(4) REVIEW.-An order of a referee approving the creditors' appointment of a trustee is subject to review by the district judge," but a defeated candidate for trustee is not entitled to a petition for review because of the exclusion of certain votes by the referee. The only persons who can appeal by petition for review are those whose votes have been cast out.42 Individual creditors who conceive themselves aggrieved by the action of the referee in approving the election of a trustee may take review in their own names. 45 43 c. Appointment by court or referee.**—(1) FAILURE OF CREDITOR TO AGREE. Only in case a majority in number and amount do not appoint can the judge or the referee appoint. If the creditors are deadlocked, or for any other reason the creditors may not agree upon the selection of a trustee, the statute protects the interests of all the 44. See also Am. B. R. Dig., §§ 318, 319. but disapproved. Matter of Wilson (D. C., Mass.), 37 Am. B. R. 513, affd. 39 Am. B. R. 419, 242 Fed. 479. 41. See Bankr. Act, § 38; In re Hanson (D. C., Minn.), 19 Am. B. R. 235, 156 Fed. 417; Matter of Parsons Mfg. Co. (D. C., Mass.), 39 Am. B. R. 858, 247 Fed. 126. Review of findings as to disputed claims. Where upon a petition to review the election of a trustee upon the ground that certain claims were not entitled to be voted, there is no evidence presented as to the disputed claims, the referee's findings of fact as to all claims must be confirmed. Matter of Snow (D. C., Mass.), 41 Am. B. R. 482, 248 Fed. 295. 42. It was so held on a petition for review taken by a receiver who was a candidate for trustee and was defeated by the exclusion of votes cast for him by a commissioner of deeds acting under a power of attorney acknowledged before himself. The commissioner of deeds himself might have appealed by reason of his representation of creditors who were the real parties in interest. Matter of Grossman, D. C., N. Y.), 34 Am. B. R. 32, 225 Fed. 1020. 43. Matter of Parsons Mfg. Co. (D. C., Mass.), 39 Am. B. R. 275, 247 Fed. 126. 45. See Bankr. Act, § 56; Matter of Knox (C. C. A., 6th Cir.), 34 Am. B. R. 461, 221 Fed. 36; In re Henschel (D. C., N. Y.), 6 Am. B. R. 305, 109 Fed. 861. The word "court" as used in section 44 necessarily includes referee. In re Brooke (D. C., Pa.), 4 Am. B. R. 50, 100 Fed. 432. When court may appoint.- Where defective proofs of debt presented by creditors, representing a majority in number of claims, at a meeting held for the purpose of selecting a trustee, though corrected, are also objected to upon the ground that said creditors are represented in this by the attorney for the bankrupt and the only effect in the end will be to prevent an election, neither of the two persons voted for having a majority in number and amount, the court may appoint a trustee and relieve the referee of that duty. In re Morris (D. C., Pa.), 18 Am. B. R. 828, 154 Fed. 211. Where at the first meeting of creditors no creditors were present, no trustee was appointed for want of assets and but one creditor proved his debt, and the final report of the referee recited that the estate had been fully administered and so far as referred to him was closed, the Where creditors by requiring the court to appoint the trustee.46 there is a sharp conflict or a close vote, resulting in a majority in amount one way and in number the other, the choice of one not a candidate and, if possible, who has had experience in the management of estates, is thought the part of wisdom. But there can be, under the present law, no official or general trustee as seems to have been the practice under the law of 1841.18 In making the appointment the court is governed by the limitations as to qualifications of trustees contained in § 45.49 There is no presumption against the character or fitness of unsuccessful candidates, and they are not necessarily ineligible to appointment by the referee or judge, although it may generally be wise not to appoint them.5 court, after the lapse of more than a year, has jurisdiction to appoint a trustee upon the petition of the assignee of the creditor alleging that the bankrupt had died leaving various properties which he had fraudulently disposed of with intent to defraud creditors. Clark v. Pidcock (C. C. A., 3d Cir.), 12 Am. B. R. 309, 129 Fed. 745. When referee may appoint.- Where the bankrupt's former attorney had a majority in number of the creditors, while his opponent had a majority in amount, and no request was made for a second ballot, the referee may appoint the trustee. In re Machin & Brown (D. C., Pa.), 11 Am. B. R. 449, 128 Fed. 315; In re Richards (D. C., N. Y.), 4 Am. B. R. 631, 103 Fed. 849. Unless it appears that the elec tion has been so conducted as to jeopardize the interests of the creditors, the choice of a majority of the creditors in number and amount should be permitted to stand. In re Eastlack (D. C., N. J.), 16 Am. B. R. 529, 145 Fed. 68. The referee may appoint a trustee upon the failure of the creditors to obtain a majority vote for any one approved. In re Kennedy & Co. (D. C., Ind.), 14 Am. B. R. 611, 136 Fed. 451. 