
    Lawrence Hull, as Trustee in Bankruptcy of Clarence E. Hopkins, Appellant, v. Fifty-second Street Storage House, Incorporated, and Others, Respondents.
    Second Department,
    March 26, 1915.
    Bankruptcy — suit by trustee to set aside fraudulent conveyances — duty of receiver pendente lite to deliver possession of property to trustee.
    Where, in a suit by a trustee in bankruptcy to set aside alleged fraudulent conveyances by the bankrupt, a receiver is appointed during the pendency of the action and until the entry of judgment, with power to continue the business of the bankrupt and to collect moneys due or to become due, and a judgment is entered in favor of the plaintiff directing all persons in possession of the premises or business or property of the bankrupt to surrender and deliver the same to the plaintiff, the receiver, upon demand by the trustee made with the certified copy of the judgment, should surrender the property and take a receipt therefor.
    The trustee has no authority, even after the entry of the judgment, to take from the person in charge of the bankrupt’s property moneys collected without notice to or demand upon the receiver.
    Where a trustee in bankruptcy has taken possession of the property under such a j udgment, it is the duty of the receiver to deliver possession, file his accounts and not obstruct the administration of the bankrupt’s estate.
    Where the receiver has expended a large sum or involved himself in future liabilities the court may require that security be given before directing delivery of possession.
    Appeal by the plaintiff, Lawrence Hull, as trustee, etc., from an order of the Supreme Court, made at the Kings County Special Term and entered in the office of the clerk of the county of Kings on the 4th day of February, 1915, directing the return of certain money to the receiver herein and declaring him to be still in possession of certain property with the right to a counsel fee.
    
      Winifred Sullivan, for the appellant.
    
      Arnon L. Squiers [Edward P. Lyon with him on the brief], for the respondents.
   Putnam, J.:

Plaintiff is the trustee in bankruptcy of Clarence E. Hopkins, who was adjudged bankrupt in the District Court of the United States for the Eastern District of Hew York. The bankrupt property consisted principally of this warehouse with the storage business there carried on. It was subject to a first mortgage of $15,000 to the Williamsburg Savings Bank, and had been further incumbered by conveyances and assignments executed by the bankrupt before his failure.

Plaintiff as such trustee came into this court suing in equity to set aside these conveyances made by the bankrupt. He applied for appointment of a receiver pendente lite. This court at Special Term, on December 2, 1914, appointed a receiver “ during the pendency of this action and until the entry of judgment herein,” giving him power to continue the business, and to collect all accounts and moneys due or to become due in connection with this storage warehouse business. On December fourth the receiver qualified and took possession. The suit came on for trial in January, and resulted in a judgment in favor of plaintiff, in which the court set aside the transfers attacked, adjudging also that this warehouse building, with all the personal property used in connection with it and all accounts receivable, were the property of the bankrupt on the date of the trustee’s appointment; also that plaintiff as such trustee is vested with the title and right of possession of the property; that the Fifty-second Street Storage House, Inc., its officers, agents and servants, “ and all persons in possession of said premises or business or property, or any surplus income or profits of said business since July 25th, 1914, surrender and deliver the same to the plaintiff as Trustee in Bankruptcy of said Clarence E. Hopkins.” This judgment of January 16, 1915, has not been appealed from. On January eighteenth plaintiff’s attorney visited the warehouse, and- informed Mr. Mead, who had continued to act- as manager under the receiver, that plaintiff had taken possession. A copy of the judgment was served with notice of such taking possession. On the nineteenth plaintiff’s attorney took from Mr. Mead, apparently without notice or demand on the receiver, the cash on hand, $274.17, receipting therefor to Mr. Mead.

On the same day the Federal court made an order authorizing the plaintiff to continue the business under the defendant’s trade name. On January twenty-third the receiver appears to have demanded from plaintiff’s attorney the return of the cash so taken. A regretable conflict has ensued between the two courts, each maintaining a present possession of this property of the bankrupt. In view, however, of the limits on the receiver’s appointment, which was only pendente lite and until the entry of judgment, followed by the provision of such judgment directing all persons in possession of said premises to surrender and deliver the same to the plaintiff, the respective rights and duties were plain. Where' a receiver has personal property and a decree is made authorizing a party to have it, the Supreme Court of the United States has declared the orderly procedure. A demand should he made with a certified copy of the decree requiring the receiver to surrender the property upon giving a receipt to he filed so as to show exact performance of the decree. (Very v. Watkins, 23 How. [U. S.] 469.) Here this money was appropriated under the general terms of the judgment, without first communicating with the receiver. This was irregular, and the Special Term rightly directed its return, which has since been done.

But the bankruptcy statutes are the law for the State courts and not alone for the Federal courts in so far as relates to the recovery of the property from adverse claimants. Indeed, under the original act of 1898 the trustee could bring such a suit as this only in the State courts, unless by defendant’s consent. How, by amendments of 1903 and 1910, the jurisdiction is concurrent. (See 30 U. S. Stat. at Large, 562, § 60; .Id. 564, § 67, subd. e; Id. 565, 566, § 70, subd. e; as amd. by 32 id. 799, 800, § 13; 32 id. 800, § 16; 36 id. 842, § 11.) The State courts are called on to carry out the spirit of the beneficial purpose of the bankruptcy statutes. Yet the professional zeal of attorneys, with the unconscious straining by courts to hold their jurisdiction in close cases, have often let them forget the due observance of comity between courts of concurrent powers. Under the bankruptcy statute of 1867 (though less by the present act) the separate State and Federal systems have been often made the occasion of burdensome charges, duplicate fees and wasteful delays. It is a reproach that courts should let the machinery devised to make a prompt and fair division of the wrecked estate work so badly and often fail of its purpose. The present situation is plain. The receiver should obey the judgment.

After plaintiff had taken possession of the warehouse property under the judgment, the receiver was not thereafter to resist the adjudged rights of the trustee in bankruptcy, since the receiver’s custody and control had been ended by the judgment. The outlays and liabilities disclosed by the affidavits did not entitle the receiver to demand to retake the real estate and property from the plaintiff. His duty was to turn over possession, file his accounts, and not obstruct the administration of the bankrupt’s estate; or if he had substantial ground to take a precautionary attitude by reason of liabilities incurred in his trust, then he should have applied to modify the judgment. Had he expended a large sum, or involved himself in future liabilities, which the affidavits show is not the case here, this court might stand on its right to secure its officer beyond the cash in his hands before directing delivery of possession.

The order should be affirmed, so far as it requires the return of moneys taken from the receiver’s custody, and directs the settlement in the Supreme Court of the receiver’s accounts; otherwise reversed, and the receiver’s motion to continue his possession of the other property theretofore held by him as receiver denied, without costs.

Jenks, P. J., Burr, Carr and Stapleton, JJ., concurred.

Order affirmed, so far as it requires the return of moneys taken from the receiver’s custody, and directs the settlement in the Supreme Court of the receiver’s accounts; otherwise reversed, and the receiver’s motion to continue his possession of the other property theretofore held by him as receiver denied, without costs.  