Court Opinion

ID: 6898491
Source: CourtListenerOpinion
Date Created: 2022-07-23 21:52:26.217304+00
Date Added: 2024-06-11T16:06:05.289788
License: Public Domain

FRANK, Circuit Judge
(dissenting).
I agree with my colleagues except as to one item, L e., the sufficiency of the notice.
The notice was solely by publication. Nothing in the record discloses any good reason for not sending notice by mail to all creditors whose claims had been allowed, at their last-known addresses as shown in the bankruptcy proceedings. It is suggested that such notices would mislead because the record does not reveal which of *478such creditors had not been1 paid in full. But notice by publication is open to the same objection. The short answer is that the notices could and. should state that no creditor may participate without proving that he had not received full payment (and then only to the extent of his unpaid balance) and that the mere giving of the notice indicates nothing as to the rights of any creditor.
As my colleagues intimate (see their note 3), the notice by publication was given in' reliance upon 11 U.S.C.A. § 94, sub. d. But that subsection, after providing that some kinds of notice “may be published,” adds: “Other notices may be published as the court shall direct.” Here the court did not direct the giving of notice by publication. That notice was given by the Special Master on his own motion. So that, even, assuming arguendo, that 11 U.S.C.A. § 94, sub. d authorizes that sort of notice, when ordered by the court, here that provision is inapplicable.
Louisville & N. R. Co. v. Robin, 5 Cir., 135 F.2d 704, 705, 706, if sound, is not, I think, in point. It dealt with a fund resulting from a sale on foreclosure of a railroad mortgage securing bonds, n'ot with the estate of a bankrupt, having known •creditors and subject to the provisions of the Bankruptcy Act. The court in the Robin case relied on 28 U.S.C.A. § 118, saying that it “appears to affora a statutory basis for the service by publication of persons having a lien' on the fund.” Whether that section was applicable there, or is applicable here, I am not at all sure. But, if we assume that it applies here, then it should be noted that 28 U.S.C.A. § 118 expressly provides for personal service “if practicable,” and for notice by publication only where “personal service * * * is not practicable.” 1 It may well be that, in the Robin case, the potential claimants were all holders of bearer bonds whose addresses were never known.2 As the district judge here, on other grounds which I agree' are insufficient, denied the relief sought by the petitioner, the judge never reached the issue of the sufficiency of the notice.3 That, accordingly, he did n'ot question its adequacy, and that no one else has raised the question, is no good reason why we should fail to do so.
An order by the judge directing notice solely by publication would perhaps not be an abuse of discretion, were the fun’d so small as to render unreasonable the expense of mailing notices. But that is not this case. It seems to me that here the slight delay and expense involved in mailing notices, in addition' to publication, should be required in order to prevent an unequitable distribution. I would therefore remand with directions to give such notices.

Moreover, it provides that, if a person, not personally served appears -within one year, the court shall set aside the judgment and permit such person to participate as if no judgment had been entered.

In the Robin case, the court cited St. Louis & S. F. R. Co. v. Spiller, 274 U.S. 304, 313, 47 S.Ct. 635, 71 L.Ed. 1060. I think that that case may mislead, if not carefully read. See Frank, Some Realistic Reflections on Some Aspects of Corporate Reorganizations, 19 Va.L.Rev. (1933) 698, 703-705. See ibid. 705-707, and Employers’ Liability Assurance Corp. v. Astoria Mahogany Co., 2 Cir., 6 F.2d 945, 946, to the effect that the purpose of a “barring order” is to protect the stakeholder, not to benefit the creditors who appear.

For no notice to creditors was necessary under the judge’s decision that petitioner receive only the pro-rata share to which he would be entitled if all the creditors appeared.