Opposition Brief — Klein v. Brandt & Brandt Printers, Inc.

a " 1. FEY, Clerk

Supreme Court of the United States

October Term, 1955

No. 2. OO”

DAVID CHARLES KLEIN, trustee in Bankruptey of

WIILIAM FRIEDMAN doing business under the name

and style of FAULTLESS PRESS,

Petitioner,

AGAINST

BRANDT & BRANDT PRINTERS, INC.,

Respondent.

BRIEF IN OPPOSITION TO PETITION FOR

WRIT OF CERTIORARI

| Cuauncey H. Levy and Sypney Basi Levy,

Counsel for Respondent,

| 225 Broadway,

New York 7, N. Y.

Loprr Appeal Press, Inc., 65 Duane Street, N. Y. C. WOrth 2-0689

|

INDEX

Question Presented

Summary of Argument ....0.65-6recccses

Point IL—A bankruptey court lacks power to grant

compensation not expressly provided for by the

Lankeuptey - Bet ie con cnc cns thie Varn Oia ees

Porst I11.—The order of the Court below relative to

lack of jurisdiction over partnership property

assuming the same is properly before this Court

ix in accord with established principles of law ...

Post IL].—No special or important reasons exist

COG COPING 6 ioci5 4 5a Sree ae Oe ee

CORCRTAION © 6 os ota

CASES CITED

American Service Co. v. Henderson, 4 Cir., 120 F. 2d

Oe OE alee aie Saas aeester aae

Bardes v. Hawarden Bank, 178 U.S. 524, 20S. Ct.

OGG OAT TEE S800 5 os ica wanes scesennekees

Beach vy. Macon Grocery Co., 5 Cir., 125 Fed. 513...

Benitez v. Bank of Nova Scotia, 1 Cir., 110 F. 2d 169

1)

10

il INDEX

Berry v. Root, 5 Cir., 148 FL. 2d 945, cert. den, 326

iS 755 66 &. Ct. 91, 90-L. Ed. 403 .....-..-...

Surnrite Coal Briquette Co, v. Riggs, 274 U.S. 208

Burton Coal Co. v. Franklin Coal Co., 8 Cir., 67 F.

Ree nc inthe Gas oie een en Wine ed 20 oY

Caine v. Payne, CL A. D.C. Col. 191 ee Ya

Callaghan v. Reconstruction Finance Corp. 297 0.8.

464, 57 S. Ct. 519, 80 L. Ed. 804 ............---

Carter v. Whisler, 8 Cir., 275 Fed. 745 .........-.-

Chakos, In re, 7 Cir., 24 F. 2d 482 .....---------e--

City of Dallas v. Ryan, 5 Cir., 62 F.2d 959, cert, den.

969 (°. S, 342, 53S. Ct. 692, 77 L. Ed. 1489 ......

City of Richmond vy. gird, 249 ULS. 174, 30S. Ct. 186

en ME NE cs lees Oko Waves eo vine wa a ene.

Columbia Ribbon Co., Matter of. 3 Cir. 117 F.2d 999

‘ornell v. Nichols Longworthy Co., 2 Cir., 201 Fed.

aie esa pe get Rec Po Pa are ee a BC a a

-~

Ephraim v. Pacitie Bank, 129 Cal. 5S, 62 Pac. 144..

Finkelstein, In re, 2 Cir., 33 F. 2d So) SN tse ree Tae Te Ree

First Bond & Mortgage Co., In re. 5 Cir, 4 B22 950

Fords Warbuck Springs Ine., In re (D.C. Mass.) ¢

ee Me on, oa i ss vine e ea a > = wo lom oe eo oer ee

Francis v. MeNeal, 228 U.S. 695, 35.5. Ct, 701, 37 1.

ee Ms a ck kn re nineirnie ta eae ee ee so eek

Fuller, In re. 2 Cir., 9 FP. 2d 597, cert. den. 269 U.S.

ei ee eS Ace une eae eon ey BSE

Gille~pie vy. J. C. Piles Co., 8 Cir., 178 Fed. 886 .....

Ginsberg, In re, 3 Cir. 219 Pee Bee eas ke wenc es

Guerin v. Weil Gotschal & Manges, 2 (ir., 205 F. 2d

MEN SA ON estas ogee AO > SH Cm hae eee P ae meek oF

Guyel v. New Orleans Bank, 9 Cir., 239 Fed. 676 ....

PAGE

INDEX ill

PAGE

Hanna v. Brictson Mfg. Co., 8 Cir., 61 F. 2d 139 .... 3

Harralson, In re, 8 Cir., 179 Fed. 490 .............. 11

Harris, In re (D.C. N. D. Ohio) 1% Fed. 517 .... 19, 20, 21

Hart v. Ronan, 58 N, D. 516, 226 N. W. 620, 14 A. B.

en aN ere boo ans wiv nae ees slope sce s s

Heintzeliian Const. Co, Ine., In re, (D.C. N.Y.) 34

Pe er Ree eta eu ds pee ees 6:5 s

a EB Ae eo OS Oe ee: 11

Hollins, Matter of, 2 Cir., 229 Fed. 249, cert. den, 241

U.S. 661, 36S. Ct. 448, GO L. Bed. 1226......... 3

Howe Co. v. Jones, 66 lowa 156, 23 N. W. 376 ...... 14

India Wharf Brewery Ine., Matter of, 2 Cir. 96 F.

OT a ee Ra a, SE OS ea ae aa a re a )

Jacob Berry & Co., In re (D.C. N. Y.) 146 Fed. 625,

ee ee oy oole bin wil ake eo i)

SN Ea Ge <> ee eae eae 8

Joslyn, Matter of, 7 Cir., 224 F. 2d 223 ............ 4

Judith Gap Commercial Co., Matter of, 9 Cir., 5 F.

tT eg Se al ago Se +

Kaufman, Matter of, 2 Cir., 176 Fed. 93 ........... 17

Kaufman Brown Potato Co. v. Long, 9 Cir. 182 F.

eee area ais as oe en bie oe 19, 21, 22

Kline, In re (D.C. Pa.) 7 F. Supp. 850, aff’d sub.

nom. U, S. National Bank v. Blauner’s, 3 Cir.,

Per MRR SR SG aie ap ve w o.0 eS s

Kneeland v. American Loan & Trust Co., 136 U.S.

a a ae, ae ee ee es SO ow kode bettas 14

Kramer and Muchnick, Matter of (D. C. Pa.) 215

Sie MIEN Da ene try Date ar eae atala oe SEL Ro Ks 19

Lake’. Laundry Inc., Matter of, 2 Cir., 79 F. 2d 326,

cert. den. 296 U.S. 622, 56S. Ct. 144, SO L. Ed.

los de ale SiG § Ther oi Rien ton a eae Gh Man ae ns Nae aM RE pe ae 9

iv INDEX

PAGE

Lane v. eso! Corp., 2 Cir, 117 F. 2d 216, cert.

