In re Norris

HAZEL, District Judge.

The trustee of the bankrupt herein claims that the bill of sale executed by the bankrupt to his wife was in fraud of creditors, and that the injunction heretofore issued under section 2, subd. 15 (Act July 1, 1898, c. 541, 30 Stat. 545 [U. S. Comp. St. 1901, p. 3421]), should be continued until the title to the property specified in the bill of sale can be determined in a plenary action. The adverse claimant is the wife of the bankrupt, who has possession of the property and claims title thereto under a bill of sale to her from the bankrupt.

In view of the facts, as I understand them, an order to show cause by the referee in bankruptcy directed to Mrs. Norris to assert her claim would not have been improper. In Mueller v. Nugent, 184 U. S. 1 , 22 Sup. Ct. 269, 46 L. Ed. 405 , the Supreme Court decided that the court had power to require the deliverance of property to the bankruptcy court, where such property was held for and on account of the bankrupt. The court has power to ascertain, if an adverse claim be made by a third person in possession of the property, whether such claim is in fact well founded, or if it is fictitious or colorable. Such *599 procedure was not adopted herein, and the moving papers indicate that a plenary action lias been or will be begun by the trustee against the adverse claimant.

Under the circumstances, it would seem that the only safe way to protect the rights of the creditors is to continue the injunction until the rights of the parties have been determined by a proper tribunal. Formerly it was doubtful whether a court of bankruptcy could take jurisdiction to restrain the disposition of property in possession of a third person claiming title thereto; but the case of Bryan v. Bernheimer, 181 U. S. 188 , 21 Sup- Ct. 557, 45 U- Fd. 814, and the amendment of 1903 (Act Feb. 5, 1903, c.187, § 8, 32 Stat. 798 [U. S. Comp. St. Supp. 1909. p. 1312]) to section 23b of the bankruptcy act, removes any doubt that may theretofore have existed as to such power. If the proposed sale of the property, which is in the possession of the wife of the bankrupt herein, is not enjoined during the pendency of the plenary action, it is not difficult to perceive that the interests of the general creditors are liable to suffer. Collier on Bankruptcy (7th Fd.) p. 50. The contemplated action by the trustee should be brought within 10 days and be vigilantly prosecuted, and on this condition the injunction will be continued until the further order of the courts

So ordered.