England v. Lines

Decision Date05 November 1958
Docket NumberNo. 15497.,15497.
Citation262 F.2d 303
PartiesJohn M. ENGLAND, Trustee of the Estate of Goodrich Manufacturing Company, a Co-partnership Consisting of Coy C. Goodrich and Lulu Goodrich, Bankrupt, Appellant, v. Kal W. LINES, Appellee.
CourtU.S. Court of Appeals — Ninth Circuit

James M. Conners, Stanley M. McLeod, Vernon D. Stokes, San Francisco, Cal., for appellant.

Louis J. Glicksberg, Lawrence Goldberg, San Francisco, Cal., for appellee.

Coy C. Goodrich, in pro. per.

Before DENMAN, BONE and ORR, Senior Circuit Judges.

DENMAN, Senior Circuit Judge.

John M. England (hereafter appellant), the trustee in bankruptcy of the estate of Coy C. Goodrich, appeals from a decision of the District Court for the Northern District of California, vacating the referee's order which appointed England trustee.

Facts: The underlying action was initiated by the petition of Coy C. Goodrich on May 24, 1954, for an arrangement with his creditors under Section 722 of Chapter 11 of the Bankruptcy Act, 11 U.S.C.A. § 701 et seq. Before the arrangement was confirmed Goodrich moved for dismissal of his petition, but his creditors resisted his motion and the referee ordered that bankruptcy be proceeded with, in accordance with 11 U.S. C.A. § 776(2). This order was issued on May 16, 1956. The event giving rise to the present controversy was the issuance of a notice by the referee on June 25, 1954, to Goodrich's creditors, setting July 12, 1954, as the date for the first meeting of creditors, and requiring that "claims must be presented * * * within six months * * *" after that meeting. No trustee was appointed at that meeting. The claims of the creditors who subsequently voted for appellant as trustee represent those filed within the six months.

Following abandonment of the petition for an arrangement and the issuance of the order that bankruptcy be proceeded with, on May 29, 1956, a new meeting of creditors was held. At that meeting the eleven creditors who had filed their claims within six months of the July 12, 1954, meeting voted for appellant as trustee. Though they were admitted creditors in the Goodrich schedules the referee refused to count fifty-one votes cast by one Kal W. Lines, as holder of powers of attorney from fifty-one creditors, for himself. The ground for the referee's disallowance of these votes was that the underlying claims had not been filed within six months of July 12, 1954, as required by the referee's notice. Appellant was appointed trustee. Lines, as the representative of the fifty-one creditors whose powers of attorney he held, petitioned the District Court for review of the order appointing appellant trustee, under 11 U.S.C.A. § 67, sub. c. The District Court vacated that order and remanded, holding that the referee had no power, under the controlling provisions of the Bankruptcy Act, to limit voting powers of creditors by limiting the time for filing claims in his notice of June 25, 1954.

Appellant appeals this decision to this court under 11 U.S.C.A. § 47. He contends 1) That appellee Lines, as the holder of mere voting powers of attorney had no standing to seek review in the District Court of the referee's order; and 2) That the District Court erroneously interpreted the Bankruptcy Act.

Did Appellee Have Standing To Appeal The Referee's Order To The District Court?

The power of attorney given appellee by the claimants for whom he acted as attorney in fact expressly authorized him to cast votes for a trustee in bankruptcy but included no express authority to seek review of orders of the referee. Appellant contends that unless such authority was expressly granted in his powers of attorney, appellee has no standing to pursue the appeal below. Appellee's position is that such a power — to seek judicial review of orders of the referee — is implied as a natural corollary of his authorization to vote, since to effectively exercise his voting power he must be able to seek judicial reversal of any order by the referee which improperly invalidates the voting rights of the claimants he represents. Appellee concedes that he has no standing to appeal in his individual capacity, that whatever standing he has he derives from his power of attorney.