den. 313 U.S, 580, 76 L. Ed. 1101, 85 L. Ed, 1537 4

Lea v. “bia ‘tev inst., 3 Cir. 142 F. 2d 982... 12

Levin v. Barker, 8 Cir., 122 F, 2d 969 ......6cseeee 4

Liberty National Bank v. Bear, 278 U.S, 215 ...... 16

Liebowitz v. Voiello, 2 Cir., 107 F. 2d 914 .......... 4

cave S; 2), BO is FO Oe cc Sepa ee ads cence 15

Lustron Corp., In re, 7 Cir., 196 F, 2d 975 ......... ’

Marcuse, In re, 7 Cir:, 12°F. 24 313 2. ee cae: 12

Marnet Oi] & Gas Co. v. Staley, 5 Cir, 218 Fed, ry 8, 20)

Mason v. Mitchell, 9 Cir., 135 F. 2d 599 ............ 7

McKenna, In re (D. C. N. Y.) 137 Fed. 611 ........ 3

MeMillen v. U.S. Fidelity & Guaranty Co., 8 Cir, 22

Se ee BON eg eye alka Se a RE Oe ev ee ed 7

Meadows, In re, 2 Cir., 211 Fed. 948, cert. den, sub.

nom. Hotchkiss v. Lyun, 254 U.S. 765, 44.8. Ct.

OT ae Se: Be, LO, S faa aoe pe has Wee Rs 1)

Meinhard v. Salmon, 249 N. ¥. 458 ......-....-.0.. s

Morcur, In re, 3 Cir., 122 Fed. BO4 2... cece scenes 9, 16, 20

Meyer, In re Henry L., 2 Cir, 98 Fed. 976 ......... 16, 20

Masro v. Beatt, 6 Cir. 30 F; Sd GOs cies cia cives 3

Morris Bro-.,

Naylor v.

In re (D.C, Ore.) Ss Oe Goes esac

Canley, 8 Cir., 96 F. 2d 161 .......-e.00e-

New Lamp Chimney Co. v. Ansonia B.C. Co, 91 0,

ay Ey ee | eer ere ery cee

New York Dock Co. v. S.S. Poznam, 274 U.S. 117

Nicholson v. Western Land & Bldg. Co., 9 Cir., 60 F.

21 516, cert. den, 28S U.S. 609, 53 S. Ct. 396, 17

CR Oe oes Ae a eae. kina rane Cees

Nisonoff v. Irving Trust Co., 2 Cir., 68 F.2d 32 .....

Norris’ Case (D. ©. Mich.) 18 Fed. Cas. 317, Fed.

Cas.

No.

MERTEN re og cia laws coe atae etala

INDEX

a A i Ue |: Re a er a

Pearson v. Higgins, 9 Cir., 49 F. 2d 47 ............

Peer Manor Bldg. Corp., In re, 7 Cir., 143 F. 2d 764,

COCU OM Meee Ws OT, oo ecw ee he ct bwewees

Pittsfield National Bank v. Bayne, 140 N. Y, 321.

Prindible, Matter of, 3 Cir., 115 F. 2d 21 .........

Quaker City Uniform Company, Inc. (D.C. Pa.) 13

Ps MN ES fe SenG no oa anda Rees

Realty As-ociates Securities Corp, vy. O'Connor, 295

U.S. 295, 55 S. Ct. 663, 79 L. Ed. 1446 ........

Redman v. Witt, 6 Cir... 9 F. 2d 36 ........0cccccce

Richardson, In re (D. C. La.) 44 F. 2d 671 .........

Roth Co, Ine, In re, 7 Cir, 118 F. 2d 156, idem. 125

Pe Cais beet ccc whe cob fee wee bile

Samuels and Lesser, Matter of, 215 Fed. 845 ......

Schwartz, In re J. & M. (D. C. N. Y.) 204 Fed. 326 ..

Seaboard Nat. Bank v. Rogers Mil] Products Co., 2

ei ee, ee eae ad bao rota rls eins

Securitios & Exchange Commission v. U. S. Realty

& Improvement Co., 310 U.S. 434, 60S. Ct. 1044,

te OR RE 1. Siete ARIE BS cen Oc iy ee ee

Silberberg v. Ray Chain Stores, Ine., 3 Cir. 58 F. 2d

766, cert. den. Winne v. Silberberg, 287 U.S. 631,

Be te OA ee WE eas Py OE a awe nk eck oe Sa

Smith v. Township, 6 Cir., 150 Fed, 257 ...........

Spregue v. Ticonic National Bank, 307 U.S. 161 ..

Stein & Co., In re L., 7 Cir., 127 Fed. 547 ..........

Tate v. Brinser (D.C. Pa.), 226 Fed, 878 ..........

Taubel-Scott-Kitzmiller Co. v. Fox, 264 U. S. 426,

OO, a ee as BE orc elke Cees

vi INDEX

PAGE

Taylor v. Fram, 2 Cir., 252 Fed, 465 ....-..------- 9

Todd v. Pettit, 5 Cir., 108 F. 2d 139 ........-...-.- 10, 11

Toole & Henry, In re (D. C. N. Y.) 294 Fed. 979 ... 10

Tresslar, In re (D. C. Ala.) 20 F. 2d 663 .........-- 7

Trustees v. Greenough, 105 U.S. 527 .....-.---+-5- d

U.S. v. Onassis (D. C. N.Y.) 133 F. Supp. 327 (foot-

ee | See ere ee a 8

Warren v. Palmer, 310 U.S. 132 .........----000-- 6

Wheeling Structural Stee] Co. v. Moss, 4 Cir., 62 F.

a ie peer be eek Ree a bane EEO 2

Wheeling Valley Coal Corp. v. Mead, 4 Cir., 171 F.

7 RS Gee paar rd ey ie ae ee ee 4

Williams Estate, In re, 9 Cir., 156 Fed. 934 .....--. 11

Wilson, In re (D. C. N. Y.) 252 Fed, 631 ...-....-- 10

Wright-Dana Hardware Co., In re, 2 Cir., 271 Fed.

Re ee gi eaeh RR Se wae e Rew Ors wees 9

4136 Wileox Bldg. Corp., In re, 7 Cir., 100 F.2d 058 11

Young & Highee Co., 324 U.S. 204, 65S. Ct. 594, 89

L. Kd. so0 rrr ere ee a a 2 4

STATUTES CITED.

