Associated Cemetery Management, Inc. v. Barnes

• Decision Date: 10 July 1959
• Docket Number: No. 16112.,16112.
• Citation: 268 F.2d 97
• Parties: ASSOCIATED CEMETERY MANAGEMENT, INC., Employees' Profit Sharing Trust, et al., Appellants, v. Z. C. BARNES et al., Appellees.
• Court: U.S. Court of Appeals — Eighth Circuit

268 F.2d 97 (1959)

ASSOCIATED CEMETERY MANAGEMENT, INC., Employees' Profit Sharing Trust, et al., Appellants, v. Z. C. BARNES et al., Appellees.

No. 16112.

United States Court of Appeals Eighth Circuit.

June 17, 1959.

Rehearing Denied July 10, 1959.

Robert L. Jackson, Kansas City, Mo., for appellants.

Oscar S. Brewer and A. J. Granoff, Kansas City, Mo., for appellees Z. C. Barnes, and others, intervening Trustees (Brewer, Myers & Branton, and Thomas E. Deacy, Jr., Deacy & Deacy, Kansas City, Mo., for Harry M. Phelan, Jr., and others, participant intervenors, were with them on the brief), for appellees.

J. H. Birmingham, Jr., Tipton, Birmingham, Taylor & Furry, Kansas City, Mo., for Clyde A. Sievers, appellant, submitted motion and brief on his behalf to dismiss appeal.

John J. Fallon, Frank P. Barker, Edwin Heller, Barker, Fallon, Jones & Barker, Kansas City, Mo., and Strasser, Spiegelberg, Fried & Frank, Washington, D. C., presented brief for H. Braverman & Co., amicus curiae.

Before SANBORN, VAN OOSTERHOUT, and MATTHES, Circuit Judges.

MATTHES, Circuit Judge.

Six of the eleven trustees of Associated Cemetery Management, Inc., Employees' Profit Sharing Trust, which we shall for the sake of brevity refer to as "Trust," filed a petition in the District Court for the purpose of having Trust declared a bankrupt. Thereupon, an order was entered adjudicating Trust a bankrupt, and the proceedings were referred to the Referee in Bankruptcy. Later, four other trustees of Trust filed an intervening petition praying that the order of adjudication be set aside and that the petition of the six trustees be dismissed. Thirty-eight other persons claiming to be participants in Trust filed a similar intervening petition. Among other grounds, intervenors contended that Trust is not a "person" within the meaning of the Bankruptcy Act, and is not subject to adjudication as a voluntary bankrupt. In due time, the district court accorded the parties a full and complete hearing, and after consideration, set aside its adjudication of bankruptcy, and dismissed appellants' petition for bankruptcy, upon the ground that Trust is not a "person" within the meaning and intent of Section 1(23) of the Bankruptcy Act (Title 11 U.S.C.A.) or a "corporation," within the ambit of Section 1(8) of the Act. See, In re Associated Cemetery Management, Inc., etc., D.C., 170 F. Supp. 298. From this order, an appeal on behalf of Trust was prosecuted to this Court.¹ Upon motion, leave was granted to H. Braverman & Co., an alleged creditor, to file brief as Amicus Curiae in this appeal.

At the outset, we have before us various motions to dismiss this appeal. Prior to institution of proceedings in bankruptcy, it appears there was severe discord among all of the trustees, which, among other things, resulted in an application by some of the trustees to the Circuit Court of Jackson County, Missouri, for "guidance and instructions." On May 23, 1958, that Court appointed one William Staley (an appellee here) as "receiver" or "managing trustee" of Trust, with power to deal generally with Trust's affairs, and at the same time ordered that the trustees and others interested be enjoined from interfering with any property or income of Trust. By its order, the state court retained jurisdiction of the matter for further action and relief, as necessary. Thereafter, upon application of six trustees, the initial order in bankruptcy was entered on June 3, 1958. Upon the hearing to set aside the adjudication in bankruptcy, the intervenors argued that the petitioning trustees were without power to act as trustees in instituting bankruptcy proceedings, by reason of the orders and jurisdiction of the state court. The District Court, looking to the terms of the trust instrument, found that "the majority of the Trustees existing at any given time had power to act for and on behalf of the trust estate," and such majority was empowered to file a petition for bankruptcy, 170 F.Supp. at page 301. From the record we observe that although the transcript of proceedings in the state court was admitted in evidence, the District Judge expressed himself to the effect that anything occurring in the state courts had no bearing on the question of whether Trust as a "person" was subject to the bankruptcy laws of the United States. We are in accord with this view. See Vol. 5, Remington on Bankruptcy, 5th Ed., § 2080; 6 Am.Jur. Bankruptcy, § 113 and cases cited and cf. In re Wisconsin Cooperative Milk Pool, 7 Cir., 119 F.2d 999, at page 1002, certiorari denied 314 U.S. 655, 62 S.Ct. 105, 86 L.Ed. 525. Now before us, we have the petition of Mr. Staley, the "managing trustee" appointed by the state court, praying for dismissal in his own right, together with petition of the intervening trustees who have been joined by the 11th trustee, and the participant intervenors, asking for dismissal of this appeal. In addition, one of the original appellants, Mr. Sievers, has also presented a petition to dismiss the appeal. Taken together, the petitions to dismiss generally question the trustee status of appellants, and their power to initiate bankruptcy proceedings on behalf of Trust and to prosecute this appeal from the decision of the district court.

