Bollman v. Tobin

• Decision Date: 16 January 1917
• Docket Number: 171.
• Parties: BOLLMAN v. TOBIN.
• Court: U.S. Court of Appeals — Eighth Circuit

239 F. 469

BOLLMAN v. TOBIN.

No. 171.

United States Court of Appeals, Eighth Circuit.

January 16, 1917

Rehearing Denied February 21, 1917.

Randolph Laughlin, of St. Louis, Mo., for petitioner.

Charles A. Houts, of St. Louis, Mo., for respondent.

Before SANBORN and SMITH, Circuit Judges, and AMIDON, District Judge.

AMIDON District Judge.

In December, 1915, the brokerage firm of Payne & Becker, doing business at St. Louis, Mo., was adjudged bankrupt on the petition of Otto Bollman and others. Bollman was the principal creditor having a claim amounting to $39,000. Randolph Laughlin had been his attorney, and was also a creditor of the estate. Bontie Becker, a member of the firm absconded a short time before the adjudication in bankruptcy and has not yet been found. He was in charge of the business at St. Louis. Payne, the other partner, resided at Kansas City. One of the principal contentions of the creditors was that E. C. Becker, the father of Bontie Becker, was a silent member of the firm. He was financially responsible, and the establishment of his liability as a partner was the main hope of the creditors. Mr. Bollman and Mr. Laughlin led a campaign to elect a trustee favorable to aggressive action to establish the responsibility of Mr. E. C. Becker. Mr. Becker undertook a counter campaign to secure a trustee favorable to himself. The Bollman-Laughlin faction secured a majority in amount and number of creditors. Powers of attorney to represent them were given to Mr. Laughlin. He first elected Mr. Bollman, but the referee, having in mind the fact that Bollman was a large creditor, and that his claim was questioned, refused to approve his selection as trustee. Thereupon Laughlin cast his votes for the respondent, John C Tobin, who had been receiver of the bankrupt estate. The Becker faction objected to Tobin, on the ground that he intended to appoint Laughlin as his attorney. Tobin was present, but made no answer to the charge, and the referee overruled the objection. Tobin had been active with the creditors who elected him, and accepted the appointment, knowing well the campaign that had been conducted, and the purpose of the creditors who had prevailed. Notwithstanding this, he so conducted the trust as to forfeit the confidence of the creditors and of Mr. Laughlin. He had conferences with E. C. Becker. He took no action to establish Becker's liability. He appointed a couple of young lawyers as his attorneys, who knew nothing about the affairs of the bankrupts, and who have accomplished nothing, either in the collection of the estate or the enforcement of Becker's liability. An expert bookkeeper had been employed by the Bollman faction to make an investigation of the business transactions of Payne & Becker, and he had made a preliminary report. His report was turned over by the trustee to the bankrupts, and has been dismembered and parts of it lost. The result of these acts by the trustee is that he has forfeited the confidence of the creditors by whom he was elected. They refuse to communicate with him, or to co-operate with him or his attorneys in the administration of the estate. The result has been antagonism, recrimination, a barren administration, and fruitless litigation. Finally the creditors who secured Mr. Tobin's election presented a petition to the court asking that he be removed. In it are charges which affect, not only his competency and fidelity, but also his honesty. This petition was answered, and a full hearing had before the trial court. The learned trial judge ruled that the question whether Mr. Tobin had forfeited the confidence of the creditors, or failed to carry out the policy which they desired, was wholly immaterial. He insisted that, inasmuch as charges had been made affecting his integrity, those charges must be proved, or the petition be denied. He condemned both the creditors and Mr. Becker for the campaign that was conducted for the election of a trustee. He expressed the opinion that Mr. Tobin ought not to continue as trustee, but refused to remove him because the charges affecting his integrity had not been proved, and to remove him might reflect upon his character. The petition was therefore dismissed, and the creditors have filed the present petition to revise.

We think that the learned judge, in his zeal to protect Mr. Tobin's character, lost sight of the interests of the estate. It was not necessary that either be sacrificed.

We first observe that the court fell into error in visiting the same condemnation upon the creditors and upon Mr. E. C. Becker for their efforts to control the election of a trustee. One of the distinctive features of the present bankruptcy law is the power which it gives to creditors in the administration of the estate. It treats the estate as theirs, and requires that they be consulted in meetings at all important steps. They may also compel special meetings at any time for the expression of their views. Section 55, subdivision 'C' (Comp. St. 1913, Sec. 9639), provides:

'The creditors shall at each meeting take such steps as may be pertinent and necessary for the promotion of the best interests of the estate and the enforcement of this act.'

At these meetings a majority of the general creditors in number and amount controls. See sections 55 and 58 of the Bankruptcy Act (Comp. St. 1913, Secs. 9639, 9642), and General Order No. 13 (89 F. vii, 32 C.C.A. vii); In re Lewensohn (D.C.) 98 F. 576; In re McGill, 106 F. 57, 45 C.C.A. 218.

The courts have uniformly enforced these distinctive features of the law. It is true that the administration of the estate is by the court, and not by creditors; but on questions of general...