Baxkruretey Act:

Sec. 1 (4) (11 U.S. C. A. See. 1 (4)) «+--+. s

Sec. 2a (3) (11 U.S. C. A. See. Ha (3)) .----- 12

See, 3 (11 U. S. C. A. See. 21) ..---------- oe 16

Sec 5 (11 U. 8. C. A. See. 23) .0--- cee enneee 9, 15, 20

Sec. 18b (11 U.S. C. A. See. 41b) ......------ 16

INDEX vil

PAGE

Bee. 26 (100, BC, A Be EBs a is vec cewenesss 3

Bok: 20°(53 Cs ROE TOO ove vane pasees 5

Bee, OF 190-0), BA. Bi ee SO) ook ac sivswess 16

mee. Ge-(55 U0 2; OO Wee heen cca sees 5)

Sec. 64 (11 U.S. C. A. Sec. 104) ..........2.-- 5,7

Bee. Tie (11 U8. ©. A Bee, Fite) 2. css fees 12

See. 70f (11 U. 8, C. A. Sec. 110f) ..........-. 13

Bee. Ta (88 OBR By ee TEED esc nkes cokvus 7

See. 140 (310 D.8. ©. B Bee FOR) occ ccecccts. 6

See. 77B (ce) (8) (k), (11 UL S.C. A. See. 207

(iS WRS NES Saeed s ties hone teas 7

Sec. 77B (ce) (9), (11 U.S. C. A. See. 207 (e) (9)) 6

Sec. 77B (1) (11 U.S. C. A. See. 207 (1)) ..... 6

Bee, 102:(11 0.6.0. B. Be. GOS vc ie vseisvnss dD

Sec, 242 (2) (3) (11 U.S. C. A. See. 642 (2) (3)) 6

Bee. 206 (11 DB, Cee: GG). i sa caver cates 6

Chap X (11 U.S.C. Title 11, Chap. 10, Sees, 501-

SPF eee abe Meee ao adT or ek te rc cn eae 6

AUTHORITY CITED

High, Receivers (4th Ed.) Sec. 796 ................ 1}

IN THE

Supreme Court of the United States

Ocroper Term, 1955

cc)

Davip Cuar tes Kern, trustee in Bankruptey of Witutiam

FriepMan doing business under the name and style of

FauLTLess Press,

Petitioner,

AGAINST

3ranpr & Branpvt Prirers, Inxc.,

Respondent.

ty.

Vy

BRIEF IN OPPOSITION TO PETITION FOR

WRIT OF CERTIORARI

Question Presented

Does a court of bankruptey have the power to charge the

assets of a non-bankrupt partnership, which assets it has

no power to administer, with the compensation of the re

ceiver, the trustee, and their attorneys of the estate of an

individual bankrupt member of said partnership?

The above question represents the issue presented to the

Court below on the last appeal and was the subject of its

decision reported in 252 F. 2d 151 (Appx. p. 20).

The petition for writ of certiorari » directed to two sep-

arate decrees of the Court of Appeals. The first was dated

9

and entered on February 14, 1955 and the petition for

rehearing was denied on May 11, 1955. No review on writ

of certiorari was sought therefrom within the time pre-

seribed by 28 U.S. C. A. See. 2101 (¢). The issues deter-

mined by the Court of Appeals on this first appeal was

the subject of its opinion in 220 F. 2d 935 (Pet. App. 13).

The Court there held that the lower court’s finding of the

existence of a partnership between the bankrupt and the

respondent was correct, but that since the partnership had

not been adjudged a bankrupt and the respondent had not

consented to the administration in bankruptey of the part-

nership property, the partnership assets must be turned

over to the respondent for administration under the New

York Partnership Law. The remand was solely for the

purpose of re-examination by the bankruptey court of the

claims filed in the bankruptey proceedings so that an order

might be entered subordinating those claims solely against

the partnership to the claims against the individual part-

ner (Pet. App. 18).

The Court below thus finally and conclusively disposed

of all the issues between the parties leaving nothing more

than an act extraneous to the issues involved.

The decree ascertained and declared the rights em-

bracing the substantial merits of the controversy and the

issues litigated or necessarily involved in the litigation.

Summary of Argument

The equitable powers of a Court of Bankruptey do not

authorize the allowance of compensation not expressly

provided for in the Bankruptey Act.

The Order of the Court below on the first appeal relative

to the lack of jurisdiction of the Bankruptey Act to ad-

minister the partnership property, assuming arguendo

3

the same is properly before this Court, is in accord with

the decisions of other Courts of Appeals.

The decisions of the Court below are not in conflict with

those of other Courts of Appeals, present no important

question of Federal Law, and are not of publie interest

and importance,

POINT I

A bankruptcy court lacks power to grant compensation

not expressly provided for by the Bankruptcy Act.

A bankruptey court has only sueh jurisdiction as is

conferred upon it by the statute. New Lamp Chimney Co.

v. Ansonia B.C. Co., 91 VS. 656. 221. Ed. 336. Bardes

v. Hawarden Bank, 178 U.S. 524, 20.8. Ct. 1000, 44 L. Ed.

1175. Taubel-Scott-Kitzmiller Co. v. Fox, 264 U. S. 426, 44

S. Ct. 396. 68 L. Ed. 770. Matter of Hollins, 2 Cir., 229 Fed.

349, cert. den, 241 U.S. 661, 36 S. Ct. 448, 60 L. Ed. 1226.

Silberbera v. Ray Chain Stores, Inc., 3 Cir., 58 F. 2d 766,

cert. den. Winne v. Silberberg, 287 U.S. 681, 53 8S. Ct. 88,

77 OL. Rd. 547. Wheeling Structural Steel Co. v. Moss, 4

Cir, 62 F. 2d 37; Naylor v. Canley, 8 Cir., 96 F. 2d 761;

Moore vy. Scott, 9 Cir., 55 F. 2d 863. Although jurisdiction

in bankruptey is conferred on the district court, the latter

when sitting as a Court of Bankruptey is regarded as a

separate court exercising powers and a jurisdiction dis-

tinet from its powers as a district court. anna v. Brictson

Mfq. Co.. 8 Cir., 61 F. 2d 139. Norris’ Case (1D. C. Mich.)

18 Fed, Cas. 317, Fed. Cas. No. 10304.

It is unquestioned that bankruptey courts have equity

powers, but it is settled that the equitable powers may be

exereised only within the limits of the Bankrupteyv Act

and subjeet to and consistent with the specifie provisions

contained therein. Securities & Exchange Commission v.

4

United States Realty & Improvement Co., 310 U.S. 454,

60S. Ct. 1044, 84 L. Ed. 1293, Young v. Higbee Co.,, 324

U. S. 204, 65 S. Ct. 594, 89 L. Ed. 890; Matter of Columbia

Ribbon Co.. 3 Cir. 117 F. 2d 999, Wheeling Valley Coal

Corp v. Mead, 4 Cir. 171 F. 2d 916; Burton Coal Co. v.

Franklin Coal Co., 8 Cir., 67 F. 2d 796. In Matter of

Judith Gap Commercial Co., 9 Cir. 5 BF. 2d 307, 309, the

Court held that though bankruptey proceedings are equi-

table in their nature “nevertheless they are to be admin-

istered in accord with the Bankruptey Act and general

orders, and not by virtue of any broad unlimited equity

power”’.

Compensation for services rendered is but one of many

phases of bankruptcy procesdings expressly governed by

the Act.

Trustees and receivers in bankruptcy, as well as ref-

erees, are public officers and their fees and allowances

are allowable only within the limits of the Bankruptey Act.

They ‘‘must show clear warrant of law before compensa-

tion will be owing to them in the performance of their

public duties’. Realty Associates Securities Corp. ¥.

