*1 primarily sale to customers for to be held ordinary of business. course jury verdict We think clearly upon the evidence sustainable denial District Court’s
and we affirm the verdict. motion for directed part.
Affirmed in part with directions.
Reversed Grossbart,
Arnold S. KAYE Sanford Appellants,
v. SPACH, Trustee, Appellee.
May
No. 18994. Appeals Court
United States Circuit. Fifth
April May 22, 1962.
Rehearing Denied Sidney Schell, Kaye, T. Arnold S. Schell, Kaye Nodvin, Atlanta, Ga., &
appellants. Frank, Beach, Fla., R. Miami Robert Gerstein, Atlanta, Ga., Joe W. Frank & Weston, Beach, Fla., appellee. Miami TUTTLE, Judge, Chief Before BROWN, Judg- Circuit CAMERON es. Judge.
TUTTLE, Chief appeal Kaye, Arnold This lawyer, and Sanford client, trial an order court adjudging them of court proceedings conduct their reason Robert L. Strauss. *2 during Strauss, had been at- that amounts certain proceedings which The paid in the were to he answered issued Strauss and tempt and conviction citation “the affirmative when asked whether ancillary proceedings in the Jewelers pending in books and records of Grossbart was which Strauss They moneys repaid.” reflect when these District of Florida. Southern a, court both 21, 11 U.S.C.A. Referee and the trial part sub. of a Section “concerning investigation ample evidence a, found that there was sub. § warranting an order the Referee conduct, property of [the] acts, or Trustee, directing ac- May Spach, books of bankrupt.” that Grossbart’s sought count be Trustee or- by counsel, exam- submitted to the represented to opportunity sought der for her to call opportunity to have an ine Grossbart belonging such mat- attention of the Referee to Grossbart to see books might pur- ters as inter- Jewelers, corporation, relevant a Grossbart rogation of Grossbart in the whether Section portedly ascertain in order to proceeding. any improper sub. a transfers had been there bankrupt’s estate from assets directing The Referee an order entered interests, or his that Grossbart Grossbart submit books any preferences been whether there had through her for exam- counsel impermissible relations between or other colloquy following ination. took parties. pursuit effort of this place: subpoena duces tecum Trustee caused Kaye: My “Mr. me client tells pro- calling issued on Grossbart to be these records are confidential corporate records. duce the concerning his sources of attorney, quash through moved to supply people from whom he has ground they subpoena con- on the money highly borrowed and other no entries the records contained tended disclosing any personal communications and con- transactions with fidential records would which indirectly. directly bankrupt, either injurious detrimental and to him motion, the Trustee’s counter To this anybody for have access other produced witnesses who several counsel than himself. dealings between to certain testified jewelry company and record, or his Grossbart “But is no he tells Strauss, Bankrupt In- or his wife. me, of these books testimony in this evidence cluded was with Mr. transactions Robert L. corporation, indirectly. which shared directy that a Strauss ownership of Grossbart with Grossbart reason, Honor, “For Your this acquired Jewelers, had its stock Gross- declining oppos- are to submit we wife. In- from Strauss’s bart Jewelers ing counsel for his examination of testimony also is that Grossbart cluded documents the records which Strauss, $7,000 from Mrs. had borrowed just I identified. I have But will re- was handled transaction which once more state the Court $7,000 Strauss, that the note for this willing, so direct should we actually Grossbart delivered repository make the court will this Grossbart testified Strauss. these records its examination as exchanged by Mrs. later Strauss note was the truthfulness of the facts 51%) (apparently in Gross- for stock represented I have on behalf Jewelers, whose my bart And client. we have them all are here in issue. and records Be- all here and available inspec- the Court’s examination or bankruptcy she had transferred this fore tion. corporation. another Further- stock testified that a few more Kaye, Mr. I “The Court: bankruptcy before bor- appointed months Court as a deposi- depository. several smaller amounts is a rowed The Clerk ' upon the further tóry. appointed business conduct ground hearings transactions con- judicial inquiries records did pro- prescribed tained This as ceeding the law. Strauss, pertain to Robert L. evi- to take is a *3 bankrupt. recourse, the I no I don’t dence. have witness, believe, but to direct this appears that “It from the record produce those Mr. to respond- explained the Referee to testify and answer records to and he, Referee, ents that the was any questions asked him which records, take the search able to proper. them, of the and determine which