West Hills Memorial Park v. Doneca, 10030.

• Decision Date: 09 November 1942
• Docket Number: No. 10030.,10030.
• Citation: 131 F.2d 374
• Parties: WEST HILLS MEMORIAL PARK et al. v. DONECA.
• Court: U.S. Court of Appeals — Ninth Circuit

131 F.2d 374 (1942)

WEST HILLS MEMORIAL PARK et al. v. DONECA.

No. 10030.

Circuit Court of Appeals, Ninth Circuit.

November 9, 1942.

Reuben G. Lenske, of Portland, Or., for appellants.

Samuel B. Weinstein and Moe M. Tonkon, both of Portland, Or., for appellee.

Before GARRECHT, HANEY, and STEPHENS, Circuit Judges.

HANEY, Circuit Judge.

Review is sought of an order affirming an order, of a referee in bankruptcy, appointing a trustee.

West Hills Memorial Park, a corporation, on May 23, 1941, was adjudicated a bankrupt on a petition filed by three creditors of such corporation on July 3, 1940. The first meeting of creditors was held on June 30, 1941. Fifteen creditors having claims totalling $5,202.54, each claim being for an amount in excess of $50., voted their claims for one Cole, as trustee, and will be hereafter called the Cole group. Other claims totalling $5,288.96 were voted for one Bollenbach, and will be referred to as the Bollenbach group.

Included in the latter group was a claim for $2,500 filed by the administrator of the estate of one Kavanaugh, deceased, hereafter called the Kavanaugh claim. The descriptive part of the proof of claim reads as follows: "* * * that said bankrupt was, at and before the filing of the petition in bankruptcy in this case, and still is, justly and truly indebted to the said claimant in the sum of $2,500.00. That the consideration of said debt is as follows: Legal services rendered: Between May 1, 1935 and October 1, 1938. * * *"

The Bollenbach group also included five claims totalling $1,198.53, the proofs of which and the powers of attorney were executed after rendition of the Jury's verdict on insolvency, but prior to entry of the order of adjudication.

In addition to the six claims in the Bollenbach group mentioned above there were two other claims each in an amount in excess of $50, and fifteen claims totalling $306.72, each of which was for an amount which was less than $50.

11 U.S.C.A. § 72, sub. a, provides that the creditors of a bankrupt, other than certain individuals, shall appoint a trustee. 11 U.S.C.A. § 92, sub. a, provides that creditors "shall pass upon matters submitted to them at their meetings by a majority vote in number and amount of claims of all creditors whose claims have been allowed and who are present." 11 U.S.C.A. § 92, sub. c, provides that claims "of $50 or less shall not be counted in computing the number of creditors voting or present at creditors' meetings, but shall be counted in computing the amount."

The referee overruled objections to the Kavanaugh claim and the five claims mentioned. In computing the number of claims, the referee excluded the 15 claims of the Bollenbach group which were less than $50. Of the remaining 23 claims, a majority (15) were voted by the Cole group. In computing the amount of claims, the referee included all 38 claims totalling $10,491.50. Of that sum, a majority ($5,288.96) was voted by the Bollenbach group. The referee ruled that the creditors had failed to elect a trustee because there were insufficient claims in both number and amount to make a majority. He thereupon appointed Bollenbach as trustee.

The Cole group then filed a petition to review the referee's order. Contained in the referee's certificate was the following:

"With respect to the objections to the Kavanaugh claim, Mr. Lenske admitted that he knew that Judge Kavanaugh had rendered valuable services to the bankrupt some years ago but that he was of the opinion that the amount asked was too large. Mr. Kavanaugh stated that statements had been rendered to the bankrupt for this amount over a period of years and that it had not been questioned by the bankrupt. The referee ruled that he would give full faith and credit to the sworn statement contained in the claim and that Mr. Kavanaugh was entitled to vote the claim."

The court below sustained the referee, and the Cole group have appealed.

Appellants contend that the Kavanaugh claim should not have been permitted to vote. It is argued that a claim for services rendered the bankrupt as attorney should be excluded. They rely on Beale v. Snead, 4 Cir., 81 F.2d 970, cert. den., 298 U.S. 685, 56 S.Ct. 956, 80 L.Ed. 1404, rehear. den., 299 U.S. 619, 57 S.Ct. 5, 81 L.Ed. 457. In that case it is said: "* * * It appears that the only votes cast in the election of the trustee were by Mr. Cyrus W. Beale, representing himself and a Mr. Catterall. As Mr. Catterall's claim was for services rendered the bankrupt as attorney, it was properly excluded from voting in the election of the trustee. * * *" Appellee attempts to distinguish that case by saying that there "the claim that disallowed for voting purposes was the claim of an attorney who represented the bankrupt in the bankruptcy proceeding." While that interpretation might be made of the quoted statement in the cited case, such statement is also subject to the interpretation that the claim was for services rendered prior to bankruptcy.

Appellants concede that claims, such as the Kavanaugh claim, are provable and allowable in bankruptcy. Adams v. Napa Cantina Wineries, 9 Cir., 94 F.2d 694, 698. Appellants insist, however, that notwithstanding the allowability of the claim, it should not be permitted to vote for a trustee. No reason is given for that position except the authority above cited. Since 11 U.S.C.A. § 72, sub. a, specifies who shall be excluded in voting for a trustee, and since the claimant here is not a stockholder, member, officer, director or trustee, what we are asked to do is to add another exception to the statute.

...