Lansdown v. Faris

• Decision Date: 07 July 1933
• Docket Number: No. 378,378
• Citation: 66 F.2d 939
• Parties: LANSDOWN et al. v. FARIS, United States District Judge.
• Court: U.S. Court of Appeals — Eighth Circuit

66 F.2d 939 (1933)

LANSDOWN et al. v. FARIS, United States District Judge.

No. 378, Original.

Circuit Court of Appeals, Eighth Circuit.

July 7, 1933.

Samuel A. Ettelson, of Chicago, Ill. (Leonard B. Ettelson, of Chicago, Ill., on the brief), for petitioners.

Edward J. White, of St. Louis, Mo. (Thomas T. Railey, of St. Louis, Mo., on the brief), for respondent.

Before STONE, GARDNER, and SANBORN, Circuit Judges.

STONE, Circuit Judge.

The Missouri Pacific Railroad Company filed its petition in the Eastern District of Missouri for reorganization under the provisions of section 77 of the Bankruptcy Act, as added by the Act of March 3, 1933, § 1 (11 USCA § 205). On March 31, 1933, the court (Judge Faris) approved the petition as properly filed under section 77. In that order, he directed the debtor (Missouri Pacific Railroad Company), broadly, to continue operation of its properties and to file monthly statements of assets and liabilities with a summary of revenues and expenses. The order reserved jurisdiction to amplify, extend, limit, or modify the order and specifically the jurisdiction to appoint trustees under section 77.

Although the Interstate Commerce Commission had made an order selecting a "Panel of Standing Trustees," under the section, on March 30, 1933, Judge Faris had no knowledge thereof until several days after the above order had been made. On May 6, 1933, B. W. Lansdown and many others, claiming to be creditors of the debtor, filed (by leave) a "petition" for the appointment of a temporary trustee or trustees from the above panel. Upon the same day, Judge Faris entered an order denying such petition upon the ground, stated in the order, that "the appointment of a trustee is not a mandatory requirement with respect to procedure under section 77 of the Bankruptcy statute, and that a trustee or trustees should not be appointed in these proceedings except for good cause shown, and no such cause appearing from the petition under consideration. * * *"

Subsequently, these petitioners applied to the Supreme Court for leave to file a petition for mandamus against Judge Faris to compel appointment of a trustee or trustees. We are informed by counsel for petitioners, and it seems conceded, that this leave was denied without prejudice to apply to this court. Such application has been made, the leave allowed, the petition filed, a show cause order issued, and a response thereto filed by Judge Faris.

The response raises several issues. Some of these we will dispose of briefly to get down to the crucial matter involved. The first of these is that the remedy of appeal is open to petitioners and, therefore, the extraordinary writ should be denied. Undoubtedly, there is a discretion in the allowance of extraordinary remedies (Guthrie v. Harkness, 199 U. S. 148, 156, 26 S. Ct. 4, 50 L. Ed. 130, 4 Ann. Cas. 433), and that discretion will be exercised against the extraordinary remedy where an ordinary remedy, such as appeal, is open to the petitioner (Ex parte Riddle, 255 U. S. 450, 451, 41 S. Ct. 370, 65 L. Ed. 725; Ex parte Nebraska, 209 U. S. 436, 440, 28 S. Ct. 581, 52 L. Ed. 876), but this rule is qualified by the exception that the rights of the petition can be fully protected through the ordinary procedure. If such protection is not afforded, the extraordinary remedy may be allowed (Ex parte Abdu, 247 U. S. 27, 28, 38 S. Ct. 447, 62 L. Ed. 966; In re Winn, 213 U. S. 458, 465-467, 29 S. Ct. 515, 53 L. Ed. 873; In re Grossmayer, 177 U. S. 48, 20 S. Ct. 535, 44 L. Ed. 665). The situation here brings this case within the exception. If it be the duty of respondent to appoint trustees, this property should not be left in other hands during the delay necessary to an appeal.

Respondent challenges the position of petitioners as creditors of this debtor. There is no record here from which we can determine this matter. Without at all determining this status of petitioners, we think the fact that respondent permitted them to file their petition and thereafter passed upon the merits thereof, coupled with our conclusion that this writ should not issue, are sufficient for us to treat petitioners, for the purposes of this action, as qualified to file such petition.

Respondent contends that, even if section 77 required him to appoint a trustee upon approval of the petition filed by the debtor, yet such appointment must be from a panel selected by the Interstate Commerce Commission, and that, at the time the order of March 31st was made, he had no knowledge of such a panel. There might be force in this if that order were here in question. It has none where the order, here involved, was entered on petition for such appointment when respondent was fully apprised of the panel selected by the Commission.