46. Matter of Forestier (D. C., Cal.), 35 Am. B. R. 51, 222 Fed. 537; Mat ter of Knox (C. C. A., 6th Cir.), 34 Am. B. R. 461, 221 Fed. 36; In re Stadley & Co. (D. C., Ala.), 26 Am. B. R. 149, 187 Fed. 285; In re Clay (C. C. A., 1st Cir.), 27 Am. B. R. 715, 192 Fed. 830; In re Brooke (D. C., Pa.), 4 Am. B. R. 50, 100; In re Kuffler (D. C., N. Y.), 3 Am. B. R. 162, 97 Fed. 187, holding that, where the creditors of the bankrupt have held two sessions, one lasting six hours, in attempting to choose a trustee, and where at the second session they were still disagreed and unable to make a choice, it appearing that there was immediate need of the appointment of a trustee, it was proper for the referee to make an appointment. Where creditors fail to appoint a trustee and acquiesce in the appointment made by the referee, they cannot complain. 47. In re Machin (D. C., Pa.), 11 Am. B. R. 449, 128 Fed. 315; In re Nice & Schreiber (D. C., Pa.), 10 Am. B. R. 639, 123 Fed. 987. General Order XIV. 48. Compare Rule 51, Southern District of New York, under Act of 1841; Owen on Bankruptcy, Appendix, p. 11. 49. In re Seider (D. C., N. Y.), 20 Am. B. R. 708, 163 Fed. 139. 50. Matter of F. & D. Co. (C. C. A., 2d Cir.), 39 Am. B. R. 378, 242 Fed. 69, revg. 38 Am. B. R. 285, 237 Fed. 895. 1 (2) DELAY IN APPOINTMENT.-A delay of more than a year cannot have the effect of taking away the power of the court to appoint a trustee." 51 (3) DISPUTED CLAIMS.-If at the first meeting all claims offered for proof are in dispute, and it is impracticable at that time to settle the dispute, it appears to be within the discretion of the referee to appoint a trustee.52 So if the determination of disputes involving claims representing more than a majority in amount, will necessarily delay the election, so that the interests of the estate will be prejudiced, a referee would be justified in appointing a trustee.53 d. Vacancies.-(1) IN GENERAL.-Here again the policy of the law is different from its predecessor. Immediately a vacancy occurs either, (1) in the office of trustee, or (2) after an estate has been reopened, or (3) a composition has been set aside, or (4) a discharge has been revoked, or (5) "if there is a vacancy in the office of trustee," the creditors must be summoned in the usual way; and they appoint the trustee. The value of the words just quoted, 51. Clark v. Pidcock (C. C. A., 3d Cir.), 12 Am. B. R. 309, 315, 129 Fed. 745. 52. Matter of Cohen (D. C., Mass.), 11 Am. B. R. 439, 131 Fed. 391. 66 53. Matter of Knox (C. C. A., 6th Cir.), 34 Am. B. R. 461, 221 Fed. 36, in which the court said: The objec tions to claims had already caused six weeks' delay, and the end was not in sight. The circumstances demanded an immediate selection of a trustee. The referee was put to a choice of three courses: (1) To continue the existing condition indefinitely, to the detriment of the estate; or (2) to have an election at which the majority of creditors in amount would be disfranchised; or (3) to make an appointment himself. Presumably the testimony thus far taken did not make likely the ultimate rejection of this majority in amount of claims, and, if such was the situation, the referee was not bound by any hard and fast rule to disfranchise this majority. Although the creditors are, by the Bankruptcy Act, given control of the election under normal circumstances, and such con trol should not lightly be disturbed, 54. See General Order XXV, and compare In re Lewensohn (D. C., N. Y.), 3 Am. B. R. 299, 98 Fed. 576; In re Hare (D. C., N. Y.), 9 Am. B. R. 520, 119 Fed. 246. Election to fill vacancy caused by removal.- Where a trustee in bankruptcy has been removed because of his employment of the attorney for an assignee for the benefit of creditors, by which attorney he had been employed, such attorney should not be allowed to control the election of a new trustee. Matter of Forestier (D. C., Cal.), 35 Am. B. R. 51, 222 Fed. 537. unless they refer to a case where at the first meeting no trustee was appointed,55 does not seem clear. The purport of the clauses on vacancies is, however, beyond the domain of discussion. All vacancies must be filled as if at a first meeting. It is thought, however, that, when a trustee duly appointed fails to qualify or dies before he can do so, on motion or consent of all the creditors who voted at the meeting when he was chosen, they may appoint a substitute trustee, without calling another meeting for that purpose.56 If a trustee embezzles the funds of the estate and absconds, his action. amounts to an abandonment of his office and a new trustee may be appointed without proceedings for removal or notice to the absconding trustee.57 58 (2) AFTER ESTATE HAS BEEN REOPENED.