96 F.2d 886 (7th Cir. 1938), 6132, In re Park Beach Hotel Bldg. Corp.

Docket Nº:6132, 6425.
Citation:96 F.2d 886
Party Name:In re PARK BEACH HOTEL BLDG. CORPORATION. v. SOUTHMAN. PANCOE
Case Date:April 28, 1938
Court:United States Courts of Appeals, Court of Appeals for the Seventh Circuit
 
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Page 886

96 F.2d 886 (7th Cir. 1938)

In re PARK BEACH HOTEL BLDG. CORPORATION.

PANCOE

v.

SOUTHMAN.

Nos. 6132, 6425.

United States Court of Appeals, Seventh Circuit.

April 28, 1938

Rehearing Denied June 13, 1938.

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David T. Alexander and Gilbert F. Wagner, both of Chicago, Ill. for appellant.

Joseph Z. Willner, of Chicago, Ill., for appellee permanent trustee.

Walter H. Eckert, of Chicago, Ill., for appellee permanent trustee.

Before SPARKS and MAJOR, Circuit Judges, and LINDLEY, District Judge.

LINDLEY, District Judge.

Appellant, receiver in a state court proceeding seeks a reversal of an order entered in the District Court in course of administration under section 77B of the Bankruptcy Act, 11 U.S.C.A. § 207 and note, wherein the court decreed that the receiver's petition for additional compensation be denied; that within a certain period he pay to the trustee certain sums; and that his final report and account be denied approval until such sums should be paid.

Foreclosure of a mortgage upon debtor's property, consisting of an apartment building, was instituted in 1931 and still pending in the state court without final disposition when certain of the bondholders filed in the District Court, on May 22, 1935, their petition for reorganization. The debtor entered its appearance, admitted the averments of the petition, and consented that the relief prayed should be granted. On July 26, the court approved the petition and appointed a temporary trustee, making the appointment permanent on August 22, 1935. On February 7, 1936, a plan of reorganization was approved. Following this, all proceedings necessary for the promulgation and completion of the plan were completed. A final decree was entered finding the plan of reorganization to have been completed, the securities distributed, and previously existing mortgages and liens released. No appeal has been taken from any of the orders entered other than that here involved.

Following appointment of the temporary trustee, appellant, who had been acting as receiver in the state court proceeding, surrendered possession of the real estate to the trustee. Thereafter on October 11, 1935, he filed his petition in the District Court, reporting that he had held possession of the property from February 28, 1934, to July 5, 1935, and that on the 10th day of September, 1935, he had caused to be filed in the state courts his final account and report and that that court had approved his report, including an allowance to him for additional compensation for services rendered. He further reported that certain claims against him as receiver remained unpaid and prayed that the court direct the trustee to pay him the additional fees allowed by the state court, prior to payment of the claims of all other creditors, and that the unpaid claims due be allowed as costs of administration. On November 27, 1935 the bondholders' committee filed a petition praying for an order upon appellant to file an account and report of all his acts during the receivership. The court directed appellant to file within five days a full and complete report and account of all receipts and disbursements and a full report of all his acts as such receiver and ordered that the trustee and all parties in interest might object thereto within ten days thereafter. On November 29, 1935, the court directed to be impounded all books, vouchers, checks, files, and other records that day surrendered by appellant; named auditors to examine the books and directed that an auditor for appellant be permitted to be present at such examination.

On December 21 the court referred to one of the referees as special master the inquiry and investigation as to appellant's acts, directing the master to proceed with the investigation and inquiry into 'all matters and things relating to said receivership and the accounts, actions and disbursements' of appellant, and relating to 'all matters touching the account and accounts of the said receivership and any and all matter touching on the method of handling the accounts and moneys belonging to the said estate, and any and all other transactions, items, and accounts that * * * might affect the said receivership transactions, and each of them. ' The court directed that the investigation should 'in no way be limited,' but that it should 'include a complete investigation of the books, records, papers, and effects' of appellant.

On August 26, 1936, the special master filed his report, in which he found that appellant, in violation of his duty at common law and under the rules of the state court, had commingled the income of the debtor with funds of many other trust estates and of...

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