In view of our disposition of this matter, we need not reach the question of what parties are entitled to represent and act for Trust, and accordingly, all motions to dismiss this appeal are denied.²

To determine whether this trust is subject to bankruptcy, we look first to the petition, verified by the six trustees who instituted the proceeding, to ascertain the category in which the petitioning trustees placed Trust. It states:

"Your petitioner is an express trust created by Trust Agreement dated December 17, 1956, as amended, * * *. Your petitioner is not a municipal, railroad, insurance, banking or a building and loan association, but is a moneyed, business or commercial corporation, not possessed by individuals or partnerships. The business conducted by the Trustees is unincorporated and is one wherein beneficial interests or ownerships are evidenced by certificates or other written instruments."

Since the petitioning trustees declared that Trust was created by "Trust Agreement dated December 17, 1956, as amended," and made a copy of such agreement a part of the petition, we examine this agreement (a part of the record), to ascertain the purposes to be accomplished, the powers and duties of the trustees, the beneficiaries of the trust fund, etc. While the trust agreement and amendments thereto are lengthy, consuming 31 pages of the printed record, we shall attempt to summarize the salient features thereof which in our judgment must be considered in resolving whether Trust is an entity encompassed by the Bankruptcy Act.

Associated Cemetery Management Co., Inc., hereinafter referred to as ACMI not directly involved in this proceeding, operated as a management company for a large number of cemetery corporations. In the trust agreement, ACMI, as the settlor, is designated as the first party, and fifteen individuals, as parties of the second part, were designated trustees. By definition, the words, "Associated Company," means any one of forty-eight named cemetery corporations. Any employee of ACMI was automatically eligible to participate in the profit sharing plan evidenced by the agreement, who, on June 30, 1957, or any anniversary date of the agreement, had been continuously employed by ACMI or an Associated Company for a stated period of years and under certain conditions not here material. Article III provided that ACMI was to make contributions to the plan from time to time. Article IV deals with participation in the trust fund and imposed upon the trustees certain duties with respect to keeping records of the interests therein, and of allocating the funds; and Article V provides for distribution of benefits to participants. The general powers, duties and liabilities of the trustees are enumerated in Article VII. Among the broad powers granted, the trustees were authorized to invest or reinvest all funds in securities and property, including common stocks of cemetery and other corporations; to vote any shares of capital stock held; and to borrow money and execute notes, bonds or other written instruments evidencing indebtedness for money borrowed. Paragraph 9 of this article provided that "Title to the Trust assets shall be registered in the name of this Trust, and ownership thereof shall be vested in the Trustees from time to time acting, and no evidence of the transfer of such ownership from a retiring or deceased Trustee to his successor shall be deemed necessary."

Fairly stated, appellants' broad contention on appeal is that the trial court erred in finding and ruling that Trust is not a "person" within the meaning and intent of Section 4, subs. a, b of the Bankruptcy Act. 52 Stat. 845, 11 U.S.C.A. § 22, subs. a, b. Keeping in mind the essential factors going to make up Trust, we consider the applicable sections of the Act. Subsection a of Section 4 (Title 11, § 22, sub. a, U.S.C.A.) provides:

"Any person, except a municipal, railroad, insurance, or banking corporation or a building and loan association, shall be entitled to the benefits of this title as a voluntary bankrupt."

For further definitions, we turn to § 1 of the Act and find that:

"`Persons\' shall include corporations, except where otherwise specified, and officers, partnerships, and women, * * *." § 1 (23), Title 11, U.S.C.A.

and that,

"`Corporation\' shall include all bodies having any of the powers and privileges of private corporations not possessed by individuals or partnerships and shall include partnership associations organized under laws making the capital subscribed alone responsible for the debts of the association, joint-stock companies, unincorporated companies and associations, and any business conducted by a trustee or trustees wherein beneficial

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