O'Connor, 295 U.S. 295, 55S. Ch. 663, 666, 79 TL. Mad. 1446:

Callaghan vy. Reconstruction Finance Corp. 297 U.S. 464,

468, 57 S. C(t. 519, 80 L. Ed. 804; Matter of Prindible, 3

Cir., 115 F. 2d, 21. The Courts of Appeal have uniformly

held that the bankruptey court lacks power to grant, and

the policy of the Act is against compensation not expressly

provided for by the Act. Lane vy. Haytian Corp., 2 Cir,

117 F. 2d 216, cert. den. 313 U.S. 580, 76S. Ct. 1101, 85

L. Ed. 1537: Guerin v. Weil, Gotschal & Manges, 2 Cir.

205 F.2d 302, Berry v. Root, 5 Cir., 148 KF, 2d 945, cert.

den. 326 U. S. 755, 66 S. Ct. 91, 90 L. Ed. 403. In re

First Bond & Mortgage Co., 5 Cir., 74 F. 2d 9380, Matter

of Joslyn, 7 Cir., 224 F. 2d 223, Lerin v. Barker, 8 Cir. 122

F. 2d 969. In Berry v. Root (supra), 148 F. 2d 940, 946,

5

the Court after noting that a bankruptcy court often ap-

plies equitable principles but ‘‘is not strictly a Court of

Equity, but a statutory Court created by the Bankruptcy

Act, and governed by it’’, stated:

‘*As to that proceeding the Act of 1898 has not

adopted the equity precedents and practices as to

costs, ineluding costs as between attorney and cli-

ent, commonly called an allowance of attorney’s fees.

The original Act and all the amendments and ex-

pansions have dealt specifically with the costs and

attorney’s and other fees to be allowed, and have

dealt jealously with them. The fees allowable for

services in each kind of bankruptey proceedings

have veen provided, expressly or by implication,

others are excluded.”’

The compensation of receivers and trustees is fixed

under See. 48 (11 U.S. C., See. 76) and Sec. 62 (11 U. S.

(, See. 162) of the Act, and is pavable, together with their

attorneys* fees, under See. 64 (11 U.S. C., See. 104) of the

Act. Matter of India Wharf Brewery Inc., 2 Cir., 96 F.

2d 710; In re Lustron Corp., 7 Cir., 196 F. 2d 975. In re

McKeuna (D.C. N. Y.), 137 Fed. 611,

Petitioner made no attempt in the court below and can-

not here indicate any provision of the Act which author-

izes the payment of the compensation sought.

Tie following cases cited by the petitioner were not

bankruptey proceedings and therefore inapplicable: New

York Dock Co, v. S. S. Poznam, 274 U.S. 117, a proceed-

ing in admiralty to establish a lien on a vessel; Burnrite

Coal Briquette Co. vy. Riggs, 274 U.S. 208, an aetion by a

stockholder against a corporation for mismanagement:

Palmer vy. Texas, 212 U.S. 118, an action by a stockholder

to liquidate a corporation; Trustees v. Greenough, 105 U.

S. 527, a bondholder’s action against trustees to preserve

6

a fund for bondholders as a class; Spraque vy. Ticonic Na-

tional Bunk, 307 U.S. 161, a bank depositor’s action to

establish her right in a trust fund which permitted other

depositors to recover from the fund on the law made in

the case.

Warren vy. Palmer, 310 U.S. 132, and In re Peer Manor

Bldg. Corp., 7 Cir., 148 F. 2d 764, cert. den. 323 U.S.

757, cited by petitioner, are in accord with the bankruptey

decisions above noted. In each of these bankruptey pro-

ceedings there was express statutory authority for the

compensation allowed. Warren v. Palmer (supra) was a

proceeding under former Sec. 77B of the Act (11 U.S. €.

A. See, 207). The authority for the granting of allowances

was See. 77 Bie) (9), (11 UL S.C. AL See. 207 (Ce) (9)) which

authorized the judge to ‘tallow a reasonable compensation

for services rendered’? and See 77 B (1) 411 UL S.C. A,

See, 207 (1)) whieh authorized the judge to include in an

order of dismissal of the proceedings **such terms as the

judge may deem equitable for the protection of the obliga-

tions ineurred by any trustee or trustees appointed under

this section, and for the payment of administration ex-

penses and allowances in the proceeding liereunder.’’ The

Peer Manor ease (supra) was a proceeding involved under

Chapter X of the Bankruptey Act (U.S.C. Title IT, Chap.

10, See, 501-676). See. 242 (2) (38) (11 U.S. CL. See.

642(2) (3)) empowered the judge to allow reasonable com-

pensation to parties in interest and their attorneys. See.

246 (11 U.S.C. See. 646) empowered the judge to allow

reasonable compensation ‘*to any persons entitled thereto,

as provided in this ehapter’’, upon dismissal of the pro-

ceedings or the entry of an order adjudging the debtor a

bankrupt.

The policy of the Act to restriet compensation to that

specifically authorized is further evidenced by General

Orders in Bankruptey 35 (3) which provides that ‘The

7

compensation allowed to receivers or trustees by the Act

shall be in full compensation for the services performed

by them’, and by Section 72 (11 U. S. C. See. 112) of the

Act which provides that no receiver or trustee ‘‘shall in

any form or guise receive, nor shall the Court allow him,

any other or further compensation for his services as re-

quired by this Act than that expressly authorized and

permitted in this Aet."* In WMeMillen v. U.S. Fidelity &

Guaranty Co., 8 Cir., 22 F. 2d 155, the Court held that See.

72 prohibits any equitable consideration of reasonable ecom-

pensation on a quantum merit basis, and in Nisonoff v.

Irving Trust Co,, 2 Cir., 68 F. 2d 32, 34, the Court stated

that ‘*The terms of the Act are explicit and strictly en-

foreed.”’

Sec. 64 of The Act (11 UC. S. C. See. 104) supra, ex-

pressly made inapplicable to proceedings under See. 77 B

(Warren vy. Palmer, supra) by See. 77 B (e) (8) (k) (11

US. CL A. See, 207 (¢) (8) (k)) and to proceedings under

Chapter X (re Peer Manor Bldg. Corp. (supra) by See.

We «d1 UL S.C. See, 502)), directs the distribution of the

moneys belonging to the bankrupt estate. It provides for

the order of payment ‘tout of bankrupt estates’, and for

the payment therefrom of compensation of receivers, trus-

tees and their attorneys. The bankrupt estate consists only

of the residue left after the determination of questions

of title, liens and other claims asserted by their parties.

City of Richmoud vy. Bird, 249 U.S. 174, 39S. Ct. 186, 63

L. Md. 543. In re Cramond (D.C. N. Y.), 145 Fed. 966;

fn re Tresslar (D.C. Ala.), 20 F. 2d 663; City of Dallas v.

Ruan, 5 Cir., 62 F. 2d 959 cert. den. 289 U.S. 342, 53S. Ct.

fe 77 L. Ed. 1489.) Under this section it is the estate of

the bankrupt whieh is liable for the compensation of the

receivers and trustees and their attorneys.