The rule of construction which generally determines the scope of an agent's implied powers is that an agent has, "unless otherwise agreed, authority to do acts which * * * are reasonably necessary to accomplish the purpose of the agency." Restatement of Agency, § 35. This rule was the basis for the finding of the lower court that:

"In my opinion, the power specifically given therein to vote for trustee includes power to protect that vote by seeking a review of the order of the Referee appointing a trustee in disregard of such vote. The motion to dismiss is denied."

Appellant argues that this rule should not be applied in the instant case for the following reasons:

1) Because appellee, and not the creditors, was the "true party in interest." Appellant suggests that appellee sought review of the referee's order not for the benefit of his claimants but on his own behalf, because he wanted to be trustee. This argument is irrelevant. If appellee's authorization included the power to seek review, appellee's hidden motives would not seem to affect his otherwise appropriate exercise of that power.

2) In re Phoenix Dress Co., 7 Cir., 1942, 131 F.2d 726, 727, is relied upon by appellant. There the trustee filed his petition for review in his own name and not as attorney in fact for the creditors. The opinion, in a dictum, treats the Supreme Court Form 18 power of attorney as limited by a letter stating that:

"The power of attorney being given is merely for the purpose of voting your claim for the nominee of your committee, for trustee in bankruptcy and the attorney in fact will be guided by your committee. It is understood that no other powers are to be vested in the Attorney-in-Fact * * *."

The decision has no applicability in the instant case.

II. Did Creditors, Listed In The Debtor's Schedules, Who Had Failed To File Claims Within Six Months After The "First Meeting Of Creditors" During The 11 U.S.C.A. § 722 Arrangement

Proceeding, Nevertheless Have Voting Rights At The "First Meeting Of Creditors" Of The 11 U.S.C.A. § 777(2) Bankruptcy Proceeding?

11 U.S.C.A. § 778(2) entitled "Procedure upon order directing that bankruptcy be proceeded with" applies to the instant facts as follows:

"(2) in the case of a petition for arrangement not preceded by a bankruptcy proceeding, as involved here, the proceeding shall be conducted, so far as possible, * * * as if a voluntary petition for adjudication in bankruptcy had been filed and a decree of adjudication had been entered on the day when the petition under this chapter was filed; and the trustee nominated by creditors under this chapter shall be appointed by the court, or, if not so nominated * * * a trustee shall be appointed as provided in section 72 of this title." Emphasis added.

In the instant case, no trustee was nominated during the arrangement proceedings. Therefore Section 72 controls appointment of a trustee:

"The creditors of a bankrupt * * * shall, at the first meeting of creditors after the adjudication * * * appoint a trustee * *."

A. The referee disallowed appellee's votes on the ground that they were not "creditors" within the meaning of Section 72. His reasoning is as follows:

1) Section 702 of Chapter 11 states that the provisions of Chapters 1 to...

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4 cases
  • Kitchin v. Commissioner, Docket No. 93733-93735.
    • United States
    • U.S. Tax Court
    • December 23, 1963
    ...F. 2d 798 (C. A. 9, 1955), reversing a Memorandum Opinion of this Court Dec. 19,522(M); and Robinson v. Elliott 59-1 USTC ¶ 9129, 262 F. 2d 303 (C. A. 9, 1958). ...
  • In re Dejay Stores, Inc.
    • United States
    • U.S. District Court — Southern District of New York
    • July 17, 1963
    ...be convened pursuant to § 55, sub. a of the Act subsequent to the debtor's adjudication in bankruptcy can be found in England v. Lines, 262 F.2d 303 (9th Cir. 1958) affirming In re Goodrich Mfg. Co., 168 F.Supp. 940 (N.D.Cal. 1956). In England v. Lines, supra, an original arrangement petiti......
  • Crittenden v. Lines
    • United States
    • U.S. Court of Appeals — Ninth Circuit
    • March 18, 1964
    ...Coy C. Goodrich in his individual capacity was at all times subject to the jurisdiction of the district court. We further held, 262 F.2d at 303: "We cannot say that the referee abused his discretion in adjudicating appellant Coy C. Goodrich a There being a dispute whether Goodrich's credito......
  • Goodrich v. England
    • United States
    • U.S. Court of Appeals — Ninth Circuit
    • November 5, 1958

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