 et seq. On the same day, a Court-appointed receiver took possession of all the assets, including the real estate, and operated the business under Court order.
A day or two before March 10, 1958, Emerson Radio of Pennsylvania, Inc. (Emerson) and Philadelphia Distributors, Inc. (Philadelphia), both represented by the same counsel, induced Lewis Dion to sign judgment notes for substantial sums of money, presumably on the theory that the money was owed to them by him individually, as well as by the corporate entity, Dee's, Inc. It may be conceded that a substantial part by this indebtedness was contracted by Dion individually and prior to January 1, 1957. After that time, many payments were made on account of the running indebtedness, and if an accounting is desirable, it might well prove that if these payments were applied to the first indebtedness, that most of the present indebtedness would now be due from the corporation.
On the same day that the bankruptcy petition was filed, these two creditors took the following action in the Common Pleas Courts of Philadelphia County:
1. The entry of the judgment notes against Lewis Dion.
2. The issuance of attachments execution under said judgments against the property of Lewis Dion in the hands of certain garnishees, including Dee's, Inc.
3. The initiation of a suit in assumpsit against Lewis Dion and Dee's, Inc., to liquidate and recover on open accounts.
4. The initiation of suit against Lewis Dion and Dee's, Inc. to enforce an equitable lien against the assets of Lewis Dion, growing out of alleged violations of the Pennsylvania Uniform Commercial Code, 12A P.S. § 1-101 et seq., with respect to bulk transfers.
On March 27, 1958, pursuant to a petition filed by the receiver, the Referee issued an order restraining the two creditors from proceeding with the actions against Dee's, Inc., insofar as they affected property within the jurisdiction of the bankruptcy court, and at the same time he also vacated the liens placed upon the property which was in the possession of Dee's, Inc. This latter action was based on Section 67, sub. a of the Bankruptcy Act, 11 U.S.C.A. § 107, sub. a, which provides that all liens acquired within four months prior to the filing of the bankruptcy petition while the bankrupt was insolvent are void. There can be no question but that the Referee acted properly in that any property which was in the possession of the debtor, Dee's, Inc., was subject to the summary jurisdiction of the bankruptcy court. Thompson v. Magnolia Petroleum Co., 1940, 309 U.S. 478, 60 S. Ct. 628, 84 L. Ed. 876. By restraining the proceedings in the State courts, the Referee effected a status quo of the said real estate, pending a determination as to its ownership. Since there is no question that the bankruptcy court has the power to enjoin State proceedings which interfere with the assets of the estate or the administration of the court, we concur with the action of the Referee and therefore affirm the order.
Our perusual of the Referee's order of March 27, 1958 reveals no restraint of the suits started against the individual, Lewis Dion, but only restrains actions against the debtor, Dee's, Inc.