-Where an estate is reopened the office of trustee is vacant and the court may appoint where the creditors have failed to do so;68 but the appointment of a trustee being vested in the court upon certain conditions, a failure to comply with such conditions does not deprive the court of its jurisdiction, and the validity of the appointment of a trustee after an estate is reopened cannot be attacked in a collateral action.59 The continuance of the former trustee in office pending the appointment of a new trustee by the creditors, is an inequality, but does not necessarily affect his official acts.60 e. Number of trustees.-Under the former law, the creditors chose "one or more assignees. '61 Now, there can be but one or three trustees. Votes for two trustees should, therefore, be refused.62 It seems also that where one of three trustees dies, a meeting should be called to fill the vacancy." At such a meeting the creditors may of course vote to continue one of the survivors as a single trustee. 63 f. When no trustee.- By General Order XV, in no-asset cases, provided there are no appearances by or for creditors, the judge or 55. See General Order XV. 56. In re Wright (Ref., N. Y.), 2 Am. B. R. 497. 57. Schofield v. United States ex rel. Bond (C. C. A., 6th Cir.), 23 Am. B. R. 259, 174 Fed. 1. 58. In re Newton (C. C. A., 8th Cir.), 6 Am. B. R. 52, 46 C. C. A., 399, 107 Fed. 429; Matter of Rochester Sanitarium and Baths Co. (C. C. A., 2d Cir.), 34 Am. B. R. 355, 222 Fed. 22, quoting the language of the text. 59. Fowler V. Jenks (Sup. Ct. Minn.), 11 Am. B. R. 255, 90 Minn. 74, citing Harvey v. Tyler, 2 Wall. (U. S.) 238, 17 L. Ed. 871, and Lamprey v. Nudd, 29 N. H. 299. 60. Matter of Rochester Sanitarium and Baths Co. (C. C. A., 2d Cir.), 34 Am. B. R. 355, 222 Fed. 22. 61. Act of 1867, § 13, R. S., § 5034. 62. See In re Fisher (D. C., N. J.), 14 Am. B. R. 366, 135 Fed. 223. 63. See last paragraph. Compare In re Scheiffer, Fed. Cas. 12,445. 65 9964 referee may "direct that no trustee be appointed. This practice is new; it is a boon to bankrupts and referees. Its validity may, however, be doubted. If the creditors do not appoint, "the court shall do so." If there is no trustee, the difficulty of setting off exempt property is apparent.66 Efforts have been made to overcome this difficulty by local rules, but their validity is also doubtful. If no trustee is appointed at such a first meeting a trustee may still be appointed later, "if the court shall deem it desirable.' '68 In cases covered by this general order, further meetings may by order be dispensed with. Form No. 27 should be used, with such additions 69 to the setting apart of exemptions as the court feels it has power to grant. 70 as g. Forms, notification, bond, etc.- Form No. 23 should be used when the referee appoints; Form No. 22 may be used when the creditors do the same. If, however, there is no contest among them, a simple order similar to Form No. 23, declaring such fact and that the creditors present appointed the trustee named and that the referee approved their choice, is suggested as time-saving and proper. The referee must immediately notify the trustee of his appointment." Form No. 24 indicates the method. The notice is, however, often given orally, and should be, if the trustee-elect is present at the meeting. The trustee should notify the referee of his acceptance or declination. He rarely does. The presentation of the bond, or a failure to present within the required time is thought sufficient. The requirements as to trustee's bonds 72 and duties 73 are discussed elsewhere. IV. REMOVAL OF TRUSTEES " a. For cause.- The creditors have no control over the removal of trustees, other than to initiate proceedings to that end. The former 64. See also Clark v. Pidcock (C. C. A., 3d Cir.), 12 Am. B. R. 309, 129 Fed. 745; In re Levy (D. C., Wis.), 4 Am. B. R. 108, 101 Fed. 247. 65. Thus, see, under the former law, In re Cogswell, Fed. Cas. 2,959; In re Graves, Fed. Cas. 5,709. 66. This must be done by a trustee. Bankr. Act, § 47-a (11). Exempt property does not pass directly to the claimant. See under § 6. 67. Thus see rule 1 N. B. N. 115. See generally the bankruptcy rules of the various district courts, Vol. IV, post. 68. Clark v. Pidcock (C. C. A., 3d Cir.), 12 Am. B. R. 309, 129 Fed. 745. In this case a trustee was appointed more than a year after the creditors' meeting. 69. See also "Supplementary Forms," Vol. III, post. 70. A form will be found in "Supplementary Forms," Vol. III, post. 71. General Order XVI. 72. See under § 50 of this work. 73. See Bankr. Act, § 47. See also Am. B. R. Dig., § 325. 74. See also Am. B. R. Dig., § 323. |