In re Federal Facilities Realty Trust, 58334

Citation140 F. Supp. 522
Decision Date25 April 1956
Docket NumberNo. 58334,58335.,58334
PartiesIn re FEDERAL FACILITIES REALTY TRUST, a common law trust, Debtor. In re NATIONAL REALTY TRUST, a common law trust, Debtor.
CourtUnited States District Courts. 7th Circuit. United States District Court (Northern District of Illinois)

Urban A. Lavery, Chicago, Ill., for intervening plaintiff, Paul E. Darrow.

Murphy, Pearson & O'Connor, Chicago, Ill., for intervening defendants, Kulp and the Estate of Johnson.

CAMPBELL, District Judge.

When these cases were first assigned to me from the calendar of Judge Holly on May 24, 1948, I asked to be relieved of the assignment. It became immediately apparent from even a cursory reading of the then pending report and findings of Special Master Archie Cohen that the affairs of these two debtors in reorganization were in horrible condition as a result of the gross mismanagement and questionable practices of one Darrow, a Trustee appointed by Judge Holly, who had resigned during the course of an investigation of his conduct of the estates. That surcharges might have to be taxed and possibly disciplinary proceedings for misconduct instituted against the resigned Trustee, and two of his employees, Kulp and Johnson seemed quite certain. At that time I did not know and had never previously heard of Darrow, Kulp or Johnson. The Executive Committee refused my request to be relieved of this distasteful assignment, however, on the ground that Master Cohen's report had been pending, without action thereon for some time, that some judge had to proceed to act on it, that Judge Holly was retiring from the Court, and that my name had been drawn by lot in the regular procedure of reassignment provided in our Rules. I thereupon reluctantly undertook these two reorganization proceedings which now are completely terminated with the fortunate result of payment of security holders and creditors in full despite many delays and difficulties.

Upon further and full consideration of Referee Cohen's report, the various objections thereto, and of the briefs and arguments filed and heard thereon, I became convinced that Kulp and Johnson, with the full knowledge and acquiescence of Darrow, had acted contrary to the best interests of the estates and to their own personal benefit in which disgraceful conduct Darrow was guilty at least of woeful neglect of duty. I thereupon filed my memorandum and order herein dated April 12, 1949 in which I concluded that the former Trustee should be surcharged thereon. I thereafter made certain that all three of these persons were severed from any further contact with the estates and the various subsidiaries. It was then my opinion based upon the clear and well supported findings of the Special Master, that Darrow, Kulp and Johnson were equally guilty of this breach of trust and that all knew what each was doing. Years of close association with the administration of these estates has confirmed that opinion and it still remains my sincere conviction.

More recently in the administration of these estates, it became my disagreeable duty to have to deal officially with Kulp and Johnson in effecting a settlement with them concerning certain property claimed both by them and by the estates. In so doing, I dealt with them to the exclusion of Darrow, not because I felt them any less culpable than Darrow, but because they had or controlled possession of the property which the estates sought. I approved a settlement of the dispute with the representatives on these two of the three unfaithful servants because I was persuaded upon full consideration of the entire matter, that the estates would profit more by the settlement than they could ultimately realize from the lengthy and costly litigation that was the only alternative. Having made that decision, I wanted to have done completely with the distasteful business as soon as possible and thus I insisted upon both of my Trustees promptly and fully carrying out the terms of my order even though one of them and his attorney obviously disagreed with certain parts of it. How Kulp and Johnson divided these reluctantly given and ill-gotten gains, and whether or not they shared any part of it with Darrow, their joint malefactor in trust, I felt, and indeed stated in Court, was no concern of mine. I had made the best settlement possible for the estates with the two malefactors in the regrettable position to deal with the estates and thought I was at last finished with all three. That I was mistaken has been made painfully apparent in the recent opinion of the Court of Appeals, Federal Facilities Realty Trust v. Kulp, 7 Cir., 220 F.2d 495, and it now becomes my duty, under that Court's mandate, to see to the division of the aforesaid gains upon the intervention petition of Darrow for a portion of them.

