Court Opinion

ID: 9443766
Source: CourtListenerOpinion
Date Created: 2023-08-03 19:30:07.086601+00
Date Added: 2024-06-11T17:29:35.786334
License: Public Domain

MAJOR, Chief Judge
(dissenting).
In my view, Rule 65(c) is in conflict with the provisions of the Bankruptcy Act and is not controlling. Title 11 U.S.C.A. § 11, which enumerates the jurisdiction and powers of bankruptcy courts, provides that they shall “(7) cause the estates of bankrupts to be collected, reduced to money and distributed, and determine controversies in relation thereto, except as herein otherwise provided,” and “(13) enforce obedience by bankrupts, officers, and other persons to all lawful orders, by fine or imprisonment or fine and imprisonment.” Section 75 of the same Title defines the duties of' trustees and, among other things, provides that they shall “collect and reduce to money the property of the estates for which they are trustees, under the direction of the court, and close up the estates as expeditiously as is compatible with the best interests of the parties in interest.” Section 107 of the same Title (quoted in Judge Finnegan’s opinion) provides that plenary proceedings may be brought where necessary in a state court and “any court of bankruptcy shall have concurrent jurisdiction.” The instant proceeding was brought in a bankruptcy court and hence we are not concerned with whether a trustee might be required to give bond if a plenary action was brought in a state court.
As stated in In re Power, 7 Cir., 115 F. 2d 69, 72, referring to a bankruptcy trustee:
"He is an officer of the court, as well as the owner of an interest. It is his duty to collect the assets and he is responsible for failure to do so. He may be charged with the value of assets which never came into his possession, if he fails in his duty to get them into his possession. To bar the court’s officer in his quest for assets *769there must have been a definite adjudication that the property sought to be recovered by the trustee was not a part of the bankrupt’s estate and was not subj ect to administration by the court.”
It thus appears that a trustee is' charged with a mandatory duty, under the direction and guidance of the court, to pursue any and all procedures designed to accomplish the statutory objective. Under proper circumstances, the trustee lias no alternative but to proceed. Whether such circumstances exist in a given situation is a matter resting in the discretion of the court. To hold that the trustee as a prerequisite to his right to proceed must give a bond, as required by Rule 65(c), is to seriously impinge not only upon his statutory duty but that of the bankruptcy court as well. Such a result is calculated to have a paralyzing effect upon the plan which Congress has promulgated for the administration of bankruptcy estates. This is so for the reason that in many estates the assets would be insufficient to permit the giving of a bond by the trustee and, of course, the trustee would have no interest in and could not be expected to otherwise supply such bond. Thus, a bankrupt who was successful in transferring all of his assets to a third party prior to adjudication would be enabled to clothe such party with immunity from the process of the bankruptcy court. It may be, as urged, that the issuing of a restraining order on the request of the trustee in the absence of a bond will work injury in some instances. However, the discretion lodged in the court can be relied upon to prevent action by a trustee except upon a proper showing and in good faith.
There are cases which, while not' directly in point, by analogy support the view which I take. In Magidson v. Duggan, 8 Cir., 180 F.2d 473, a suit was brought in a reorganization proceeding under the Bankruptcy Act by the trustee in a federal court other than that which had jurisdiction of the proceeding. One of the questions urged on appeal was that the District Court erred in not requiring a bond or other security in compliance with Rule 65(c). Relative thereto, the court held, 180 F.2d at page 479:
“The temporary and permanent injunctions issued by the trial court in the instant case were to aid and preserve the court’s jurisdiction over the subject matter involved and as such were not limited by Rule 65 (c), supra.”
Pertinent by analogy also is In re Lus-tren Corp., 7 Cir., 184 F.2d 789, at page 797, wherein this court (opinion by Judge Lindley) stated:
“RFC raises procedural objections to the restraining order. It is said that the bankruptcy court did not comply with requirements of Federal Rule of Civil Procedure 65(b), 28 U.S.C.A., as to issuance of the order and extending it. We are inclined to believe that the paramount authority of the bankruptcy court under the Bankruptcy Act is such that the rules which apply to ordinary restraining orders are not applicable to restraints of courts and parties, in aid of the Bankruptcy Act.”
If Rule 65(b) was inapplicable to a bankruptcy proceeding, as thus indicated, it would follow that Rule 65(c) is also inapplicable. The court in the Lustren case also made a material observation (same page):
“As the trustees were bound, in the performance of their duties, to collect assets and, in pursuance thereof, sought the restraining order to preserve the status, if they, as officers of the court, should have been required to file bonds for costs and damages, they would have been unable to perform their statutory obligations.”
I would hold that Rule 65(c) is without application, and whether a bond is required of a trustee under the circumstances of the instant situation is a matter resting in the discretion of the bankruptcy court.