The important issue in this action is whether respondent was under a mandatory duty to appoint a temporary trustee or trustees upon approval of the petition filed by the debtor. While petitioners charge that the refusal of respondent to make such appointment "constituted an abuse of judicial discretion and was a clear and palpable violation of law," their main reliance is placed on the contention that such appointment was mandatory. The issue here is whether such appointment was mandatory or discretionary. If it be mandatory, the writ should issue (Garfield v. United States, 211 U. S. 249, 261, 29 S. Ct. 62, 53 L. Ed. 168); if discretionary it should not (Interstate Commerce Comm. v. Waste Merchants Ass'n, 260 U. S. 32, 34, 43 S. Ct. 6, 67 L. Ed. 112; United States ex rel. Alaska Smokeless Coal Co. v. Lane, 250 U. S. 549, 555, 40 S. Ct. 33, 64 L. Ed. 1135; United States ex rel. Carrick v. Lamar, 116 U. S. 423, 6 S. Ct. 424, 29 L. Ed. 677). Determination of this issue is to be found in the requirements of section 77, under which this debtor petition is filed. A painstaking examination of this section leaves no room for doubt that there is no mandatory duty upon respondent but that the appointment of trustees thereunder is discretionary.

This section contains a comprehensive plan for reorganization of railroads. A portion of this plan deals with control of the property of the debtor (railroad) during the reorganization thereunder. There is a provision (section 77 (a) of the act, 11 USCA § 205 (a), that the court approving the petition of the debtor "shall, during the pendency of the proceedings under this section and for the purposes thereof, have exclusive jurisdiction of the debtor and its property wherever located." An agency for exercising the control clearly implied by this jurisdiction is supplied through provision (section 77(c), of the act, 11 USCA § 205(c), for a "panel of standing trustees qualified for such service to be selected and designated in advance by the commission" (Interstate Commerce Commission). The provision governing the action of the court as to appointment of trustees is: "Upon approving the petition as properly filed the judge (1) may temporarily appoint," from the above panel, "a trustee or trustees of the debtor's estate" who shall have power, among other things, "to operate the business of the railroad corporation" and (2), after notice of a hearing for that purpose, "may make permanent such appointment, or may terminate it and may, in the manner herein provided for the appointment of trustees, appoint a substitute trustee or substitute trustees, and in the same manner may appoint an additional trustee or additional trustees. * * *" It will be noted that all through the above quotations the action of the court is governed by "may." This word, in ordinary meaning, carries no thought of compulsion — it is permissive or power giving and not at all compelling, discretionary, and not mandatory. Farmers' & Merchants' Bank v. Fed. Res. Bank, 262 U. S. 649, 662, 43 S. Ct. 651, 67 L. Ed. 1157, 30 A. L. R. 635; Terre Haute & I. R. Co. v. Indiana, 194 U. S. 579, 588, 24 S. Ct. 767, 48 L. Ed. 1124. While this ordinary meaning will be given to that word "unless it would manifestly defeat the object of the provisions" of the statute (United States v. Thoman, 156 U. S. 353, 359, 15 S. Ct. 378, 380, 39 L. Ed. 450; Thompson v. Lessee of Carroll, 22 How. 422, 434, 16 L. Ed. 387), such words sometimes are construed as mandatory where the clear intention of the legislative body requires such meaning (Farmers' Bank v. Fed. Res. Bank, 262 U. S. 649, 662, 43 S. Ct. 651, 67 L. Ed. 1157, 30 A. L. R. 635; United States v. Thoman, 156 U. S. 353, 359, 15 S. Ct. 378, 39 L. Ed. 450). If this were all of the language on this matter in this section we would be inclined to think there might be doubt as to the meaning of this word, because the section contemplates that the court shall assume jurisdiction over the property and because it is a very unusual situation where a court assumes such jurisdiction and leaves the active control of the property in the owner or any one not an officer of the court. But there is other language in this section upon this subject which leaves no doubt as to the meaning we must give this word.

Further on in this subsection (c) it is provided that "The debtor, or the trustees if appointed" (italics added), prepare lists of creditors, stockholders, and claimants with the amounts and character of their debts, claims, and securities. Obviously, these lists are to be prepared after approval of the petition filed by the debtor, and this language clearly contemplates that trustees may not be appointed at the time the lists are made. In the same connection is a provision that these lists shall be open to inspection of interested parties "upon application to the debtor or trustees, as the case may be." This is another clear indication that the section contemplates that there may be no trustees at times, necessarily, considerably after approval of the above petition. These provisions as to lists are entirely inconsistent with a duty to appoint trustees "upon approving the petition as properly...