The words *testate’’ and ‘*bankrupt estates** in the Act

mean the unencumbered assets generally of a bankrupt

8

properly administrable in bankruptey. The Act does not

deal with property which forms no part of the bankrupt’s

assets. Matter of Quaker City Uniform Company Ine.

(D. (., Pa.) 134 F. Supp. 596. A ‘*bankrupt”’ is one

against whom an involuntary petition has been filed, or who

has filed a voluntary petition, or who has been adjudged

a bankrupt (Sec. 1 (4)) (11 U.S. C., See. 1 (4) of Act).

In the instant matter the bankrupt is Friedman and not

the partnership.

The partnership assets did not constitute an asset of

the individual's bankrupt estate. Two separate entities

are involved herein, the partnership, and Friedman, as

the individual bankrupt. Each has its own assets and lia-

bilities. In New York, it has been held that in keeping

partnership accounts, the partnership is treated as a legal

entity, separate and distinct from the several partners.

Jones vy. Blun, 145 N. Y. 333, 341; U. S. v. Onassis (S. D.,

NX. Y.), 133 F. Supp. 327, 331 (footnote 4).

Upon the finding of the Court below that a partnership

existed, the partnership property herein was held by the

bankrupt only as a trustee. Meimhard y, Salmon, 3249 N.Y.

458: Hart v. Ronan, 58 N. D. 516, 226 N. W. 620; 14 A. I.

R. (XN. S.) 421.) Property held bv a bankrupt in’ trust

does not constitute an asset or part of a bankrupt’s estate.

In re Finkelstein, 2 Cir., 33 F. 2d 278; In re Heintzelman

Const. Co. Inc. (D. C., NX. Y.), 34 F. Supp. 109; In re Kline

(D. C., Pa.) 7 F. Supp. 850, affd. sub. nom; United States

Notional Bank v. Blanner’s Affiliated Stores, 3 Cir. 79 F.

Yd S26.

The fact of possession of partnership property by the

receiver-trustee is of no signifieance. In Marnet Oil &

Gas Co. v. Staley (supra), 218 Fed. 45, 49. the Court

stated:

“The jurisdiction of the court as a court of hank-

ruptey was not enlarged by the act of the bankrupt

9

in surrendering to the trustee in bankruptcy partner-

ship property, theretofore in the bankrupt’s charge

as Managing partner, which, without the consent of

his solvent partner, the plaintiff in this suit, was not

subject to be administered in the bankruptey pro-

ceeding,”

Under Section 52 of the New York Partnership Law

‘a partner’s interest in the partnership is his share of the

profits and surplus*’, which can be determined only after

compliance with Section 71 of said Law (App. P. 16). The

ouly interest that the reeceiver-trustee of Friedman had in

the partnership property was the right to demand and re-

ceive Friedman's interest as a partner, if any, in the firm

assets after an accounting and payment of partnership

debts ont of partnership assets. See also Redman v. Witt,

6 Cir, 9 F.2d 26: In re Mercur, 3 Cir., 122 Fed. 384:

Pearson v. Higgins, supra, 49 F. 2d 47; Seetion 5 (i) Bank-

ruptey Act (11 U.S. ©., See. 28 (1)). Faetually, this

interest does not exist. In his petition annexed to the pro-

posed order to show cause herein submitted to the Referee,

the petitioner stated: **As the partnership funds are in-

sufficient to pay partnership debts, there will be no neces-

sity to account to the Trustee for the interest of the bank-

rupt partner.’’

The following have been held not to constitute assets

of a bankrupt’s estate:—property subject to a conditional

sales agreement (Matter of Lake's Laundry, Inc., 2 Cir.

YP 2d 326, cert. den. 296 U.S. 622, 56S. Ct. 144, 80 L.

Ed. 442); property held by a bankrupt as bailee or agent

nore Wright-Dana Hardware Co., 2 Cir., 211 Fed. 908:

Taulor v. Fram, 2 Cir., 252 Fed. 465): property in posses-

sion of 2 bankrupt on consignment (Liebowitz: v. Voiello,

- Cir, 107 F.2d 914): pledged property in the hands of

the bank rupt pledgee (In re Jacoh Berry & Co, (D. C.,

NX. Y.), 146 Fed. 623, aff'd 174 Fed. 409); property whieh

10

came into possession of the bankrupt through fraud (Gi/-

lespie v. J.C. Piles Co., 8 Cir 178 Fed. 886), and property

of a third party pledged as collateral for the payment of

a bankrupt’s obligations. Ja re A. Roth Co. Inc., 7 Cir.

118 F. 2d 156; idem, 125 F. 2d 396.

Property which does not constitute a part of the bank-

rupt’s estate must be withdrawn from the bankruptey pro-

ceedings free from the conditions that may be imposed

upon general or secured creditors, American Service Co,

v. Henderson, 4 Cir., 120 F. 2d 525, and free from admin-

istration expenses to meet which estate assets may not

suffice. Todd vy, Pettit, 5 Cir, 108 FB, 2d 139,

Where property is taken from an owner thereof with-

out his consent by a receiver under an order reversed on

on appeal, the claimant is entitled to a return of the prop-

erty without charge of any kind against either him or the

property. Beach vy. Macon Grocery Co., 9 Cir., 120 Fed.

313. Commissions are allowable only upon the surplus

remaining after the sale in bankruptcy of personal prop-

erty pledged for the repayment of a loan. In re Meadows,

2 Cir, 211 Fed. 948, cert. den. sub, nom. Hotehkiss vy.

Lynn, 234 U.S. 763, 34.8. Ct. 997, 58 L. Ed. 1581. Upon

the bankruptey of a stockholder, the commissions of the

trustee are calculated on funds which do not include either

securities or their proceeds which claimants have success-

fully reclaimed, nor ean any allowance to the attorney

for the trustee be made out of such securities or their

proceeds. In re Wilson (D. C., N. Y.), 252 F. 631; In re

Morris Bros. (D. C., Ore.), 8 F. 2d 629. In re Toole and

Henry (D. C.. N.Y), 204 Fed. 975. No commissions are

payable upon property sold by a receiver but found not

to constitute property of the bankrupt estate on the ground

that the property of the bankrupt estate on the ground that

the property fraudulently came into the possession of the

bankrupt. Gillespie V. J.C. Piles & Co, (supra), 178 Fed.

886.

11

Where mortgaged property is retained for administra-

tion for the benefit of general creditors, compensation is

payable out of the general estate. In re Meyers, 2 Cir.,

24 FL 2d 349; Gugel vy. New Orleans Bank, 5 Cir., 239 Fed.

676; Swith v. Township, 6 Cir., 150 Fed. 257; In re Chakos,

7 Cir, 24 F.2d 482; In re 4136 Wilcox Bldg. Corp., 7 Cir.,

Wok, 2d O88. In re Williams Estate, 9 Cir., 156 Fed. 934,

930, the Court stated:

“They are not chargeable with the general costs

of the administration of the bankrupt’s estate such

as the services of a receiver in carrying on the busi-

ness of the bankrupt, the expenses and losses of

such business, the fees of the attorney for such re-

eeiver, the general fees of the trustee or those of

his attorney.’

