117 F.2d 1007 | 3rd Cir. | 1941
The County of Allegheny (in the State of Pennsylvania) owns inter alia 23 bridges and the approaches thereto. Over these bridges run the tracks, cars, buses, and other facilities of the debtor company. This company has been in reorganization
In the meantime and during the period of these negotiations, the trustees were under the necessity of carrying out their obligations vis a vis the court that appointed them. There is no more fundamental duty imposed on those who hold property for others than that of rendering an account of its management.
We think that the County labors under a legal misapprehension. The monies accounted for have been expended and plainly cannot be recovered from the recipients. The only recourse, then, is against the trustees. It is quite true that a fiduciary (whether by creation of the parties or by operation of law) can be surcharged for mismanagement.
It is clear that the exceptions are ineffective and therefore properly stricken. Any attempt at surcharge here depends upon two factors, an ultimate insolvency and a negligent (at least) failure to comprehend its imminence. By definition priority is relevant only to insufficiency. In the principal case there is barely an intimation,, much less a proof of any such condition. As a matter of fact the trustees’ accruals, for the claims in litigation seem “only $2,720.05 less than the settlement agreed-upon and 3.26% of the cash balance in the hands of the Trustees on May 31, 1939.”' Furthermore, the appellant does not appear to have thought about the second', requisite. So it is maintained that the trustees should not have paid out the monies essential to the continued operation of the Railways because they should have-foreseen • an ultimate financial inability to-meet their liability to the County of Allegheny. When and if the evidence on the points indicated exists and is offered, it may be addressed to subsequent accounts.. That is, if the procedure by petition is not felt to be more productive of results. In this discussion we have assumed that the accounts are of legal substance and not merely of bookkeeping form.
The order of the District Court is affirmed.
Bankr.Act § 77B, 11 U.S.C.A. § 207; cf. 11 U.S.C.A. § 501 et seq.
In re Reorganization of Pittsburgh Rys. Co., 3 Cir., 111 F.2d 932.
Appointed June 14, 1938, Bankr.Act § 77B, sub. c, 11 U.S.C.A. § 207, sub. c. cf. 11 U.S.C.A. § 556.
2 Scott on Trusts, §§ 172, 260 ; 3 Pomeroy, Equity Jurisprudence, 4th Ed. § 1083, p. 2435; 1 Mechem, Law of Agency, 2d Ed., § 1334, pp. 970, 971; 4 Bogert, Trusts and Trustees, § 962, pp. 2783-2784; Accounts—Duty of Fiduciaries to Keep Adequate Accounts—Procedural Effect of Breach of Duty, 21 Minnesota Law Review 737 (note).
11 U.S.C.A. § 207, note 196 and cases cited; 11 U.S.C.A. § 75, note 16 and cases cited.
11 U.S.C.A. § 75, cases cited at p. 124, 1940-41 Supplement.
2 Remington on Bankruptcy, 3d Ed., § 1138.