might might not be ma- entries you do to now so “And direct gave terial, the Referee wit- the that, Mr. Grossbart. designate opportunity to the ness Kaye: And I directed “Mr. have contended items which the witness ques- my the client not answer immaterial, were which the witness tions, Honor. Your did not do. you declined “The Court: Have “Sufficient evidence was adduced Now, that, Grossbart? to do Mr. the show that Referee to before make he’s the one that has to transactions there were number of Kaye. you, decision, not Mr. in fact had the witness between right, Kaye: All sir. “Mr. Strauss, Grossbart and the they corporations of coun- On advice with which “The Witness: yes. to render sel, identified sufficient probable that the books and rec- certify Well, I will “The Court: ords would contain material evi- thing have certified that I same dence. Karp. Mr. case of appear “It that the does is, do understand what “You n contained any information which be You will you, Mr. Grossbart? law, privileged was under the nor whether Court certified appear does even you for with to deal Court wants by respondents, effort made contempt or not. in .selectthe items contained the rec- Yes, sir.” Witness: “The allegedly ords business certified Referee Thereafter secrets, production therefore of ruling for a Court the District record only the books limited to the Referee Grossbart to whether court as himself would have been of no bene- contempt of court. in Kaye held should sought pro- who their fit counsel decision, the trial its preliminary to As a procedure duction, would following comments: made court impossible have rendered the exam- alleged of acts “(1) One concerning ination of the witness against charged re- both in the books. entries wit- the failure spondents “Frequently referees, judges and said advise of ness acting judicial capacity others will, produce in evidence attorney to regardless legal require- * * * kept witness of this ‘books cooperate ments, parties with connected company affiliated by a keeping matter of witnesses bankrupt.’ with records even their where the secret assigned by are not clothed with records the wit- reason “The pro- privilege under law. Such produce the books refusal ness given however, only can tection in- Court, could be where complete cooperation Trustee, there is where counsel for spected seeking parties allegedly same. contain- the books arbitrary unreasonable, pertaining It privileged matters ed deciding bankrupt. trial however, respondents after itself have court should being that case Referee ordered eighteen corporate pro- pages only examined records, produce to offer minutes, said: perusal this Court duce for the them counsel, upon required and not for also Referee “The court allegations contents in deter- broad exercise discrimination writings mining portions are immaterial reasonably The fore- contain secrets. business which are relevant practice permitted per- going would material issues. to such processes the Courts ex- obstruct the formance involves seeking writings in all truth end to obtain the amination *4 kind, only in fact matters of this as be that so much thereof respondents obstruct- tactics of have held of within the boundaries processes subpoena satisfy ed instant case. limita- these as tions.” might inclined to “This Court be leniently aforesaid deal with the then The Court further said: ap- respondents acts of the did it performed in this “The task to be definitely pear in- that there was by judge case not a the district is upon part purpose tent of hard one.” respondents in connection with these opinion footnote then contained a records, in connection with stating, reading eighteen “Our by witnesses, other as shown pages under seal to us— transmitted transcript to investi- obstruct cursory duty primary because gations to made Referee and belonged discretion to the court below— induce all the witnesses withhold to reveals is the election of officers possible.” information bankrupt places, mentioned three at Other acts place, of an obstructionist is mentioned in one charged by nature were the Referee and no reference made to the two is
against Kaye individually, and these
corporations.”
Schutter
trial court in its
adverted to
present
No
was
in the
such situation
guilty
Kaye
determination that
was
as bankruptcy court here as
referred
was
charged. Because, however,
find
we
to
the above case. Here there were
lawyer
flat
refusal of the
pages
some
ledger
four
of
three or
thousand
comply
witness to
with the court’s order
sheets and financial
records.
fully
corporate
justified
to the
records,
swearing
Grossbart had commenced
judgment
contempt,
the trial court’s
of
that there
no reflection in the rec-
was
necessary
we do not consider it
con
to
dealings
any
ords of
with the
sider these other matters.
directly
connected with him
or
indirectly.
