In re Allen B. Wrisley Co., 133 F. 388

In re Allen B. Wrisley Co.

133 F. 388 | 7th Cir. | 1904

Lead Opinion

JENKINS, Circuit Judge.

Whether the order under review is correct depends upon the question whether the petition presents a case availing to vacate the confirmation of the composition. Dumont v. Des Moines Valley Railroad Company, 131 U. S. clx., 25 L. Ed. 520. It does not, however, follow that filing of the petition should have been refused, if it be essential that all creditors assenting to the composition should be made parties and cited to answer, upon the ground that, upon the vacation of the order confirming the composition, such creditors must repay the money they had received, and incur the risk of obtaining a less sum from the trustee, under the ruling in Marshall Field & Company v. Wolfe Dry Goods Company, 57 C. C. A. 326, 120 Fed. 816— a question upon which we express no opinion. Failure to make such creditors parties might be ground for special demurrer; but the petition in that respect is amendable, and all proper parties could have been brought in. It is only, we take it, when the petition upon its face shows that, upon the facts asserted, the petitioner cannot under any circumstances be entitled to relief, that filing should be refused.

We are constrained to the conclusion that it is shown by the petition’ that the petitioner is not entitled to the relief sought. The confirmation of the composition can only be set aside “upon the application of parties in interest.” Act July 1, 1898, 30 Stat. 550, c. 541, § 13 [U. S. Comp. St. 1901, p. 3427], The petition shows that the petitioner assigned his claim, receiving therefor 40 per cent, of the amount. It is true that it is alleged that this was done upon the representation that it was necessary in order to carry through the composition. The law does not so provide. The petitioner was bound to know the law, and had no right to rely upon such representation. By the assignment, and so long as it stands effective, the petitioner was devested of all interest in the claim and in the estate of the bankrupt. The consideration was paid to and received by the petitioner at the date of the assignment. If the confirmation of the composition had failed, and creditors had received less than the amount offered, the petitioner would not be obliged to refund the excess received over the amount the estate should realize. The risk of loss was borne by the purchaser of the claim. We do not say that the petitioner may not have a right of action against the trustee for the damages sustained by reason of asserted false representation, but we hold that, having parted with all title to his claim, the petitioner is not in a position to assail the composition.

*390While: we-are- thus-constrained to hold, we cannot permit that silence, with-, respect to the' alleged- doings- of the- trustee should be- construed as',in."ahysehse condonation- of the conduct complained of. A trastee in. bankruptcy is an officer of the court, chosen by vote of the creditors. He stands to creditors in a fiduciary relation. He holds the estate in trust- .primarily for creditors; secondarily, if there be a surplus, for. the-benefit of the bankrupt. He should have- no interest to serve except to conserve 'the estate.' He should not be interested in any scheme of composition. In all matters between creditors and bankrupt he should stand indifferent. His sole care should be to make the most out of the estate, and that primarily in the interest of the creditors. When he goes beyond that, and.seeks to aid the bankrupt at the expense of the creditors, and by concealment or by false representations induces creditors to act contrary to their interest, he violates his duty, and should be removed from the trust to which he has been false. If the^ facts stated in this petition be true — but for the fact that the petitioner had''disposed of all,'interest in his claim — we should not hesitate to annul the composition.

Dissenting Opinion

GROSSCUP, Circuit Judge (dissenting).

To my mind, in a case, such as presented by this petition, the court should have allowed the petition to háve been filed; and, the facts being established by the proofs,'-have entered an order, without prejudice to the composition, so far as it affected creditors not joining in the petition, and without prejudice to the creditors joining in the petition, so far as the com-' position was an executed matter, requiring the bankrupt and the trustee, the wrong doers, to account for any advantage obtained by them .through the wrong perpetrated. Had the purchaser of the bankrupt’s assets been an innocent third party, the petition might be'unavailing. But the composition money came, not from an innocent third person, but from the trustee. A trustee cannot be allowed thus either to help himself or his cestui que trust; and as to him there cannot be applied the considerations that in the case' of an innocent purchaser, would preclude the opening up of the. máíter. I think that the majority opinion, while recognizing clearly the fraud on the bankruptcy law that the facts averred disclose, fails to recognize the power in the possession of a court of equity to circumvent such fraud by requiring the wrong doer to surrender' up the advantages of the fraud.

The order is affirmed.