In re Schulte-United

• Decision Date: 18 May 1932
• Docket Number: 9379,9340,9382.,9381,No. 9339,9380,9350,9351,9339
• Citation: 59 F.2d 553
• Parties: In re SCHULTE-UNITED, Inc. In re MILLER'S, Inc. IRVING TRUST CO. OF NEW YORK v. NELSON et al. (eight cases).
• Court: U.S. Court of Appeals — Eighth Circuit

59 F.2d 553 (1932)

In re SCHULTE-UNITED, Inc. In re MILLER'S, Inc IRVING TRUST CO. OF NEW YORK v. NELSON et al. (eight cases).

Nos. 9339, 9379, 9350, 9380, 9340, 9381, 9351, 9382.

Circuit Court of Appeals, Eighth Circuit.

May 18, 1932.

COPYRIGHT MATERIAL OMITTED

Charles M. Blackmar, of Kansas City, Mo. (Henry I. Eager and Meservey, Michaels, Blackmar, Newkirk & Eager, all of Kansas City, Mo., and Davies, Auerbach & Cornell, of New York City, on the brief), for appellants.

Harry I. Schwimmer, of Kansas City, Mo., and Louis V. Stigall, of St. Joseph, Mo. (Manard & Schwimmer, of Kansas City, Mo., on the brief), for appellees.

Before VAN VALKENBURGH and SANBORN, Circuit Judges, and DAVIS, District Judge.

SANBORN, Circuit Judge.

The Irving Trust Company of New York was appointed receiver of Schulte-United, Inc., and Miller's, Inc., on January 14, 1931, by the United States District Court for the Southern District of New York, upon separate involuntary petitions in bankruptcy. It continued as receiver until February 5, 1931, when it was elected trustee in bankruptcy of both corporations. Schulte-United, Inc., operated a chain of stores, one of which was in Joplin, Mo., and another in St. Joseph, Mo. Miller's, Inc., was a separate corporation, but had a merchandise department in each of these stores, was apparently under the same management as Schulte-United, Inc., and affiliated with it.

On January 23, 1931, a petition for the appointment of an ancillary receiver for Schulte-United, Inc., was filed by certain creditors in the United States District Court for the Western District of Missouri, in the St. Joseph Division, and on January 27, 1931, a similar petition was filed in the Southwestern Division. The Joplin store was in the Southwestern Division, and the St. Joseph store in the St. Joseph Division. On January 27, 1931, George A. Nelson was appointed ancillary receiver for Schulte-United, Inc., and went into possession of both stores. Harry I. Schwimmer, of Kansas City, was appointed attorney for the ancillary receiver with respect to the property of the bankrupt at Joplin, and Louis V. Stigall was appointed as his attorney with respect to the property at St. Joseph.

On January 30, 1931, upon the application of the ancillary receiver, representing that merchandise of Miller's, Inc., was in the same stores, that it was in actuality a part of the assets of Schulte-United, Inc., and that Miller's, Inc., was in bankruptcy and the Irving Trust Company was its receiver, the court made an order extending the receivership to include the assets of Miller's, Inc.

On February 10, 1931, the ancillary proceedings were referred to Fred S. Hudson, referee in bankruptcy, as special master, for the supervision of the operation of the business and "for all other purposes necessary for the administration and liquidation of this estate." On the same day, the court entered an order requiring the ancillary receiver to retain the proceeds from the sale of merchandise.

On February 25, 1931, the Irving Trust Company, trustee, petitioned for the termination of the ancillary receivership, alleging that it was then vested with title to the property of the bankrupt and was entitled to its possession, and that the property was in the hands of "George A. Nelson, heretofore, on January 28, 1931, * * * duly appointed and qualified as ancillary receiver of said bankrupt." This petition was referred to the special master, and he, on March 12, 1931, recommended against the termination of the ancillary receivership. No exceptions were taken to his report, and on March 14, 1931, the court denied the application to terminate, but granted leave to the Irving Trust Company to renew the request at any time.

