17 F.2d 584 | 2d Cir. | 1927
The motion cannot depend upon section 11 of the Bankruptcy Act (Comp. St. § 9595), as Newman does not ask protection against the suit. It must depend upon the right of the bankruptcy court to protect assets in its custody. As the state suit was commenced after petition filed and receiver appointed, any property of Newman was at that time already in the custody of the bankruptcy court. We do not find it necessary to say whether a decree in the state suit would be a valid estoppel against a trustee’s title by succession from Newman in Newman’s property in the “plan,” if property there be; that may depend upon whether his title relates back to the adjudication (section 70, a [Comp. St. § 9654]), or to the date of the filing of the petition.
Even assuming the second alternative (Everett v. Judson, 228 U. S. 474, 33 S. Ct. 568, 57 L. Ed. 927, 46 L. R. A. [N. S.] 154; Acme Harvester v. Beekman, 222 U. S. 300, 307, 32 S. Ct. 96, 56 L. Ed. 208), it is a well-recognized rule that the court first assuming jurisdiction of property may protect it from subsequent litigation which may affect or assume to affect its title (Wabash R. R. v. Adelbert College, 208 U. S. 38, 28 S. Ct. 182, 52 L. Ed. 379; Lion Bonding Co. v. Karatz, 262 U. S. 77, 43 S. Ct. 480, 67 L. Ed. 871).
It is enough for the present to say that the subject-matter of the state suit may turn, out to be property of Newman which passes to his trustee in bankruptcy, and that a decree may clog or tarnish its title. As there appears to be no prejudice to Newman involved in the short delay which will ensue from a stay until the bankruptcy proceedings are determined, and a trustee appointed, if they are successful, it seems to us desirable to enjoin the suit for so long, so as to enable the trustee to intervene and protect the interests of the estate, if he shall be so advised.
The stay should, however, be conditioned upon a prompt prosecution of the bankruptcy proceedings.
Order reversed, and cause remanded, with instructions to proceed in conformity with the foregoing. Mandate to issue forthwith.