Opinion
No. 75-B-1917-1930
January 29, 1980
Former Bankruptcy Act — Jurisdiction — Summary Proceeding — Trustee Authority
The bankruptcy court does not have jurisdiction to hear an action brought by a lessee, where title to the subject property was transferred in a prior Chapter XI proceeding, divesting the then debtors-in-possession, and subsequently, the trustee of all interest in the property. Therefore, without actual or constructive possession of the property the court is unable to assert its jurisdiction. See Sec. 23(a) at ¶ 2227.
[Digest of Opinion]
The bankrupt, in the instant case, formed an auto leasing corporation, where vehicles were purchased from various automobile manufacturers, and leased to corporations. The creditor had provided the funds for the purchase of the automobiles, and had executed and perfected security agreements which covered the vehicles subject to the trustee's action. Bankrupts filed a petition under Chapter XI of the Bankruptcy Act, and the court approved the bankrupt's request that the creditor be assigned the right to receive and enforce all payments under the automobile lease agreements, and ordered debtors to surrender all of their rights to possession of the vehicles to creditor. A number of the vehicles had been leased by creditor to defendant-lessee.
The Chapter XI proceeding was converted to a liquidation proceeding and the lessee sought from trustee the certificate of titles on vehicles that were subject to the court's order. The creditor asserted that by surrendering its right to possession and title to the vehicles, the bankrupt had removed the property from the reach of the court's jurisdiction.
The court found that the vehicles were transferred pursuant to the court order of the Chapter XI proceeding, without any vestige of right remaining in the bankrupt. Further, the trustee, who suceeds the debtor-in-possession when a Chapter XI proceeding is converted to straight bankruptcy, is bound by the authorized acts of the debtor-in-possession. Consequently, the trustee did not acquire any rights in the property, since the debtors-in-possession had divested themselves of all interest in the vehicles. The trustee does not have the power to disaffirm the debtor-in-possession's actions. Consequently, the court lacked jurisdiction and the case was dismissed since the property was not in the court's possession.