Appellants
later, however,
He
contend
that their con- or
ad-
here
refusing
mitted, contrary
pre-
comply
duct in
to what
with the Ref-
viously sworn,
eree’s
that there were some such
order to make the
available
fully
also
Other witnesses
testified as
Trustee
was
entries.
justified by
parties
transactions between the
a recent decision
closely
Court,
Blackford, Cir.,
persons associated
with them that
Herron v.
264
normally appeared
have
on the
F.2d 723. In that case there
in dis- would
question.
pute
question
corporate
party
that were in
whether a third
lawyer
hearing
party
witness and his
witness in
third
a Section
sub.
parts
required
to find these
undertake
be
did not
should
submit to
trus-
them to
copies
corporate
and show
the court
tee and
the record
his counsel
counsel,
simply
upon
consisting
eighteen
only
stood
but
their
minutes
pages,
original
there were no
claim that
wherein it was stated
ob-
jecting party
entries,
the books were all irrele-
minutes were
simply
vant,
to toss
them on
offered
as to
transactions with the
silent
up
study
understanding
based
leave it
desk of the Referee
anything,
what,
of his client’s
case.
the referee
to him determine
Here
investigation.
something
would become
than an
other
relevant
judge
arbiter
put
if he
in the
nothing in
We think
position
having
theory
construct
Herron
opinion in the
What
said
might
which Grossbart’s
records
find
prevents our
quoted
ease
above that
go
considered relevant and then
forward
ing
before
under the circumstances
seeking
information
the sev-
strictly com
here, he had
the Referee
eral
pages
thousand
ascertaining
duty of
plied with his
theory.
sustain his
The construction
particular documents
these
whether
theory
such a
for evi-
search
journal
submitted
pages
should
support
dence
theory
are matters
examina
and her counsel
normally addressed to counsel rather
duty
“exam
tion.
think that the
We
judge.
than to the
writings,” referred
ination of the
conclude,
We
therefore, that the order
fully met
opinion, was
the Herron
one,
Referee was a lawful
physical doc
Referee, with the
when the
obey.
appellants
of both
ad
him,
heard
uments before
*5
Their
adequate
refusal
to do
an
so is
nego
had
mit that the
Strauss
judgment
basis for the
contempt
is-
$7,000
loan
Grossbart
tiated a
sued
the trial court.
Strauss,
de
note was
the
Mrs.
judgment
is,
The
therefore, affirmed
Strauss,
heard
further
and
livered to
appellants.
as to both
testimony
this note held
that
Grossbart’s
paid
off
been
Mrs. Strauss had later
BROWN,
Judge (concurring).
Circuit
exchanging
(apparently
it for stock
fully
opinion
concur
in the
and deci-
Jewelers,
51%)
with whose
of Grossbart
sion
including
of the Court
the artic-
concerned,
are
and then
books we
here
ulated distinction between this record
admit
“the
that
further heard Grossbart
presented
and that
in Herron v. Black
books and
Jewelers
records Grossbart
ford, Cir., 1959,
264 F.2d
loans from
small
[several
reflect when
necessity
carefully
that that case be
con-
repaid.” These
himself]
Grossbart
fined to its own facts. Consideration of
by Grossbart,
his
admissions
without
present
the
case convinces me that the
making any
point
attempt
to
to these
very serious
entertained,
doubts I
but
records,
entries in the
authorized the
submerged,
there
Judges
as
requiring
in
records
Referee
the
participating
joining
Herron,
in
over
for exam
be turned
to the Trustee
grounded.
were well
I now think the
ination.