In ve T. BE. Will Co., 7 Cir, 159 Fed. 73, cited by peti-

tioner, is not in confliet with the decision below. It in-

volved a dismissal of a bankruptey proceedingy. The

Seventh Cireuit is in accord with other circuits to the effect

that non-bankrupt estate property is not chargeable with

expenses of compensation for estate serviees. In re Chakos

(supra), 24 BF. 2d 482, In re 4136 Wileoxr Bldq, Corp. (su-

pra), 100 P, 2d O88: In re A. Poth Co. Ine.. 118 F. 2d 156:

idem, 125 F.2d 396. In ore Joslyn (supra) 224 F. 2d 223.

The absenee of funds in the bankrupt estate to pay the

commissions and allowances does not warrant the Court to

order payment thereof from property not constituting

property of the estate. Jn re Fords Warbuck Sprinas,

Tne. (D.C, Mass.) 7 F.2d 959; Todd v. Pettit (supra), 108

Pd 189: Gugel vy. New Orleans Bank (supra), 239 Fed.

6: In ore Harralson (8 Cir, 179 Fed. 490; Smith v.

Township (supra), 150 Ped. 257: In re Richardson (B.C.

La.). 44 F. 2d 671. In Burton Coal vo Frautklin Coal Co.

supra), OF BF. 2d 796, 797, the court, after noting that

the jurisdiction of a bankruptey court in equity is confined

12

to the jurisdiction conferred upon it by the provisions of

the Bankruptcy Act, stated:

“The plain mandate of the law cannot be set

aside because of considerations, which may appeal

to referee or judge as falling within general pyin-

ciples of equity jurisprudence,”’ |

One of the contentions of the petitioner is that a bank-

ruptey court is a court ‘of equity and that under general

principles of equity the partnership assets constituted a

fund which was equitably chargeable with a lien for the

expenses which have created and preserved it, including

compensation to counsel. This contention is untenable

both under equitable doctrines and under the Bankruptey

Act.

As above discussed, compensation of a receiver-trustee

and counsel is strietly governed by the Act and is payable

only from the estate of the bankrupt.

Further, the petitioner did not create and preserve the

partnership assets. Such assets were always those of the

partnership, the existence of which was found by. the

Court. The receiver-trustee could not aet for partnership

creditors. He represented only the estate of the indi-

vidual bankrupt and his individual creditors. There was

no finding of expressed or implied consent by the partner:

ship creditors to their representation by petitioner. Lea \.

Paterson Sav. Iust., 5 Cir., 142 F. 2d 982. The receiver

was appointed under Section 2a (3) of the Bankruptey

Aet (11 U.S. ©., See. Ta (3)) which authorizes the ay-

pointment of a receiver ‘*to take charge of the property of

bankrupts’’. In his action to fasten a partner's liability

upon respondent, the receiver acted outside the scope of his

duties, In re Marcuse, 7 Cirv., 11 F. 2d 512. The Trustee,

vested ‘¢with the title of the bankrupt’? under Section 7a

(11 U.S. €., See, 10a, supra), was elected under Section

13

44 of the Act (11 U.S. C. See. 75) by ‘‘the creditors of

the bankrupt’’, and the first duty of trustees, under See.

47 of the Act (11 U.S. C. A. See. 75) is to collect and

reduce to money ‘‘the property of the estates for which

they are trustees’’, It is ‘tall the items of real and per-

sonal property belonging to the bankrupt estate’’ which is

the subject of appraisal and sale. Section 70f (See. 11

U.S. €., See. 110f). The operation of the business of the

hankrupt herein by the receiver-trustee was not done by

the procurement or with the consent of the partnership.

It was presumably in the interests of the general eredi-

tors of Friedman, as the individual bankrupt herein.

Apart from the restrictions on the power of the bank-

rupt court as above discussed, and viewed from the point

of equitable doctrines, it is respectfully submitted that the

compensation sought is without authority,

The allowance in equity of the expenses of litigation

termed costs ‘tas between solicitor and elient’’ are allow-

able only in exeeptional cases and for dominating reasons

of justice. It has been held that the diseretion to allow

same should never be exercised in a case where the inter-

ests of the party whose fund is to be charged are antagonis-

Te to the party for whose benefit the suit is proseented.

Caine v. Payne (C, C. A. D. C., Col.), 191 F. 2d 482, In

Gillespie v. J. C. Piles & Co. (supra), 8 Cir., 178 Fed.

S86, SY, the Court stated:

There is a manifest injustice and inequity in

taking out of a fund or property in the custody of

acourt compensation for the services of an attorney

or for the service of any other party by means of

which the fund or property has been taken or kept

from its true owner. The latter ought not to be

required to pay for services which have been a posi-

five detriment to him. And courts of equity may

not lawfully take out of a fund or property in its

z one |

14

custody and pay compensation for the services of an

attorney of a trustee or for the services of any

other party by means of which the fund or property

has been taken or detained from its equitable owner,

Hobbs v. MeLean, 117 U.S. 567, 581, 6 Sup. Ct. 870,

29 L. Ed. 940.’

In equity there can be no compensation allowed on as-

sets not constituting part of the property being admin-

istered by the court. Attorney General v, North American

Life Ins. Co., 89. N. Y. 94, 105; Cornel! vy. Nichols, Long-

worthy Co,, 2 Cir. 201 Fed. 320. Thus, if property of

which the receiver takes possession is determined to belong

to persons not parties to the action, the reeeiver is not

entitled to reimburse himself from the fund or property in

his possession. High, Receivers (4th Ed.) Section 796,

Ephraim vy. Pacific Bank, 129 Cal, 589, 592, 62 Pae. 177,

Hlowe Co. vv, Jones, 66 lowa 156. 72 N NW. 376, Pittsfield

National Bank vy. Bayne, 140 N.Y. 321, 329, 330. The

general rule in equity, as in bankruptey as above dis-

cussed, is that neither a mortgagee nor the mortgaged

property is liable for receivership expenses not sought or

acquiesced in by the mortgagee, Kneeland y, American

Loan & Trust Co., 126 U.S. 89, 10.8. Ct. 950, 34 LL. Ed.

370: Nicholsen v. Western Loan d& Bldg. Co., 9 Cir., 60

F. 2d 516, cert. den. 288 U.S, 605, 53.8, Ct. 396, 77 L. Ed.

O80, In Seaboard Nat. Bank v. Rogers Mill Products Co.,

2 Cir, 21 F. 2d 414, it was held improper to charge ex-

penses of administration, principally fees for equity re-

ceivers and their attorneys, to the fund realized from. the

sale of mortgaged property,

It is respectfully submitted that it is uniformly held that

a court of bankruptey lias no power to direct that compen:

sation be paid to its officers and their attorneys from prop-

erty not constituting an asset of a bankrupt estate being

administered by it.

15

POINT II

The order of the Court below relative to lack of juris-

diction over partnership property assuming the same is

properly before this Court is in accord with established

principles of law.

