James Talcott, Inc. v. GlavinJames Talcott, Inc. v. Glavin
The appellant filed two- petitions with the referee in bankruptcy to recover from the bankrupt estate of Neo-Ped, Inc., money paid and merchandise returned to it by certain of its customers, whose accounts had allegedly been assigned, prior to bankruptcy, to the appellant. Both petitions involve the same questions. The appellee, on behalf of the bankrupt estate, filed answers to these petitions asserting that the alleged assignments were invalid as indicated by the fact that the appellant had permitted the bankrupt, after the assignments, “to have and exercise complete dominion over merchandise returned”. He further alleged that some of the assignments of accounts, valued at $69,489.27, were unlawful preferences because they were made within four months of bankruptcy, in consideration of antecedent indebtedness, at a time when the bankrupt was actually insolvent and when the appellant had reasonable cause to believe that such assignments would in fact result in preferences. The appellee also filed counterclaims against the appellant in which, relying upon’ the invalidity of the assignments, he prayed that the defendant be required to return and surrender all of thé accounts which remained uncollected in whole or in part; to turn over and account for all sums of money paid to or collected by it from these accounts within four months preceding bankruptcy and subsequent thereto; to turn over and account for all merchandise returned to it on these accounts after the date of bankruptcy, and to turn over and account for all money paid and merchandise returned on those accounts, the assignments of which were alleged to be unlawful preferences.
The appellant, contending that the answers and counterclaims raised issues which could only be decided in a plenary action, filed special appearances to each of the separate defenses and causes o.f action. The referee dismissed these special appearances and the District Court issued an order affirming his action. This appeal was taken from the District Court’s order, no decision on the merits having been made, and the only question involved is whether or not the action- of the District Court in affirming the referee was correct.
There can be no doubt that the referee and District Court had power to consider on their merits the issues raised by the appellee in the defense of the
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bankrupt estate. As trustee in bankruptcy, the appellee “may not only properly object to the allowance of a claim on any ground disentitling it to proof or allowance against the estate, but it is his duty to do so”. 8 C.J.S., Bankruptcy, p. 1302, § 437. In re Clayton Magazines, 2 Cir.,
In the counterclaims, the appellee is attempting to recover property in the possession of the appellant which it holds under a claim alleged to be bona fide and adverse to the bankrupt estate. If he had instituted summary proceedings to recover such property the District Court would not have had jurisdiction to consider the merits of the claim or to grant the prayer for relief, (8 C.J.S., Bankruptcy, pp. 1102-1106, § 342; Taylor v. Sternberg,
However, in the present case, the summary proceedings were instituted by the appellant, not by the appellee. It is true that this fact alone would not confer upon the District Court jurisdiction to determine matters, raised by way of counterclaim, which were “entirely disconnected from the subject-matter of such claim or petition”. Daniel v. Guaranty Trust Company,
It is a well established principle of law that an “adverse claimant may waive his right to a trial of his claim in a plenary suit rather than by summary proceedings” and that he does so irrevocably when he “comes into the bankruptcy court of his own motion and asks it to determine the question of title * * * 8 C.J.S., Bankruptcy, pps. 1123-1125, § 342 (e); In re Ann Arbor Machine Co., D.C.,
The order of the District Court is affirmed.