Herron
wrongly
case was
decided.
principle
think
an
that the
We
in the Herron case should not
nounced
CAMERON,
Judge (dissent-
Circuit
beyond
be extended
Where,
the
case.
facts
ing).
here,
undisputed
as
is
question presented
basic
entries in
party
or
records
confusing record is whether the court
witness relevant to
third
justified
adjudging
below was
appellant,
investigation,
sub. a
it is not
Section
Sanford
and his
duty
to
Referee then make the
attorney,
guilty
Arnold Kaye,
S.
of civil
analysis
just
initial
ascertain
order to
refusing
comply
to
with a
what
and what is
relevant.
not
verbal order of the Referee in Bank-
litiga-
ruptcy
adversary
to
The whole
nature of
turn over
to
Trustee and
only
attorney
party
(con-
her
tion can be
maintained
records
sisting
per-
it is
client
of some
or four
whose
to serve his
three
thousand
pages)
Jewelers,
call
mitted
judge
to the attention
of Grossbart
Inc.
to
This
engaged
corporation
referee,
be,
jewelry
in the
as the case
was
Georgia.
points
Atlanta,
pro-
which he
business
deems to be relevant
involuntary
very
eeeding
He
fa
ancillary
testified that he
was
gave
against
books,
one miliar with
he
but
bookkeeper
name of
familiar
Miami,
who was
Florida.
Strauss in
Presumably
with them.
was avail
she
Appellant
served
Grossbart
able to the
attendance
Referee
her
an individual
subpoena
duces tecum
by subpoena.
procured
could have been
Atlanta,
bring
the Referee
before
Clearly
No effort was
this.
made
do
Georgia
corporate
of which
records
these
brought
if she had
the Ref
been
before
brought
rec-
he was custodian. He
eree and
transactions
had testified to
presented
the Referee.
them to
ords and
bankrupt, or
between
possibly
Kaye, offered, on three
attorney,
His
bank
occasions,
all of
turn over
more
rupt,
she could have been called
Referee,
refused
books to
but
locate those
as recorded
transactions
in Bank-
Trustee
turn
over to the
them
corporation.1
no
books of
But
attorney
un-
ruptcy
for their
her
portions
could,
the record
under
chaperoned
The Referee
examination.
law, have been ordered turned over to the
proffer
accept this
would
attorney
her
until the Referee
books, stating
not feel that
did
that he
them
determined
examined
and had
books, but
function to examine
in advance
were rele
rather
hear
he was commissioned
subject
compulsory
vant and
or
evidence;
that he would
he stated
der of
Trustee. This
submission to the
certify
for a con-
District Court
Herron,
is the rule
no
announced in
hearing,
tempt
to turn
the refusal
contrary authority
is referred
unconditionally
Trus-
books over
majority opinion. It is
not sufficient
acting upon the
Court,
The District
tee.
say
applicable only
that Herron is
when
*6
agreed
briefs,
the
with
and
certificate
prior
the
examination
the ref
and sentenced both Grossbart
Referee
easy
simple
or the
a
eree
court is
or
one.
contempt.
attorney, Kaye, for
and his
rights
private property
Protection of
and
so
error in
I
committed
think the court
enterprise system
free
the
cannot be
doing.
depend upon
made to
judicial
convenience
who
officers
are called
I.
matters.
consider such
offering
for
to turn over
books
In
fully
pointed
Herron,
As
out
in
ap-
Referee,
the examination
regulating bankruptcy practice,
statutes
including
specific
proceeding in
con-
pellants were
regulations, provide
also the
formity
our
in
recent decision
Rules
that the Federal
of Civil Procedure
Blackford,
al. v.