The Court below held that the bankruptey court had

no jurisdiction to administer the partnership property

over the objection of the respondent herein.

The involuntary petition in bankruptey herein was di-

rected solely to ‘*William Friedman doing business under

the name and style of Faultless Press, bankrupt’’. It al-

leged that said Friedman, while engaged in business, and

insolvent, committed aets of bankruptey. The respondent

was not named in said petition. There was no allegation

of a partnership, open or secret, and no allegations of the

insolvency of a partnership or of any secret or dormant

partner. The subpoena issued thereon and the subsequent

order of adjudication was addressed solely to said Fried-

mani.

Under Section 5 of the Bankruptey Aet (11 UL S.C.

23), an adjudication of a partner does not result in the

adjudication of the partnership. The partnership and its

individual partners are separate and distinet entities from

one another, A partnership may be adjudged bankrupt.

irrespective as to whether its members as individuals are

adjudged bankrupt, and any member may be adjudged

haukrapt without involving the partnership entity. Jn re

Gisherg, 2 Cir., 219 F. 2d 472: Lurie v. U. S.. 6 Cir., 20

F.2d 580. A partnership must petition or be petitioned

against an entitv. and if the adjudication in bankruptey

follows, the partnership as such is the entity adjudicated.

An adjudication of the partnership as an entity, apart

nee |

Ae onset

16

from or in addition to the adjudication of its partners,

is indispensable to the jurisdiction and power of the Bank.

ruptey Court to administer the partnership property Jn re

Ienry L. Meyer, 2 Cir, OS Fed. 976; In re Mercur, supra,

122 Fed. 384; In re L. Stein & Co., 7 Cir., 127 Fed. 547.

The only manner in which the Bankruptey Court could

aequire jurisdiction over the assets in an involuntary pro-

ceedings in bankruptey is set forth in Seetion 3, 5 and 59

of the Act (11 U.S. C. Sees. 21, 23, 95).

Qualified creditors of the partnership, alleging acts of

bankruptey, may file an involuntary petition against the

partnership or as against the partnership and its indi-

vidual members. The partnership, or any general part-

ner thereo*®, eould appear and plead to the petition. Bank-

ruptey Act, Section 18B (11 U.S. C. See. 41 B). The

tllegations of partnership. insolveney, amounts of claims

of creditors, and the commission of the alleged acts of

bankruptey may be controverted. See. 18 of the Act (11

U.S. C. A. See. 41).

In Liberty National Bank v. Bear, 278 U.S. 215, cited

by petitioner herein, this Court rejected the contention

that the adjudication of a partnership was in effect an

adjudication of the individual members as contrary to the

eXpress provisions of Sec. 5 of the Bankruptey Act, and

held that a petition filed against a partnership which id

not in terms seek an adjudieation that the individual part-

ners Were bankrupts as individuals, nor allege that the indi-

viduals were insolvent or had committed any acts of bank-

ruptey, was not in legal effect a petition filed against

them individually, and the adjudication of the partnership

was not in lewal effect an adjudication of the individual

partners,

In defending, the partnership or general partner may

defeat the involuntary petition upon a showing of solvency.

17

A partnership is not insolvent unless the total of its as-

sets and the total of the assets of all of its individual mem-

bers together, are insufficient to pay its debts. Francis v.

McNeal, 228 U. S. 695, 33 S. Ct. 701, 57 L. ed. 1029;

Inve Faller, 2 Cir, 9 F.2d 557; Mason v. Mitchell, 9 Cir.,

135 F. 2d 599.

In the instant matter, the effeet of the order of the Ref-

eree Was to subject alleged partnership assets and an al-

leged seeret partner’s assets to the jurisdiction of the

Court, although there had been wo adjudication in Bank-

ruptey of the partnership or of the alleged secret partner.

Such practice was not warranted by any provision of the

Act.

In Matter of Kaufman, 2 Cir., 176 Fed, 93, 94, an invol-

untary petition in bankruptey was filed against one Isaae

Kaufman. A motion was thereafter made to amend the

proceedings to correspond to the facts so that the peti-

tion and adjudication should run not only against Tsaae

Kaufman, individually, but ‘‘Isaae Kaufman’? a partner-

ship of which the members were Isaac Kaufman and one

Lena Kaufman, his wife. Lena Kaufman appeared gen-

erally and filed an answer to the motion. The District

Judge held that ‘‘it is established that they were as a

matter of faet partners doing business under the name

of Isaac Kaufman’? and ordered the title of the proceed

gs amended to recite the partnership, and Lena Kanf-

man to turn over all partnership property to the trustee.

The Circuit Court in reversing the order stated:

“Counsel for Lena Kaufman contends that the

record does not sustain the finding that she was a

partner with her husband, but it is not necessary to

xo into that branch of the ease. For the purposes

of this appeal it may be assumed that for some time

prior to the filing of the petition in bankruptey thers

18

was a firm in the district doing business under the

name of ‘Isaac Kaufman,’ the partners in which

were Isaac Kaufman and Lena Kaufman. The ex-

istence of the firm, however, was not known or even

suspected and in consequence the proceeding was

instituted not against any partnership but against

Isaac Kaufman individually. The difficulty with

the order is that, after proceedings against the

individual has progressed for a considerable time,

much testimony having been taken, it undertakes to

establish the pendeneyv pari passi of another pro-

ceeding against the firm, which was never begun by

filing any petition against it, and to put that second

proceeding in the same condition as the first. In

our opinion this cannot be done by a mere order;

such a procedure would deprive the firm and the

partner now sought to be brought in of the opportu-

nity which the statute gives them to controvert the

facts alleged in the petition and to have, if they so

desire, a trial by jury on the question of insolveney

and any act of bankruptey alleged to have been com-

mitted.”’

In Matter of E. M. Fuller & Company (supra) 9 F. (2)

5d7, the Court stated:

‘Indeed, we very clearly indicated, though we did

not decide, in Re Samuels, 215 F. 845, 1382 C. C. A.

1387, that a new adjudication of bankruptey was

necessary, when there was a dormant partner. Any

other view must treat the original petition as alleg-

ing not only that the estates of named partners

and the firm assets were insufficient, but that the

same was true if one added the estates of whatever

unknown and dormant partners might chance to be

discovered. That would be plainly an absurdity, and

19

no such evidence would have been admissible on the

trial of such a petition.’’

See also Matter of Kramer and Muchnick (). C., Pa.) 2138

Fed. 138; In re J. & M. Schwartz (D.C. NX. Y.) 204 Fed.

326; Carter v. Whisler, 8 Cir., 275 Fed. 743.

