Circuit Court of Appeals, Second Circuit.
*557 Walter Gordon Merritt, of New York City, for appellant.
Jacob M. Mandelbaum, Daniel F. Cohalan, and William P. Maloney, all of New York City, for appellee.
*558 Before MANTON, L. HAND, and SWAN, Circuit Judges.
L. HAND, Circuit Judge (after stating the facts as above).
The trustee's application necessarily presupposes that the syndicate has money, the property of the bankrupt, which it colorably retains. Such a position alone could justify summary action by the bankruptcy court. Bryan v. Bernheimer, 181 U.S. 188, 21 S. Ct. 557, 45 L. Ed. 814; Taubel v. Fox, Trustee, 264 U.S. 426, 44 S. Ct. 396, 68 L. Ed. 770; May v. Henderson, 268 U.S. 111, 45 S. Ct. 456, 69 L. Ed. 870. Possibly the syndicate unjustly refuses to give Roman his interest in the stock; that was the subject of the New York suit, and is still undetermined. Nobody suggests that the bankruptcy court could summarily dispose of that litigation by directing the performance of that contract, or the surrender of that stock. The theory is, however, that the same court may direct the performance of the agreement of settlement, a subsequent, independent, executory contract, because that performance is property of the bankrupt, like a chattel in the promisor's hands. It may be that this chose in action was itself property, as much in the possession of the bankruptcy court as any chose in action can be. If so, then the bankruptcy court may perhaps draw to itself the summary determination of who is the proper obligee, and the obligor could, if that be true, safely recognize whichever obligee succeeded. So much in any case appears to have been decided in Re Ransford (C. C. A. 6) 194 F. 658, and Orinoco Iron Co. v. Metzel (C. C. A. 6) 230 F. 40, though the opposite was held in Copeland v. Martin (C. C. A. 5) 182 F. 805. See, also, In re Kelley (D. C.) 297 F. 676. We need not decide that question, because the order does not stop there; it compels the obligor to perform, and, as we have said, can proceed only on the notion that not only the obligation is property of the bankrupt, but that its performance is also such before it has been performed. It is, indeed, true that title may change, and property vest, by reason of a contract alone for instance, a contract of sale. This is not such a case. Nobody can maintain that, before the payment is made, the bankrupt has any property in the syndicate's hands. Even though its refusal were no better than colorable, its property remained its own; it had only broken its promise, and, like any other promisor, was liable to an action for damages. Thus, not only is the order a decree of specific performance, where no such remedy exists, but it ignores the distinction between the obligation to perform and the consequences of performance. It would not be permissible to collect even a bank deposit due a bankrupt by these means. So far as possession can be imputed to such property at all, it is confined to the rights of the bankrupt to enforce the promise. The trustee must proceed as the bankrupt must have proceeded, in a court having competent jurisdiction in such causes. This was clearly the distinction which the court had in mind in Board of Trade v. Johnson, 264 U.S. 1, 44 S. Ct. 232, 68 L. Ed. 533, where the discussion turned entirely upon whether a seat in a trading exchange was property or a chose in action, and where the decision depended upon the view that it was property. Where procedural questions are at stake, such differences go to the essence, and we could not affirm the order without vesting in the bankruptcy court power summarily to try actions in contract, at least so far as to decide whether the defense is real.
Hence we need not decide whether the syndicate's refusal was colorable, though in fact there was no ground for saying that it was. The agreement must in such a proceeding be taken as made in the terms which the respondent asserts. The syndicate says that the settlement required Roman to satisfy it that the consents and releases would protect it, and that it was in fact dissatisfied. Even were it permissible to inquire whether that dissatisfaction was merely a cover to evade its obligation, we should have no warrant so to hold. Certain of the claimants had not consented at all; some had consented in documents which the syndicate rejected, a rejection which for aught that appears may have been in good faith. Nor does it follow, though the aggregate claims of those who had not consented, or whose consent was unsatisfactory, did not exhaust the whole agreed amount, that the syndicate was bound to pay the uncovered balance. The agreement was that all claims should be brought in, and did not contemplate the syndicate's remaining stakeholder in a suit between Roman and any claimant to a part of the payment. It was entitled to be quit of the whole controversy by a single payment, or to contest the suit on the merits.
Order reversed; order to show cause discharged.