In that regard, the matter is now before me on Darrow's affidavit which had been filed, after the lodging of the above mandate, under the alleged authority of the provisions of Title 28 U.S.C. § 144. Affiant attacks the duty of this Court to proceed to a final adjudication in these debtor proceedings, alleging that the presiding judge has a personal bias and prejudice against him. It becomes my duty, therefore, as the presiding judge, to pass upon the legal sufficiency of Darrow's affidavit, but not upon the truth or falsity of the facts therein alleged. Berger v. United States, 255 U.S. 22, 41 S.Ct. 230, 65 L.Ed. 481; Tucker v. Kerner, 7 Cir., 186 F.2d 79. If the reasons and facts set forth in the affidavit give fair support "to the charge of a bent of mind that may prevent or impede impartiality of judgment", then it is my duty to allow the affidavit and certify the case to the Executive Committee for reassignment to another judge. Berger v. United States, supra, 255 U.S. at page 33, 41 S.Ct. at page 233. However, my duty to "deny the affidavit on insufficient allegations is no less imperative than to allow it on sufficient allegations." Tucker v. Kerner, supra, 186 F.2d at page 85. That Section 144 must be strictly construed is not open to question. Cf. Ex parte American Steel Barrel Co. (Seaman), 230 U.S. 35, 33 S.Ct. 1007, 57 L.Ed. 1379; Marquette Cement Mfg. Co. v. Federal Trade Commission, 7 Cir., 147 F.2d 589. With these fundamental rules in mind, I shall consider the legal sufficiency of Darrow's affidavit.

The facts upon which the affiant relies to support his charge of prejudice are set forth in paragraphs 6, 7, 8 and 9 of the affidavit. Paragraphs 7(a) and 7(b) contain certain statements, previously made by Referee Ward, which were read by me from the bench on July 23, 1954. These statements were in regard to what I believed to be the lack of merit of Darrow's claim as set forth in his Intervention Petition. Paragraph 7(c) contains a statement made by me on the same date to the effect that Darrow's petition on its face indicated that it was of no merit. Paragraph 8(a) contains a statement made by me on July 23, 1954, to the effect that I considered Darrow's motion for a supersedeas order, which previously had been presented to Judge Perry, to be inadequate and, in many respects, inaccurate. Paragraph 8(b) contains a comment that I considered the presentation, to Judge Perry, of the motion for a supersedeas order to be in disobedience to my order of general reference to Referee Ward. Paragraph 8(c) contains my comment to the effect that an appeal on its face must appear to be meritorious in order to justify the issuance of a writ of supersedeas. In each paragraph only partial quotations are taken from the transcript of proceedings. Such quotations as set up in the affidavit are clearly out of context and the entire transcript of each proceeding cited should be read.

It is quite apparent, even from the most cursory examination of the statements contained in paragraphs 7 and 8 of the Darrow affidavit, that the affiant merely complains about adverse rulings already made. That is, the affiant objects to the Court's opinion as to the law applicable to the issue then presented for decision. Each statement, in each instance, was in regard to a judicial determination made by the Court concerning the Court's ruling, first, on Darrow's intervention petition and later on Darrow's motion for a supersedeas order. It is well settled law that a judge's ruling derived from a judicial determination of the facts in each case, together with his reasons in support of the ruling, are subject to attack only on appeal and not upon the filing of a motion to disqualify. Ex parte American Steel Barrel Co. (Seaman), supra; Tucker v. Kerner, supra.

In the latter case, the Court made a statement which is particularly appropriate here. It stated, 186 F.2d at page 84: "Every member of this court, every member of any court, every judge, when he hears a case or writes an opinion must form an opinion on the merits and oft times no doubt an opinion relative to the parties involved. But this does not mean that the judge has a `personal bias or prejudice.' If it did, the disqualification of judges would be a matter of every-day rather than the unusual and extraordinary occurrence which the statute is designed to meet."

In writing the Tucker case, supra,...

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