Trustee
Herron et
hearings.
applicable
bankruptcy
Cir., 1959,
Bankruptcy,
IV. to be examined and audited.” subject general Treating Upon Papers safeguarded, Even as thus Third “production Books and Bankrutcy, Appeals per- Examination,” Circuit Court of would on Collier length, quotes mit All 2, 294-296, Continent’s books to turned pp. at Volume (96 language of over to the Its decisions trustee. footnotes, from two in the 21-22) spells F.2d Appeals Third Cir out a standard which for the the Court of 3 confirming questioned by any language is not the fore case cited cuit certainly by Collier, appearing going apply a turnover none authorities majority records, opinion: in the covering as well books and order covering property. other forms as one granting “In the trustee’s re- Trustee, Russell, (And, v. cf. Oriel et al. quest, the referee said: T cannot Fox, case, supra.) In re In former find case which the exact judge F.Supp. D.C., the district 16 question involved has di- here been order of him on review the had before rectly passed upon by raised and our directing, un- the referee in courts.’ delivery safeguards, der strict thought, however, “He he had bankruptcy of the books of trustee power under section 21a of act Corpora- All account of Continent allow the examination of the strong proof of the tion. There Corpora- All Continent corpora- identity bankrupt and prayer tion accordance with the entering order, district tion. petition. of the ity Under author- judge used these words: Building of Looschen Land & “I am that the trustee satisfied Company Milson, Cir., et al. v. have from the books [of entitled to think F. we do not he had such any information Continent] All power. Corpo- The All Continent may pres- be relevant party be an ration claims to adverse inquiry. What is relevant ent bankruptcy proceedings passed upon primarily to be the books that the title to and other judicial discretion referee. properly is in and not in the bank- rupt. agree such be the “I with the cannot referee’s fact referee If not have books surrendered requiring complete deliv- order examined, to the trustee and ery of the books to the trustee for a though they belonged to the bank- period of six weeks. believe the rupt. Whether or the books are accounts should be de- property in fact the place posited in some secure neutral Corpo- the All deposit and not of Continent —probably in safe vaults ration has not been determined and bank—to be examined and of some authority building by under the Looschen in said an ac- audited above, Case, question cited selected countant trustee or plenary referee, must be determined said to have accountant no Until has been suit. determined responsibility to the credi- is not bankrupt. the trustee entitled to the tors of said The exam- ination representatives Mrs. sonable All Continent Fox, presence of a notice which should be if they books, etc., present, desire to have Corporation representative upon rea- should given be [*] lant’s books to requiring “But we [*] examine the transactions be- *9 under the [*] know of no rule of delivery the trustee so that facts this appel- case. law Fox, Corp. 247, 431, 665, 3. In All Continent 83 L.Ed. revers- re et al. v. 59 S.Ct. 950; Steelman, Cir., 20, D.C., F.Supp. ing 3 96 and In Re F.2d certiorari 16 Co., Fox, Capital Cir., granted 554, 1040, 96 Leitstein v. 3 304 U.S. 58 S.Ct. 1524, dismissed, F.2d 23. L.Ed. certiorari 305 U.S. having appellant judge others think tween the learned trial with, power attorney in, punish without or connection no interest bankrupt. contempt, know Neither do we the client for I re- permits spectfully majority rule of law which dissent from the indirectly opinion holding the same counsel to obtain otherwise. having into a read result witness record books the evidence which the
of a transaction with bankrupt no connection. Of
course, were done could be appellant be- established longed was sim- ply ego, his alter this could but Adams, Jean ADAMS and Z. A. only by plenary suit. established Appellants, the as- The error referee v. sumption that this was fact America, UNITED STATES of though the fact then Appellee. Until this has been established. fact No. 19160. the trustee did had been established right possession not have the Appeals United States Court of appellant’s books. What Fifth Circuit. do trustee could not could not April accountants or counsel done his Rehearing May 30, 1962. Denied [Em- nor counsel creditors.” phasis added.] along said in Much the same line is reported in 96 F.2d on
the other case pages foregoing is 25 and but the think, sufficient, I establish that the by the Referee was here entered order powers void,
beyond and was required obey
appellants it. were not the court below was with-
It follows that adjudge jurisdiction appellants out guilty violating court for
the void order. hearings were before the Referee The language altogether conducted
not diplomatic. appellants
chaste transgression. It in this not alone were appellants pointed out that the cooperative Referee. may lie, the fault for this Wherever right merely insisting on the which, law, under the en- client attorney pro- an
titled.
im-
of his client
the interests
tect
one,
important
portant
than that
less
exercising
Referee.
these
See also