Court Opinion

ID: 8760324
Source: CourtListenerOpinion
Date Created: 2022-11-26 12:03:31.210165+00
Date Added: 2024-06-11T17:01:31.399520
License: Public Domain

VAN DEVANTER, Circuit Judge,
after stating the case as above, delivered the opinion of the court.
While it is well settled by the decisions of the Supreme Court of Iowa that the defense of usury under the statutes of that state is personal to the debtor and may not be interposed by a stranger to the contract, no decision of that court has gone so far as to hold that the defense is not open to the debtor’s administrator, executor, guardian, trustee in bankruptcy, or like legal representative. No question is presented, therefore, as to the effect to be given to such a decision in proceedings under the national bankruptcy act, and we are at liberty to follow the rule which we deem to be sustained by the better reason and authority; that is, that the defense of usury is as available to the debtor’s trustee in bankruptcy as to the debtor himself. Brandon v. Pate, 2 H. Bl. 308; Brandon v. Sands, 2 Ves. Jr. 513; Gray v. Bennett, 3 Metc. (Mass.) 522; Tamplin v. Wentworth, 99 Mass. 63; Monongahela Nat’l Bank v. Overholt, 96 Pa. 327 ; Wheelock v. Lee, 64 N. Y. 242; Barbour v. National Exchange Bank (Ohio) 12 N. E. 5; Crocker v. National Bank, 4 Dill. 358, Fed. Cas. No. 3,397; Wright v. National Bank, 30 Fed. Cas. 673 (No. 18,078) ; In re Prescott, 19 Fed. Cas. 1286 (No. 11,389); Tiffany v. Boatman’s Institution, 18 Wall. 375, 390, 21 L. Ed. 868; In re Kellogg, 57 C. C. A. 547, 121 Fed. 333.
On principle a claim not enforceable against the bankrupt ought not to be enforceable against his estate in the hands of his trustee, and such, we think, is the implication and effect of the bankruptcy act. Thus, section 57a (Act July 1, 1898, c. 541, 30 Stat. 560 [U. S. Comp. St. 1901, p. 3443]) requires the proof of claim to set forth that the sum claimed is justly owing from the bankrupt to the creditor; section 7 (30 Stat. 548 [U. S. Comp. St. 1901, p. 3424]) requires the ■bankrupt to examine the correctness of all proofs of claims filed against his estate, to immediately inform his trustee of any attempt by a creditor to evade the provisions of the act, and, in case a false claim is proved against his estate, to disclose that fact immediately to his trustee; and section 70a (30 Stat. 565 [U. S. Comp. St. 1901, p. 3451]) declares that the trustee shall be vested with all powers which the bankrupt might have exercised for his own benefit. The significance of these provisions, especially of those which enable the trustee to employ both the knowledge and the powers of the bankrupt, is obvious.
In respect of opposing the allowance of claims, and moving for their reconsideration after they have been allowed, the trustee is not bound to comply with every request preferred by objecting creditors, irrespective of its merits; nor is he clothed with absolute discretion to refuse. As the representative of the estate, he is bound to exercise his judgment and to act for the best interests of all concerned, but subject to the supervising power of the referee and the district judge. He does not act judicially, but only administratively, and, if he refuses to oppose a claim or to move for its reconsideration when he ought to do so, he may be compelled to act or to permit the objecting creditors to act in his name. Chatfield v. O’Dwyer, 42 *959C. C. A. 30, 101 Fed. 797; In re Lewensohn, 57 C. C. A. 600, 121 Fed. 538; In re Baird (D. C.) 112 Fed. 960.
In passing the order, now sought to be reviewed, the learned district judge omitted a duty of supervision which cannot he put aside and accorded to the action of the trustee a measure of consideration to which it is not entitled. Particularly is it apparent that the trustee’s action was accorded undue consideration, when it is considered that from the inception of these proceedings he was represented and presumably advised by counsel who was also representing the credit- or whose claim was challenged. Of course, this ought not to have been, no matter what may have been the belief of counsel respecting its propriety. The interests of the creditor were adverse to the bankrupt estate, with the protection of which the trustee was charged, and were in conflict with the interests of others who were represented by the trustee. Gray v. Grand Forks Mercantile Co. (C. C. A.) 138 Fed. 341. The situation, therefore, forbade any presumption or assumption that the trustee’s refusal to move for a reconsideration proceeded from a correct conclusion.
Other questions were urged upon us in argument wdiich will not be noticed at this time, because they have not been considered in the District Court and may not arise in the further progress of the case.
The order complained of is vacated, and the case is remanded to the District Court, with instructions that such further proceedings be had upon the last certification of the referee as may not be inconsistent with the views herein expressed.