Court Opinion

ID: 8803331
Source: CourtListenerOpinion
Date Created: 2022-11-26 14:40:20.600256+00
Date Added: 2024-06-11T17:03:59.695754
License: Public Domain

WARD, Circuit Judge.
At the first meeting five creditors, whose claims aggregated some $32,000, voted for Marshall S. Hagar as trustee, while seven creditors, whose claims aggregated some $1,600, voted for Jacob J. Lesser. No candidate having a majority in number and amount of claims voted, there was no election, and the referee appointed Hagar trustee, who thereafter filed a bond and entered upon the administration of the estate. Subsequently a creditor filed in the office of the referee a petition to review his order appointing Hagar, and, the same having come on for hearing, the District Judge reversed the order and appointed a new trustee.
Section 45 of the Bankruptcy Act provides:
“Trustees may be (1) individuals who are respectively competent to perform the duties of that office, and reside or have an office in the judicial district within which they are appointed, or (2) corporations authorized by their charters or by law to act ip such capacity and having an office in the judicial district within which they are appointed.”
The District Judge expressly approved the character and integrity of Mr. Hagar, and stated as the sole ground for removing him that the referee should not have appointed one of the unsuccessful candidates. He said:
“What this action of the referee comes to is that he has appointed one ol' the persons whom the creditors have demonstrated 'that they are unable to select. Such an appointment by the referee is, in effect, overriding the clear intent' of the statute. For this reason the order will be reversed, and the court will appoint a new trustee.”
The intent referred to is probably that a majority of the creditors in number and amount is necessary to the election of a trustee, and, neither of. the unsuccessful candidates having had such a majority, it is to be assumed that neither was acceptable to the creditors. But the provision of the statute applies to an election, and not to an appointment by the referee or District Judge. There is no presumption against the character or fitness of the unsuccessful candidates when there is no election by creditors, and while it may generally be wise not to appoint an unsuccessful candidate, we cannot assent to the proposition that they are ineligible. Such appointments were made in several reported cases, though no objection was raised on this ground. In re Richards (D. C.) 103 Fed. 849; In re Rosenfeld, Goldman & Co. (D. C.) 228 Fed. 921; In re Harry Rothleder (D. C.) 232 Fed. 398.
The order is reversed, and, as the original appointment was proper, and should have, been confirmed, there is no vacancy within section 44 of the Bankruptcy Act (Comp. St. 1916, § 9628), and the court below is directed to reinstate the trustee appointed by the referee.