Defendant Burdette Electric, Inc. (Burdette) was adjudicated an insolvent corporation on June 26, 1964 and a receiver was appointed.
Among the accounts receivable held by Burdette was one owed by B.J. Builders, Inc. This account receivable was allegedly assigned by Burdette to one Milton Rabin by reason of advances to Burdette on certain promissory notes made by it to Rabin dated February 19, 1964 and March 4, 1964.
A financing statement, signed by both parties, was filed with the Secretary of State on March 6, 1964. Demand was made upon Rabin to produce a security agreement in support of this transaction but he failed to do so, and this court necessarily concludes that no written security agreement was ever executed by Burdette.
The matter is now before this court on the receiver's motion for an order declaring the said assignment null and void.
Initially, Rabin objects to the summary disposition of his claim to the account receivable in this receivership proceeding. He urges that as against strangers to the record who hold property adversely to the insolvent company, or who are indebted to the insolvent company at the time of the appointment of the receiver, the latter must proceed in an independent, plenary action against such party. In support of this contention he cites Grobholz v. Merdel Mortgage Investment Co., 115 N.J. Eq. 411 (E. & A. 1934), and Jersey City Welding & Machine Works, Inc. v. Hudson County White Co., 116 N.J. Eq. 548 (E. & A. 1934). These cases
are factually distinguishable in that they involved money claims by the receiver against a third party, and the courts there held that such claims should not be summarily decided in the receivership proceeding. However, disputed liens on property in the possession of the receiver are usually determined in a summary manner in the cause in which the receiver was appointed. Riedinger v. Mack Machine Co. etc., Inc., 117 N.J. Eq. 334 (Ch. 1934). In 19 N.J. Practice (Skills and Methods), § 254, at p. 221, the author indicates that summary proceedings, inter alia, are available for the determination of the validity of liens and encumbrances claimed upon property vested in the receiver. It is further stated therein that:
"Assets in the hands of the receiver are deemed to be in the hands of the court and are thereby withdrawn from the jurisdiction of all other courts. Thus, the appointing court has ancillary power to hear and determine all questions respecting title, possession and control of property in its hands and all liens thereon."
As between the assignor and assignee, the party who exercises the larger measure of control over an account receivable is deemed to be in "possession" of the same. Rabin apparently notified the account debtor of his interest before the institution of the receivership proceeding. Hence, it may be argued that the receiver is not in the actual "possession" of the account receivable in question, and therefore a plenary proceeding may be required to test the validity of the assignment. Cf. New York Credit Men's Ass'n v. Manufacturers Discount Corp. 147 F.2d 885 (2 Cir. 1945); Schwartz v. Horowitz, 131 F.2d 506 (2 Cir. 1942); In re I. Greenbaum & Sons Co., 6 F. Supp. 245 (S.D.N.Y. 1933).
In passing, it is to be observed that under the Uniform Commercial Code the concept of "possession" of an account receivable is treated differently than in receivership jurisdictional disputes. As will hereinafter appear, an account receivable is an intangible and cannot be the subject of "possession" under the Code. Though summary jurisdiction
may not be invoked because the lien of the adverse claimant is on property probably not in the receiver's possession, there is still another ground upon which such summary jurisdiction may be based. Since our insolvency statute is essentially a bankruptcy act, we may look to the bankruptcy rules for guidance. Sullivan v. James Leo Co., 124 N.J. Eq. 317, 326 (E. & A. 1938); ...