Document: 341 U.S. 267 71 S.Ct. 680 95 L.Ed. 927 MOSSER et al.v.DARROW al. No. 461. Argued April 10—11, 1951. Decided May 7, Messrs. Roger S. Foster, Washington, D.C., Stanley A. Kaplan, Chicago, Ill., for petitioners. Irving Herriott, Urban Lavery, respondents. Mr. Justice JACKSON delivered the opinion of Court. 1 The principal question here concerns personal liability a reorganization trustee who, although making no profit, permitted key employees to profit from trading in securities debtors' subsidiaries. Upon long record, controlling facts have been found with little disagreement. 2 In 1935, United States District Court appointed respondent Darrow as two common-law trusts. These had functioned holding companies and their assets were twenty-seven underlying companies, each which owned improved real estate its own debt capital structure. Both subsidiary trusts promoted by Jacob Kulp Myrtle Johnson, who thoroughly knew inside business acquainted many investors. tangled financial history leading is not important our issue. 3 employed Miss Johnson assist his trusteeship. That they competent useful undenied. managed physicial properties while supervised office, complete charge all records income, expenditures both debtors companies. decided upon policy buying bonds subsidiaries retirement, where available at discount, during trusteeship reduced outstanding this method about one-half million dollars. depended Johnson's judgment advice allocating funds sinking fund operations, purchase fixing prices be offered. 4 express agreement that could continue trade personally through Colonial Securities Corporation, owned. Without such consent stated would remained. considerable period shared office facilities personnel, trustee's was interested bonds, her Colonial, same thing. 5 Kulp, employment trustee, traded extensively On occasions acquired themselves on day, or within few days, transferred them profit. paid some advance delivery him even before made them. sometimes bought offered bondholders come dispose trustee. They substantial profits these transactions. 6 eight years trusteeship, filed but one account debtor-corporations none other. Exchange Commission intervened demanded investigation conduct trust thereafter he resigned accounts, met objections successor issues referred special master, heard contest over foregoing other items unimportant here. master recommended surcharge conduct. master's report reviewed Court, concluded evidence supported findings recommendations surcharged amount $43,447.46, reserving questions later consideration. appealed Appeals reversed decision reasons we will consider. 184 F.2d 1. We conclude correct cannot stand. 7 At outset are jurisdictional objection. Respondent contends powerless grant motion substitute parties because petition writ certiorari jurisdictionally defective it name Stacy Mosser, It further contended John W. Guild, named petitioner, without standing seek review only an indenture contentions erroneous. 8 An expressly authorized 52 Stat. 894, 11 U.S.C. § 606, U.S.C.A. provides, 'The debtor, trustees, any creditor stockholder debtor shall right matters arising proceeding under chapter.' (Italics added.) And respondent, opposing substitute, erroneously relies cases involving government officers. Davis v. Preston, 280 406, 50 171, 74 514; Snyder Buck, 340 15, 21, 93, 96. Successor unlike successors public officers, regarded transferees assignees interests predecessor, removal does cause abatement. 840, 860, 74, 74. hold, accord Bowden 107 251, 264, 246, 256, 27 386, substitution fully proper circumstances accordingly turn merits. 9 This strict those quasi-trusteeships self-interest representative combined. A court arguable if engaged advantage transactions part subordinates should surcharged. Equity tolerates bankruptcy trustees interest adverse trust. always corrupt corrupting. By exclusion interest, seeks avoid delicate inquiries into appointees exacting forbearance opportunities might bring disinterestedness administration question. 10 prohibitions serve purpose free authorize others do what forbidden. While there here, obvious open up devious dealings own. motives man too complex equity separate case motive acquiring efficient help favoring help, reason anticipation counterfavors come. think authorize, forbidden benefit behalf himself. argued appears view Appeals, principles negligence applied decisions unless guilty 'supine negligence.' see room operation has knowingly authorized. betrayed grounds believe trustworthy, did exactly agreed do. whether negligent detailed operations unimportant, given blanket authority operations. created failure detect defalcations, required willful deliberate setting 12 contended, however, incurred loss. Indeed, argued, much taken effect, program whole Of course, rising market directly extract amounts till But retire discount advances most rapidly achieves greatest results when lowest. concededly relied offering prices. Those sufficiently above willing accept, so margin left may intentionally rigged purpose, can doubt result. If people trudge holdings less than offer, why low price Instead, between seller buyer herself doing so. 13 larger transactions, block judicial sale. bid did. About she obtained resale Darrow. He her, delivery, $12,447 cost approximately $8,000, check used make payment due bid. Darrow's able paid, difficult say injury sought limit fact-finding tasks concerning precluding effect often trace, prohibition merely against injuring estate—it profiting out position occurred, far concerned, 14 impressed argument, creates very heavy enjoyed must condoned "so strike terror mankind acting own." 1, 8. Trustees obliged judgments, best disinterested accomplish foresight serious criticism obstreperous creditors aided hindsight. quite likely protect liabilities mistakes judgment. undertaken lightly discharged. effective sanction good consequences acts, ways effectively himself liability. 15 practice well established structions court, notice parties, involve particular matter, claimed knowledge indispensable This, said, yielded insistence speculate services arrangement highly irregular trust, disclosed cited show openly Instead this, discuss Judge Holly disclose critical fact employing terms securities. feature transaction counsel. hardly probable candid disclosure creditors, resulted instructions pursued course; but, authorized, least assenting estopped transaction. 16 remedy limiting, avoiding, prompt intervals, puts objectors burden raising objections. accounted, required, undoubtedly discovered ago objectionable. lies mouth allow accumulate time then ask relieve become burdensome. 17 fairness noted hint proof present future, make. For appears, simply misled thinking persons indispensable, entered courts door practices demoralize trusteeships discredit administration. 18 remanded proceedings consistent opinion. 19 Reversed remanded. 20 BURTON took consideration case. 21 BLACK, dissenting. 22 Special Master, seem agree Darrow, act bad faith. As result administration, large accrued estate. Nevertheless, now holds $43,000 solely trust's profited extent knowledge. rule exist today, shown statute support Court's decision. 23 Despite novelty, said favor future. seems me, retroactively grossly unfair. Admittedly, honest mistake today subjected penalty. Under circumstances, new announced I prospective application only. See Great Northern R. Co. Sunburst Oil & Refining Co., 287 358, 53 145, 77 360 cited, 85 A.L.R. 262. 24 affirm Appeals.

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