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August 8, 1966

Matter of Herman Rubin et al., Bankruptcy

Davis, D.J.

The opinion of the court was delivered by: DAVIS

We have before us the petition of the receivers for review of the decision of the referee denying their citation for civil contempt against some of the debtor's former driver-salesmen and against its major supplier and certain of its employees for disregarding the Order of Court dated February 23, 1965.

 The long and varied history of this case commenced on February 23, 1965 when the debtor, Herman Rubin, filed a petition for arrangement under Chapter XI of the Bankruptcy Act. On that day the court appointed a receiver and on March 9, added a co-receiver.

 At the time of the filing of the petition the debtor was engaged in business as a wholesale pastry distributor. He would purchase pastries from suppliers such as the respondent John Reber Baking Corporation and then resell this merchandise to retail outlets through driver-salesmen.

 For approximately a week or so, the receivers purchased its pastries from the Reber Corporation, but all business between it and the debtor ceased on March 8.

" (It is) Further Ordered that the debtor and all other persons, firms and corporations, including the landlord, creditors, sheriffs and constables, are hereby enjoined and restrained from in any wise interfering with the exclusive possession and control by said receiver of said business and property of the debtor, and from selling, assigning, concealing, encumbering transferring or otherwise disposing of or affecting any of the said business and property."

 The referee granted the respondent's motion to dismiss on the ground that no property of the debtor was involved in the petition and that the court lacked jurisdiction over their persons because of the lack of service of process of the Order appointing the Receiver. We reversed that decision in the case of In the Matter of Herman Rubin, 242 F. Supp. 408 (E.D. Pa. 1965), where we held that the established routes were assets of the debtor within the possession of the Bankruptcy Court and that the court had jurisdiction over the persons of all the respondents. We remanded the case to the referee for a hearing on the merits of the receivers' petition for contempt.

 After a hearing, the referee, in his opinion filed on March 29, 1966, dismissed the receivers' petition, finding, inter alia, that the routes were not the property of the debtor and that the respondents had not interfered with any property of the debtor in violation of the court's Order of February 23, 1965.

 After careful review of the Opinion of the referee and the testimony before him, we have come to the conclusion that he erred and that his decision must be reversed.


 In the first place, the referee assumed that the routes travelled by the driver-salesmen were not assets belonging to the debtor's estate but belonged to the driver-salesmen. This court specifically rejected that conclusion in its Opinion of June 14, 1965, and must again reiterate that they are property owned by the debtor.

 The Union contract, between the Teamsters and the debtor, which was introduced into evidence at the hearing before the referee sets forth the relationship of the driver-salesmen to the debtor. While the agreement states "whereas it is the contention of Rubin that his relationship with said driver-salesmen is that of distributor and independent contractor, "it at no point provides that the driver-salesmen own their own routes. Instead, under the contract, the debtor was to maintain a relief driver to service any route when the need arose and, in the event of a vacancy, the route was to be filled by bid and under certain circumstances "in any manner deemed fit by Rubin."

 In addition, paragraph II of the Union contract states:

"The Union agrees to cooperate with Rubin in enforcing covenants contained in individual agreements with driver-salesmen, not to compete or divert trade and patronage assigned to such driver-salesmen for a reasonable period of time following the date of termination of service, and will do everything possible to cooperate with Rubin for the enforcement of such covenants or agreements restraining unfair competition by such former driver-salesmen. "

 The record does not contain a copy of the contracts between the driver-salesmen and debtor if any, in fact, existed, but the testimony given at the hearing, added to what the union contract states, gives us a clear picture that these men had the status of employees and not independent contractors owning their own routes. Although they owned their own trucks, serviced them, supplied their own liability insurance, and did not have their taxes withheld, the debtor supplied them with uniforms, provided them with sick leave compensation and life insurance, paid their health insurance premiums, restricted them to selling items ...

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