On March 28, 1931, the Irving Trust Company filed a petition reciting that it was trustee and was authorized to continue the business and to take over the property of the bankrupt in the hands of the ancillary receiver "after proper deductions approved by the court"; that to enable it to perform its duty it was necessary that "all ancillary receivers should account promptly and promptly turn over to your petitioner all assets in their respective possessions remaining after the determination by the Court of amounts properly to be paid for compensation and expenses of the receivers and of their attorneys, and any other proper deductions determined by the Court for charges and expenses of the receivership"; that the Bankruptcy Act imposes the same limitations upon the fees of ancillary receivers as apply to the fees of other receivers, "and notice to the creditors of the bankrupt of applications for allowances to ancillary receivers and their attorneys is specifically required by the provisions of section 48, subdivision (d) and section 58 of the Bankruptcy Act 11 USCA § 76, subd. d, and § 94 and General Order XLII 11 USCA § 53"; that "there are approximately 4,000 creditors of Schulte-United, Inc.," and that "the making of allowances to ancillary receivers or their attorneys without notice to all creditors would not be in accordance with law, but that the giving of notice, in each ancillary receivership, to the very large number of creditors involved would be extremely delaying, expensive and burdensome"; that "there is an active and representative committee of creditors of the bankrupt, which committee is represented by its own attorneys," and that the creditors have conferred upon the committee authority to represent all creditors in respect of most of the matters arising in the administration of the estate; "that the delivery by ancillary receivers to your petitioner of two copies (one to be submitted by petitioner to the creditors' committee) of their respective proposed accountings, applications for allowances to receivers and their attorneys, etc., and the deferring of the hearing upon applications in connection therewith until opportunity has been had for the trustee and the creditors' committee to examine said applications, would be a practical method of avoiding legal irregularities in such applications, and would constitute a very substantial saving in time, labor and expense"; and that "the Creditors' Committee has requested the adoption" of this procedure.

Upon motion of counsel for the Irving Trust Company, trustee, an order was entered March 28, 1931, requiring the ancillary receiver to prepare his account and to send two copies of it to the trust company and also two copies of any proposed applications for payment of compensation and expenses of himself and of his attorneys, and providing that the date of hearing should be fixed by the court so as to allow reasonable opportunity to the trustee and the committee of creditors to examine, approve, or object to the account and applications. On the same day, on motion of the trustee, the court required the ancillary receiver to turn over to the trustee all property held by him except cash on hand, and to relinquish possession of the stores to the trustee.

During the course of the proceedings, and on February 19, 1931, the special master had allowed, on account of services, $500 to the ancillary receiver, $1,250 to Mr. Stigall, $1,250 to Mr. Schwimmer, and $250 in each division to Manard & Schwimmer, attorneys for the petitioning creditors. The orders allowing these sums were made by the special master, and the partial allowances were paid by the ancillary receiver on February 19, 1931. Applications for further allowances were made by the ancillary receiver, by his attorneys, and by the attorneys for the petitioning creditors on April 20 and 27, 1931. They were referred to the special master to take testimony and to report his findings and recommendations. On May 16, 1931, he filed his reports, which recite that the matter of these applications came on for hearing before him on May 11, 1931, upon notice of hearing, "the parties appearing in person and by their attorneys, and the Irving Trust Company appearing by and through its attorney, Charles M. Blackmar," and that testimony, oral and documentary, was received. In his report filed in the St. Joseph Division, with respect to the St. Joseph store, he finds that the ancillary receiver took in $40,037.17 in cash and on April 1, 1931, turned over to the trustee merchandise inventoried at $66,663.87, and furniture and fixtures which cost $52,366, that the receivership lasted two months, and that the attorney for the ancillary receiver devoted many days of his time and did considerable work. In his report filed in the Southwestern Division, with reference to the Joplin store, the master found that the ancillary receiver took in $40,390.55 in cash, and on April 1, 1931, turned over to the trustee merchandise inventoried at $52,541.07, and furniture and fixtures which cost $47,240.58; and he made the same findings with respect to the duration of the receivership and the services of counsel as in his report filed in the St. Joseph Division. In his reports, he recommended that additional allowances be made as follows: $1,500 in each division, or $3,000 in all, to the ancillary receiver; $1,250 to Mr. Schwimmer for his services in the Southwestern Division; $1,250 to Mr. Stigall for his services in the St. Joseph Division; $500 to Manard & Schwimmer, as attorneys for the petitioning creditors, being $250 in each division.

On June 1, 1931, the Irving Trust Company filed two motions in each division, one to dismiss the petitions for the appointment of the ancillary receiver and to vacate his appointment because of insufficiency of the petitions and lack of jurisdiction; the other to dismiss the petitions to include the assets of Miller's, Inc., in the ancillary receivership, and to vacate the order extending the receivership to include those assets, on similar grounds. On the same day, it filed in each division exceptions to the report of the special master recommending additional allowances, asserting that the orders appointing the...