The petitioner cites Kaufman-Brown Potato Co. vy. Long,

9 Cir., 182 F. 2d 594. There an involuntary petition in

bankruptey was filed against two partners individually and

two partnerships of which they were partners. The indi-

vidual partners and the two partnerships were adjudi-

cated bankrupts. The Trustee moved for an order adjudg-

ing that there was a third partnership comprised of the

two individual bankrupts and other persons. An order

was entered adjudging the third partnership a bankrupt

but the other persons were not individually adjudicated

bankrupts. The Court held that the question was whether

the lower Court had the power to decree the third persons

members of a partnership which had not been theretofore

mentioned in the proceedings and to adjudge such partner-

ship a bankrupt. In holding that the order ‘twas beyond

the legal power of the Court’? (below), the Court held

that there was no authorization to be found in the Bank-

ruptey Act for an involuntary adjudication as a bankrupt

except upon the petition of qualified creditors, and that

since the acts of bankruptey charged in the involuntary

petition involved insolvency, proof of the partnership in-

solvency was mandatory. This holding is in accord with

that of the Court below in the instant matter,

The petitioner also cites In re Harris, 108 Fed. 517.

There the Referee held that since there was an adjudiea-

tion of bankruptey of the ostensible partner, the partner-

ship in reality was adjudicated bankrupt under the name

of the ostensible partner, such latter name appearing to

be the firm mame under which the secret partnership did

20

business. The referee therein stated: ‘There appears

to my mind some doubt as to the soundness of this view”.

The Court below noted that ‘Jn re Harris, D. C. XN, D.

Ohio, 108 I. 517, is perhaps distinguishable on its facts;

if not we think it is wrong’? (Pet. App. 17 footnote 4).

Petitioner does not cite any decision of another Court of

Appeals on the same matter in conflict with the decision

of the Court below.

Under See. 5 (1) of the Act (11 U.S. C. See. 23), where

all of the general partners of a partnership are not ad-

judged bankrupt, ‘‘the partnership property shall not be

administered in bankruptey, unless by consent of the gen-

eral partner or partners not adjudged bankrupt; but such

general partner or partners not adjudged bankrupt shall

settle the partnership business as expeditiously as its na-

ture will permit and account for the interest of the general

partner or partners adjudged bankrupt.’’

It is settled that while the Bankruptey Court has juris-

diction over the interests of the bankrupt partners in the

partnership property, the non-bankrupt partner has the

right to administer the partnership property elsewhere

than in the bankruptey,

Marnet Oil & Gas Co. v. Staley, 5 Cir., 218 Fed. 45; Beni-

tez v, Bank of Nora Scotia, 1 Cir. 110 F. (2) 169; In re

Henry L. Meyer, supra, 98 Fed. 976: In re Mercur, supra,

122 Fed. 384: Redman v. Witt, supra, 9. (2d) 363 Pearson

v. Higgins, supra, 49 F. (2d) 47.

The petitioner does not now question the applicability

of the cases cited above but contends that there was a

consent. In its answer respondent challenged the jurisdie-

tion of the Court to administer the property, and when

consent was given by it to a sale of the property, such con-

sent Was ‘without prejudice io our claim that the court

has no jurisdiction over the property ’* with the Referee’s

21

comment that ‘*the understanding is whatever rights you

have are being preserved.”’

Petitioner contends that only a partner who acknowl-

edges his status as such at the inception of the proceedings

is protected under Section 5 of the Act. No authority is

cited for such contention and the Act does not so provide.

Petitioner further contends that by denying its status as

a partner and in claiming property as owner it, by its ad-

verse claims, gave its consent, and that the Act was not

intended to and does not apply to one resisting the con-

tention that he is a partner, No authority is cited to sus-

tain such position, In Francis v, McNeal (supra), 228 U.S.

6), cited by petitioner, the involuntary petition in bank-

ruptey and subsequent adjudication were against all the

partners and the firm. In du re Harris (supra), the

Referee found consent from the action of the silent part-

ner in **standing by without protest, and even with posi-

tive denials of any interest in the fund’. In the instant

case, the respondent asserted its rights and adverse in-

terest to the property in question without delay,

In Kaufman-Brown Potato Co. v. Long (supra), 182 F.

21 594, 602 (footnote), the Referee noted the existence of

consent. There two grounds were advanced as the basis

of consent; the first, as a result of a denial of existence of

a partnership, and the second, in joining in the involun-

tary petition, voting for trustee, and in failing to assert

an adverse claim. The Court held that the first was not

a consent, but that consent could be inferred from. the

second. None of the elements of the second eround are

present here, In the case at bar the petition of the peti-

toner is silent as to an allegation of consent or facts from

wich consent conld be inferred. Consent is neither noted

in the Referee’s decision, nor in the order entered thereon.

Petitioner also contends that sinee the respondent did

not object to the administration of all of the firm property,

22

and turned over a bank balance in the account of Faultless

Press to the Receiver, its consent may be inferred. The

bank balance was turned over to the Receiver in March,

1954 (Ree. p. 81) several months before the present mo-

tion was instituted. Until the petition below was filed by

the Receiver, no attempt was made to administer all of the

assets as partnership property, and it cannot be said that

respondent consented to such administration when it was

unaware of any claim of partnershiy at the time the bank

account was turned over. As noted by the Court below

“This turn over, however, occurred several months before

the Trustee in the bankruptey proceedings sought to hold

Brandt as a partner’’ (Pet. App. 16 Footnote 2). As

stated by the Court below ‘tnor has appellant overtly or

impliedly consented to the administration in bankruptey

of the partnership property’’ (App. 16).

Kaufman-Brown Potato Co. v. Long (supra) cites Tate

v. Brinser (D. C. Pa.), 226 Fed. 878. The opinion in the

Tate ease is appropriate herein. The Court in referring

to the status of one Brinser who was not adjudicated a bank-

rupt stated (pp. 883-884):

‘*There was no attempt then being made to bring

the partnership assets in to such court, and how

could it be said that Brinser assented to such when

it was not attempted? The referee’s decision upon

the right of Brinser to vote the claims for the elee-

tion of a Trustee, and the review of that decision

by the court upon the petition of Brinser, in no

manner involved the partnership assets. Whether

they should be brought in by the solvent partner

was neither before the referee nor the court. * * *

When these claims were proven and attempted to be

voted, Brinser was not confronted with any such

action. There was no such action. The moment

he was confronted with the action he promptly ehal-

23

lenged the jurisdiction and has persisted in that

challenge ever since.’’

The decision of the Court below relative to the lack of

jurisdiction of the Bankruptey Court over the partnership

property was in accord with established principles of law

and the decisions of other Courts of Appeal. If the deei-

sion is in conflict with the Harris decision (supra), de-

cided by a Distriet Judge in another circuit, then, it is

respectfully submitted, such conflict is outside the rule

which moves this Court to grant a writ on the ground of

a conflict of decisions (Rule 19).

POINT III

No special or important reasons exist for certiorari.

The decisions of the Court of Appeals are not in conflict

with the decisions of this Court or of the other Courts of

Appeals. There are no important questions of federal law

presented. The questions presented are not of public

interest and general importance. The decisions of the

Court below are of limited application due to unusual facts

presented,

CONCLUSION

It is respectfully submitted that the petitioner has shown

no reason for the granting of the petition for writ of cer-

tiorari, and the petition should be denied.

Respectfully submitted,

CHuauncey H. Levy and Sypney Basin Levy,

Counsel for Respondent,

225 Broadway,

New York 7, N. Y.