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In re Perspectron Inc.

February 12, 1970


Castle, Chief Judge, and Major and Hastings, Senior Circuit Judges.

Author: Major

MAJOR, Senior Circuit Judge.

The receiver for Perspectron, Inc., a bankrupt (Perspectron or the bankrupt), on July 28, 1966, filed a petition for a turn-over order, subsequently adopted by the bankruptcy trustee. The petition in substance alleged that on or about June 15, 1966, equipment and material of a value of approximately $150,000 was transferred from Perspectron to Aero-Dyne Corporation of Illinois (Aero-Dyne) without consideration, for the purpose of delaying and defrauding creditors of the bankrupt.

Aero-Dyne by answer denied the allegations of the petition and alleged that it was not subject to the summary jurisdiction of the court; that the United States owned the property in question and that Aero-Dyne held it on behalf of the United States, pursuant to a contract dated June 9, 1965, under which Aero-Dyne was the prime contractor; that the government contract provided that title to the property in question was in the United States; that the contract had been incorporated in Aero-Dyne's purchase order forming a subcontract with the bankrupt, and that the latter's work on the contract as a subcontractor had been terminated by Aero-Dyne upon the bankrupt's acknowledgment that it could not perform. It was further alleged that upon such termination the property was delivered to Aero-Dyne in order that work on the contract might be completed, and that Aero-Dyne had paid to the bankrupt all money received by it from the United States as progress payments on the government contract.

On September 8, 1966, the United States intervened and filed an answer, and on September 12, an amended answer, to the turn-over petition. In both it asserted ownership of the property in question. The amended answer challenged the summary jurisdiction of the court.

The referee held that he had summary jurisdiction of both the government and Aero-Dyne and, after a hearing, entered his order on March 27, 1967, by which it was determined that the claim of the trustee to the property involved and removed from the premises of the bankrupt by Aero-Dyne was superior to the claim of title of the United States. Both Aero-Dyne and the United States petitioned for review of the referee's order. The district court granted such request, considered the evidence adduced before the referee and, with the acquiescence of all parties, permitted further testimony.

On July 12, 1968, the court rendered its memorandum of decision and order, holding that real and substantial claims were advanced by Aero-Dyne and the United States which preclude the exercise of summary jurisdiction. The court concluded:

"* * * the order of the Referee finding that summary jurisdiction existed, entered without the required findings of fact and conclusions of law, and the order of the Referee finding that the Trustee's title to the property was superior to that of the United States, entered without jurisdiction, must be and hereby are reversed and this summary proceeding must be and is dismissed."

From this order of dismissal the trustee appeals, and presents the issues for decision as:

"1. Did not the District Court err, on a Petition for Review, in preempting the Bankruptcy Court entirely for failure to make Findings of Fact, instead of remanding the matter with instructions to make the required findings?

"2. Was Aero-Dyne Corporation (disdaining any right or title in itself) a 'person aggrieved' so as to qualify for the right of review under Section 39(c) of the Bankruptcy Act?

"3. Did the United States waive any challenge to the Summary Jurisdiction of the Bankruptcy Court?

"4. Could title to Perspectron Corporation's inventory vest in the United States by virtue of the contract between Aero-Dyne and the government?"

In our view, the only serious question here is whether the bankruptcy court had summary jurisdiction of Aero-Dyne and the government. If this issue be decided adversely to the trustee, any other issues are of no consequence.

The district court stated in its memorandum:

"The parties have agreed that only two questions are presented for review: First, whether the court has summary jurisdiction, and, second, whether the United States has title to the property in question. Although the questions are somewhat interrelated in that the substantiality of the United States' claim to title determines the existence of summary jurisdiction, the court would have no occasion to decide the second if summary jurisdiction is lacking."

As noted, the district court reversed the referee's conclusion that the trustee's title to the involved property was superior to that of the United States, solely on the basis that the court was without summary jurisdiction. It follows that if the decision of the district court is affirmed, it will be without prejudice to the right of the trustee to seek relief in any appropriate plenary proceeding.*fn1

The trustee argues that findings of fact were not made by the referee and the court was without authority to reverse, but should have remanded the cause ...

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